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EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
VA LINUX SYSTEMS, INC.
AND
XXXXXXX.XXX, INC.
DATED AS OF APRIL 26, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER.................................................. 1
1.1 The Merger.................................................. 1
1.2 Effective Time; Closing..................................... 1
1.3 Effect of the Merger........................................ 2
1.4 Certificate of Incorporation; Bylaws........................ 2
1.5 Directors and Officers...................................... 2
1.6 Effect on Capital Stock..................................... 2
1.7 Surrender of Certificates................................... 3
1.8 No Further Ownership Rights in Company Common Stock......... 4
1.9 Lost, Stolen or Destroyed Certificates...................... 4
1.10 Tax Consequences............................................ 4
1.11 Taking of Necessary Action; Further Action.................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 5
2.1 Organization of the Company................................. 5
2.2 Company Capital Structure................................... 6
2.3 Obligations With Respect to Capital Stock................... 6
2.4 Authority; Non-Contravention................................ 7
2.5 SEC Filings; Company Financial Statements; No Undisclosed 8
Liabilities.................................................
2.6 Absence of Certain Changes or Events........................ 9
2.7 Taxes....................................................... 9
2.8 Title to Properties; Absence of Liens and Encumbrances...... 11
2.9 Intellectual Property....................................... 11
2.10 Compliance; Permits; Restrictions........................... 13
2.11 Litigation.................................................. 14
2.12 Brokers' and Finders' Fees.................................. 14
2.13 Transactions with Affiliates................................ 14
2.14 Employee Benefit Plans...................................... 14
2.15 Environmental Matters....................................... 17
2.16 Year 2000 Compliance........................................ 18
2.17 Agreements, Contracts and Commitments....................... 18
2.18 [RESERVED].................................................. 19
2.19 Disclosure.................................................. 19
2.20 Board Approval.............................................. 20
2.21 Fairness Opinion............................................ 20
2.22 Restrictions on Business Activities......................... 20
2.23 Insurance................................................... 20
2.24 State Takeover Statutes..................................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... 20
3.1 Organization and Qualification; Subsidiaries................ 20
3.2 Certificate of Incorporation and Bylaws..................... 20
3.3 Capitalization.............................................. 21
3.4 Authority; Non-Contravention................................ 21
3.5 SEC Filings; Parent Financial Statements.................... 22
3.6 Absence of Certain Changes or Events........................ 22
3.7 Tax......................................................... 23
3.8 Compliance; Permits; Restrictions........................... 23
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3.9 Litigation.................................................. 23
3.10 Agreements, Contracts and Commitments....................... 24
3.11 Registration Statement; Proxy Statement..................... 24
3.12 Board Approval.............................................. 24
3.13 Benefit Plans............................................... 24
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME......................... 24
4.1 Conduct of Business by the Company.......................... 24
4.2 Conduct of Business by Parent............................... 26
ARTICLE V ADDITIONAL AGREEMENTS....................................... 26
5.1 Prospectus/Proxy Statement; Registration Statement; Other 26
Filings.....................................................
5.2 Meeting of Company Stockholders............................. 27
5.3 Registration Rights......................................... 29
5.4 Confidentiality; Access to Information...................... 29
5.5 No Solicitation............................................. 29
5.6 Public Disclosure........................................... 30
5.7 Reasonable Efforts; Notification............................ 30
5.8 Third Party Consents........................................ 31
5.9 Stock Options and Employee Benefits......................... 31
5.10 Form S-8.................................................... 32
5.11 Indemnification............................................. 32
5.12 Invention Assignment Agreement.............................. 33
5.13 Nasdaq Listing.............................................. 33
5.14 Company Affiliate Agreement................................. 33
5.15 Option Assumption Agreement................................. 33
5.16 1999 Stock Option Plan...................................... 33
ARTICLE VI CONDITIONS TO THE MERGER.................................... 33
6.1 Conditions to Obligations of Each Party to Effect the 33
Merger......................................................
6.2 Additional Conditions to Obligations of the Company......... 34
6.3 Additional Conditions to the Obligations of Parent and 34
Merger Sub..................................................
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER........................... 35
7.1 Termination................................................. 35
7.2 Notice of Termination; Effect of Termination................ 36
7.3 Fees and Expenses........................................... 37
7.4 Amendment................................................... 37
7.5 Extension; Waiver........................................... 37
ARTICLE VIII GENERAL PROVISIONS.......................................... 38
8.1 Non-Survival of Representations and Warranties.............. 38
8.2 Notices..................................................... 38
8.3 Interpretation; Knowledge................................... 38
8.4 Counterparts................................................ 39
8.5 Entire Agreement; Third Party Beneficiaries................. 39
8.6 Severability................................................ 39
8.7 Other Remedies; Specific Performance........................ 39
8.8 Governing Law............................................... 40
8.9 Rules of Construction....................................... 40
8.10 Assignment.................................................. 40
8.11 WAIVER OF JURY TRIAL........................................ 40
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INDEX OF EXHIBITS
Exhibit A Company Voting Agreement
Exhibit B List of Company Affiliates (not included)*
Exhibit C Affiliate Agreement
Exhibit D Form of Non-Competition/Non-Solicitation Agreement (not
included)*
Exhibit E List of Key Employees (not included)*
Exhibit F Form of Employee Agreement (not included)*
Exhibit G Form of Contractor Agreement (not included)*
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* Registrant hereby agrees to furnish supplementally a copy of any omitted
exhibit to the Securities and Exchange Commission upon request.
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AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
This AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION is made and
entered into as of April 26, 2000, between VA Linux Systems, Inc., a Delaware
corporation ("PARENT") and Xxxxxxx.Xxx, Inc., a Delaware corporation (the
"COMPANY") and hereby amends and restates the Agreement and Plan of
Reorganization among Parent, Atlanta Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of Parent ("MERGER SUB"), and the Company dated
February 2, 2000, as amended February 11, 2000 and February 25, 2000.
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law ("DELAWARE LAW"), Parent,
Merger Sub and the Company intend to enter into a business combination
transaction.
B. The Board of Directors of the Company (i) has determined that the Merger
(as defined in Section 1.1) is consistent with and in furtherance of the
long-term business strategy of the Company and fair to, and in the best
interests of, the Company and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement
and (iii) has determined to recommend that the stockholders of the Company adopt
and approve this Agreement and approve the Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's and Company's respective willingness to enter into
this Agreement, certain stockholders of Company are entering into Voting
Agreements in substantially the form attached hereto as Exhibit A (the "COMPANY
VOTING AGREEMENTS").
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
E. As an inducement for Parent to enter into this Agreement, each of the
individuals set forth on Exhibit E hereof (the "KEY EMPLOYEES") shall execute
the form of Non-Competition/Non-Solicitation Agreement attached hereto as
Exhibit F.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
the Company (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "SURVIVING CORPORATION".
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF
MERGER") (the time of such filing with the Secretary of State of the State of
Delaware (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 practicable on or after the Closing Date (as herein defined). Unless
the context otherwise requires, the term "AGREEMENT" as used herein refers
collectively to this Agreement and Plan of Reorganization and the Certificate of
Merger. The closing of the Merger (the "CLOSING") shall take place at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, at a time
and
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date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "CLOSING DATE").
1.3 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. Without limiting the generality of the foregoing, and subject thereto, 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.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation of the Surviving
Corporation; provided, however, that at the Effective Time the Certificate of
Incorporation of the Surviving Corporation shall be amended so that the name of
the Surviving Corporation shall be "Xxxxxxx.Xxx".
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, until their respective successors are duly elected or appointed and
qualified. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, until their
respective successors are duly appointed.
1.6 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 Merger Sub, the Company or the holders of any of the following
securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of common stock,
par value $0.01, of the Company ("COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, other than any shares
of the Company Common Stock to be canceled pursuant to Section 1.6(b), will
be canceled and extinguished and automatically converted (subject to
Section 1.6(e)) into the right to receive 0.425 of a share of Parent Common
Stock (the "Exchange Ratio").
(b) Cancellation of Parent-Owned Stock. Each share of Company Common
Stock held by the Company or owned by Merger Sub, Parent or any direct or
indirect wholly-owned subsidiary of the Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the Effective
Time, all options to purchase Company Common Stock then outstanding under
the 1995 Stock Option Plan and the 1999 Stock Option Plan (the "COMPANY
STOCK OPTION PLANS") shall be assumed by Parent in accordance with Section
5.9 hereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock of Merger
Sub (the "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 of the Surviving
Corporation. Each certificate evidencing ownership of shares of Merger Sub
Common Stock shall evidence ownership of such shares of capital stock of
the Surviving Corporation.
(e) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock that otherwise would be received
by such holder) shall, upon
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surrender of such holder's Certificate(s) (as defined in Section 1.7(c)),
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction, multiplied by
(ii) the closing price of Parent Common Stock on the last full trading day
prior to Closing as reported on the Nasdaq National Market System.
(f) Adjustments to Exchange Ratio. The Exchange Ratio 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 Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification or other like change
with respect to Parent Common Stock or Company Common Stock occurring on or
after the date hereof and prior to the Effective Time.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select an institution reasonably
satisfactory to the Company to act as the exchange agent (the "EXCHANGE AGENT")
in the Merger.
(b) Parent to Provide Cash and Common Stock. Within ten (10) business days
after the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, (i) the shares of Parent Common
Stock issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Common Stock, (ii) cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.6(e) and (iii) any dividends or
distributions which holders of shares of Company Common Stock may be entitled
pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "CERTIFICATES") which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6, cash in lieu of any fractional shares
pursuant to Section 1.6(e) and any dividends or other distributions pursuant to
Section 1.7(d), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) Form W-9 and (iii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock, cash in lieu of any fractional shares pursuant to Section 1.6(e) and any
dividends or other distributions pursuant to Section 1.7(d). Upon surrender of
Certificates for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor certificates representing the number of whole shares of Parent Common
Stock which such holders have the right to receive pursuant to Section 1.6(e),
payment in lieu of fractional shares which such holders have the right to
receive pursuant to Section 1.6(e) and any dividends or distributions payable
pursuant to Section 1.7(d), and the Certificates so surrendered shall forthwith
be canceled. Until so surrendered, outstanding Certificates will be deemed from
and after the Effective Time, for all corporate purposes, subject to Section
1.7(d) as to the payment of dividends, to evidence the ownership of the number
of full shares of Parent Common Stock into which such shares of Company Common
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.6(e)
and any dividends or distributions payable pursuant to Section 1.7(d). No
interest will be paid or will accrue on the cash consideration payable upon the
surrender of any Certificate.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after February 2, 2000 with respect to Parent
Common Stock with a record date after the Effective Time will be paid to the
holders of any unsurrendered Certificates with respect to the shares of Parent
Common Stock represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of
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Parent Common Stock issued in exchange therefor along with payment in lieu of
fractional shares pursuant to Section 1.6(e) hereof and the amount of any such
dividends or other distributions with a record date after the Effective Time
payable with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of Parent Common
Stock are to be issued in a name other than that in which the Certificates
surrendered in exchange therefor are registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the persons requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of the certificates for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) Required Withholding. Each of the Exchange Agent, 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 Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable Legal Requirement
(as defined in Section 2.2(c)). 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.
(g) No Liability. Notwithstanding anything to the contrary in this Section
1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All cash and
shares of Parent Common Stock issued upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms hereof (including any cash
paid in respect thereof pursuant to Section 1.6(e) and 1.7(d)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Common Stock
which 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 I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common
Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(e) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may direct as
indemnity against any claim that may be made against Parent, the Company or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations. Accordingly, both prior to and after the Closing Date,
each party's books and records shall be maintained and federal, state and local
income tax and returns and schedules thereto shall be filed in a manner
consistent with the Merger being qualified as a tax-free merger under Section
368(a) of the Code (unless a court of competent jurisdiction renders a
determination (as defined in Section 1313(a)(1) of the Code) that the Merger
does not qualify as such). Each party shall provide to each other such
information, reports, returns or schedules as may be reasonably required to
assist such party in accounting for reporting the Merger being so qualified.
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1.11 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, so long
as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of February 2, 2000 and as of the Closing Date, the Company represents
and warrants to Parent and Merger Sub, subject to the exceptions specifically
disclosed in writing in the disclosure letter and referencing a specific
representation (except that disclosure in one part of the disclosure letter
shall be deemed to be disclosure with respect to all reasonably applicable
sections of the disclosure letter) supplied by the Company to Parent dated as of
February 2, 2000 and certified by a duly authorized officer of the Company (the
"COMPANY SCHEDULES"), as follows:
2.1 Organization of the Company.
(a) The Company has no subsidiaries, except for the corporations identified
in Part 2.1(a)(i) of the Company Schedules; and neither the Company nor any of
the other corporations identified in Part 2.1(a)(i) of the Company Schedules
owns any capital stock of, or any equity interest of any nature in, any other
entity, other than the entities identified in Part 2.1(a)(ii) of the Company
Schedules, except for passive investments in equity interests of public
companies as part of the cash management program of the Company. Except as
identified in Part 2.1(a)(ii) of the Company Schedules, neither the Company nor
any subsidiary thereof has agreed or is obligated to make, or is bound by any
written, oral or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature, as in effect as of February 2, 2000 or as may
hereinafter be in effect ("CONTRACT") under which Contract it may become
obligated to make, any future investment in or capital contribution to any other
entity. Neither the Company nor any subsidiary thereof is or at any time, has
been a general partner of any general partnership, limited partnership or other
entity.
(b) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) The Company and each of its subsidiaries is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect (as defined
in Section 8.3) on the Company.
(d) The Company has delivered or made available to Parent a true and
correct copy 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. The Company is not in violation of any of the
provisions of the Company Charter Documents. None of the Company's subsidiaries
is in violation of any provision of its Articles or Certificate of Incorporation
or Bylaws or other similar governing instruments, except for such violations as
are not material to the Company and its subsidiaries taken as a whole.
(e) The Company has delivered or made available to Parent all proposed or
considered amendments to the Company Charter Documents.
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2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of: (i)
100,000,000 shares of Company Common Stock, $0.01 par value, of which 15,734,119
shares have been issued and are outstanding as of February 2, 2000; and (ii)
1,000,000 shares of preferred stock, $0.01 par value, of which no shares are
outstanding as of February 2, 2000. All of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued, and are fully
paid and nonassessable. As of February 2, 2000, there are no shares of Company
Common Stock held in treasury by the Company. Upon consummation of the Merger,
(A) the shares of Parent Common Stock and cash issued in exchange for any shares
of Company Common Stock that are subject to a Contract pursuant to which the
Company has the right to repurchase, redeem or otherwise reacquire any shares of
Company Common Stock will, without any further act of Parent, the Company or any
other person, become subject to the restrictions, conditions and other
provisions contained in such Contract, and (B) Parent will automatically succeed
to and become entitled to exercise the Company's rights and remedies under any
such Contract. Except as set forth in Part 2.2(a) of the Company Schedules,
there are no shares of Company Common Stock immediately prior to the Effective
Time that are unvested or that are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company.
(b) As of February 2, 2000: (i) 1,695,333 shares of Company Common Stock
are subject to issuance pursuant to outstanding options to purchase Company
Common Stock under the Company Stock Option Plans (excluding options granted
pursuant to Section 5.9(d)); and (ii) 960,155 shares of Company Common Stock are
reserved for future grant under the Company's 1999 Stock Option Plan. Stock
options granted by the Company pursuant to the Company Stock Option Plans are
referred to in this Agreement as "COMPANY OPTIONS". Part 2.2(b) of the Company
Schedules sets forth the following information with respect to each Company
Option outstanding as of February 2, 2000: (i) the name and address of the
optionee; (ii) the particular plan pursuant to which such Company Option was
granted; (iii) the number of shares of Company Common Stock subject to such
Company Option; (iv) the exercise price of such Company Option; (v) the date on
which such Company Option was granted; (vi) the applicable vesting schedule;
(vii) the date on which such Company Option expires; (viii) whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement, and indicates the extent of any such
acceleration; and (ix) whether or not such option was granted with the intention
to qualify as an "incentive stock option" within the meaning of Section 422 of
the Code (i) through (ix) collectively, "INFORMATION OPTION". The Company has
made available to Parent accurate and complete copies of all stock option plans
pursuant to which the Company has granted stock options that are currently
outstanding and the form of all stock option agreements evidencing such options.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. Except as set forth in Part 2.2(b)(i) of the Company
Schedules, there are no commitments or agreements of any character to which the
Company is bound obligating the Company to accelerate the vesting of any Company
Option as a result of the Merger. Each Company Option shall be assumed as set
forth in Section 5.9.
(c) All outstanding shares of Company Common Stock, all outstanding Company
Options, and all outstanding shares of capital stock of each subsidiary of the
Company have been issued and granted in compliance with (i) all applicable
securities laws and, to the knowledge of the Company, other applicable Legal
Requirements (as defined below) and (ii) all requirements set forth in
applicable Contracts. For the purposes of this Agreement, "LEGAL REQUIREMENTS"
means any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined below).
2.3 Obligations With Respect to Capital Stock. Except as set forth in Part
2.3 of the Company Schedules and except for options under the Company Stock
Option Plans, there are no securities exchangeable or convertible into or
exercisable for any equity securities, partnership interests or similar
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ownership interests of any class of any Company equity security, issued,
reserved for issuance or outstanding. Except for securities the Company owns
free and clear of all claims and Encumbrances (as defined below), directly or
indirectly through one or more subsidiaries, and except for shares of capital
stock or other similar ownership interests of certain subsidiaries of the
Company that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries (which
shares or other interests do not materially affect the Company's control of such
subsidiaries), as of February 2, 2000, there are no securities exchangeable or
convertible into or exercisable for any class of equity security of any
subsidiary of the Company, issued, reserved for issuance or outstanding. For the
purposes of this Agreement "ENCUMBRANCES" means any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or, to the knowledge of the Company, 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. Except as
set forth in Part 2.3 of the Company Schedules or as set forth in Section 2.2
hereof, there are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its subsidiaries is a party or by which it is bound obligating
or permitting the Company or any of its subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of the
Company or any of its subsidiaries or obligating or permitting the Company or
any of its subsidiaries to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. As of February 2, 2000, except as contemplated by this
Agreement and pursuant to that certain Third Amended and Restated Registration
Rights Agreement dated September 15, 1999 (the "COMPANY REGISTRATION RIGHTS
AGREEMENT"), there are no registration rights and there is, except for the
Company Voting Agreement, no voting trust, proxy, rights plan, antitakeover plan
or other agreement or understanding to which the Company is a party or by which
it or, to the knowledge of the Company, any of the stockholders of the Company
is bound with respect to any equity security of any class of the Company or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries. Stockholders of the Company
will not be entitled to dissenters' rights under applicable state law in
connection with the Merger.
2.4 Authority; Non-Contravention.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company, subject only to the
approval and adoption of this Agreement and the approval of the Merger by the
Company's stockholders and the filing of the Certificate of Merger pursuant to
Delaware Law. A vote of the holders of a majority of the outstanding shares of
the Company Common Stock is sufficient for the Company's stockholders to approve
and adopt this Agreement and approve the Merger. This Agreement has been duly
executed and delivered by the Company and, assuming due execution and delivery
by Parent and Merger Sub, constitutes a valid and binding obligations of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will not,
(i) conflict with or violate the Company Charter Documents, (ii) subject to
obtaining the approval and adoption of this Agreement and the approval of the
Merger by the Company's stockholders as contemplated in Section 5.2 and
compliance with the requirements set forth in Section 2.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or any of its subsidiaries or by which the Company or any of its
subsidiaries or any of their respective properties is bound, 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
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impair the Company'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 lien or
Encumbrance on any of the material properties or assets of the Company or any of
its subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective assets are bound. Part 2.4(a) of the Company Schedules lists all
consents, waivers and approvals under any of the Company's or any of its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby,
which, if individually or in the aggregate not obtained, would result in a
material loss of benefits to the Company, Parent or the Surviving Corporation as
a result of the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("GOVERNMENTAL ENTITY"), 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 Merger, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) approval of the
Prospectus/Proxy Statement (as defined in Section 2.19) and the Registration
Statement (as defined in Section 2.19) by the Securities and Exchange Commission
("SEC") in accordance with the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the securities or antitrust laws of any foreign country, and (iv) to
the knowledge of the Company, such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to the Company or Parent or have a material adverse effect on the ability of the
parties hereto to consummate the Merger.
2.5 SEC Filings; Company Financial Statements; No Undisclosed Liabilities.
(a) The Company has filed all forms, reports and documents required to be
filed by the Company with the SEC since December 8, 1999 and has made available
to Parent such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that the Company may
file subsequent to February 2, 2000) are referred to herein as the "COMPANY SEC
REPORTS". As of their respective dates, the Company SEC Reports (including, but
not limited to, the Company's registration statement on form S-1 and the
prospectus included therein) (i) were prepared in accordance and complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Reports and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports (the "COMPANY
FINANCIALS"), including each Company SEC Reports filed after February 2, 2000
until the Closing, (i) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of the Company's operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and were or are subject to normal and
recurring year-end adjustments. The audited balance sheet of the Company as of
September 30, 1999 previously delivered to Parent by the Company
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and contained in the Company SEC Reports as of December 8, 1999 is hereinafter
referred to as the "COMPANY BALANCE SHEET."
(c) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
(d) The Company issued stock in an initial public offering pursuant to a
registration statement on Form S-1 (the "COMPANY S-1"), which was declared
effective on December 8, 1999 (the "EFFECTIVE DATE") and a prospectus (the
"COMPANY PROSPECTUS"), the final form of which was filed with the SEC on
December 8, 1999 pursuant to Rule 424(b) of the Securities Act. At the Effective
Date, the Company S-1 did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements not misleading.
(e) Neither Company nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Company and its subsidiaries taken as a whole, except (i)
liabilities provided for in Company Balance Sheet or (ii) liabilities incurred
since September 30, 1999 in the ordinary course of business, none of which is
material to the business, results of operations or financial condition of
Company and its subsidiaries, taken as a whole.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (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
the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock, (iv) except as set forth in Part 2.6 of the Company
Schedules, any granting by the Company or any of its subsidiaries of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by the Company or any of its subsidiaries of any bonus, except
for bonuses made in the ordinary course of business consistent with past
practice, or (v) any granting by the Company or any of its subsidiaries of any
increase in severance or termination pay or (vi) any entry by the Company or any
of its subsidiaries into any currently effective employment, severance,
termination or indemnification agreement or any other agreement the benefits of
which are contingent or the terms of which are materially altered upon the
occurrence of a transaction involving the Company of the nature contemplated
hereby, (vii) entry by the Company or any of its subsidiaries into any licensing
or other agreement with regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 2.9) other than licenses in the
ordinary course of business consistent with past practice, (viii) any amendment
or consent with respect to any licensing agreement filed or required to be filed
by the Company with the SEC, (ix) any material change by the Company in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, (x) any revaluation by the Company of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business and consistent with past practice; or (xi) any changes in the vesting
schedules of outstanding Company Options.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "TAX" or
"TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales,
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use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits.
(i) The Company and each of its subsidiaries have timely filed all
federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") relating to Taxes required to be filed
by the Company and each of its subsidiaries with any Tax authority. The
Company and each of its subsidiaries have paid all Taxes shown to be due on
such Returns.
(ii) The Company and each of its subsidiaries as of the Effective Time
will have withheld with respect to its employees all federal and state
income taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA"), Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and
other Taxes required to be withheld.
(iii) Neither the Company nor any of its subsidiaries has been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed in writing (or otherwise, to the Company's knowledge,
proposed) or assessed against the Company or any of its subsidiaries, nor
has the Company or any of its subsidiaries executed any unexpired waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of the Company or any
of its subsidiaries by any Tax authority is presently in progress, nor has
the Company or any of its subsidiaries been notified in writing (or
otherwise, to the Company's knowledge, notified) of any request for such an
audit or other examination.
(v) No adjustment relating to any Returns filed by the Company or any
of its subsidiaries has been proposed in writing formally or informally by
any Tax authority to the Company or any of its subsidiaries or any
representative thereof.
(vi) Neither the Company nor any of its subsidiaries has any liability
for unpaid Taxes which has not been accrued for or reserved on the Company
Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to the Company, other than any liability for unpaid Taxes
that may have accrued since the date of the Company Balance Sheet in
connection with the operation of the business of the Company and its
subsidiaries in the ordinary course.
(vii) Except as set forth on Part 2.7(b) of the Company Schedules,
there is no contract, agreement, plan or arrangement to which the Company
is a party as of February 2, 2000, including but not limited to the
provisions of this Agreement, covering any employee or former employee of
the Company or any of its subsidiaries that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Sections 280G, 404 or 162(m) of the Code.
(viii) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by the Company.
(ix) Neither the Company nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(x) Except as may be required as a result of the Merger, the Company
and its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions,
events or accounting methods employed prior to the Closing.
(xi) Part 2.7 of the Company Schedules lists (A) any foreign Tax
holidays, (B) any intercompany transfer pricing agreements, or other
arrangements that have been established by the
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Company or any of its subsidiaries with any Tax authority and (C) any
expatriate programs or policies affecting the Company or any of its
subsidiaries.
(xii) None of the Company or its subsidiaries (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 of the Company
and its subsidiaries) 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.
(xiii) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (x) in the two years prior to February 2, 2000 or (y) in a
distribution which could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the Code)
in conjunction with the Merger.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) Part 2.8(a)(i) of the Company Schedules lists the real property
interests owned by the Company as of February 2, 2000. Part 2.8(a)(ii) of the
Company Schedules lists all real property leases to which the Company is a party
as of February 2, 2000 and each amendment thereto that is in effect as of
February 2, 2000. All such current leases are in full force and effect and 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 material claim. Other than the leaseholds created under the
real property leases identified in Part 2.8(a)(ii) of the Company Schedules, the
Company owns no interest in real property.
(b) The Company has good and valid 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 liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS"), except as reflected in
the Company Financials and except for liens for taxes not yet due and payable
and such Liens or other imperfections of title and encumbrances, if any, which
are not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
2.9 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, URLs, domain names,
common law trademarks and service marks, trademark and service xxxx
registrations and applications therefor throughout the world; (vi) all databases
and data collections and all rights therein throughout the world; (vii) all
moral and economic rights of authors and inventors, however denominated,
throughout the world; and (viii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, the Company and its subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications related to
trademarks; (iii) registered domain names and reserved domain names, (iv)
registered copyrights and applications for
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copyright registration; and (v) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or its
subsidiaries.
(a) No Company Intellectual Property or product or service of the
Company is subject to any proceeding or outstanding decree, order,
judgment, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by the Company, or which may affect the
validity, use or enforceability of such Company Intellectual Property.
(b) Part 2.9(b) of the Company Schedules is a complete and accurate
list of all Company Registered Intellectual Property and specifies, where
applicable, the jurisdictions in which each such item of Company Registered
Intellectual Property has been issued or registered or in which an
application for such issuance and registration has been filed, including
the respective registration or application numbers. Each material item of
Company Registered Intellectual Property is valid and subsisting, all
necessary registration, maintenance and renewal fees currently due in
connection with such Registered Intellectual Property have been made and
all necessary documents, recordations and certificates in connection with
such Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property.
(c) The Company owns and has good and exclusive title to, or has
license to or otherwise has a right to use or exploit in the way it has
been used as of February 2, 2000, each material item of Company
Intellectual Property or other Intellectual Property used by the Company
free and clear of any Encumbrance (excluding licenses and related
restrictions granted in the ordinary course of business consistent with
past practices); and the Company is the exclusive owner of all trademarks
and trade names used in connection with the operation or conduct of the
business of the Company, including the sale of any products or the
provision of any services by the Company.
(d) The Company owns exclusively, and has good title to, all
copyrighted works that are Company products or which the Company otherwise
expressly purports to own.
(e) Neither the Company nor its subsidiaries have transferred
ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was material to the Company Intellectual
Property, to any third party.
(f) To the extent that any material technology, software or
Intellectual Property has been developed or created independently or
jointly by a third party for Company or any of its subsidiaries or is
incorporated into any of the Company Products, Company has a written
agreement with such third party with respect thereto and Company thereby
either (i) has obtained ownership of, and is the exclusive owner of, or
(ii) has obtained a perpetual, non-terminable license (sufficient for the
conduct of its business as currently conducted and as proposed to be
conducted) to all such third party's Intellectual Property in such work,
material or invention by operation of law or by valid assignment, to the
fullest extent it is legally possible to do so. The Company Schedules list
all material contracts, licenses and agreements to which the Company is a
party (i) with respect to Company Intellectual Property licensed or
transferred to any third party (other than end-user licenses in the
ordinary course); or (ii) pursuant to which a third party has licensed or
transferred any material Intellectual Property to the Company.
(g) All material contracts, licenses and agreements relating to either
(i) Company Intellectual Property or (ii) Intellectual Property of a third
party licensed to Company or any of its subsidiaries, are in full force and
effect. The consummation of the transactions contemplated by this Agreement
will neither violate nor result in the breach, modification, cancellation,
termination or suspension of such contracts, licenses and agreements. Each
of Company and its subsidiaries is in material compliance with, and has not
materially breached, any term of any such contracts, licenses and
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agreements and, to the knowledge of Company, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached, any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of Company's rights under such contracts, licenses and
agreements to the same extent Company and its subsidiaries 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 Company would otherwise be
required to pay. Neither this Agreement nor the transactions contemplated
by this Agreement, including the assignment to Parent or Merger Sub by
operation of law or otherwise of any contracts or agreements to which the
Company is a party, will result in (i) either Parent's or the Merger Sub's
granting to any third party any right to or with respect to any material
Intellectual Property right owned by, or licensed to, either of them, (ii)
either the Parent's or the Merger Sub's being bound by, or subject to, any
non-compete or other material restriction on the operation or scope of
their respective businesses, or (iii) either the Parent's or the Merger
Sub's being obligated to pay any royalties or other material amounts to any
third party in excess of those payable by Company prior to the Closing.
(h) The operation of the business of the Company and its subsidiaries
as such business currently is conducted, including the Company's design,
development, marketing and sale of the products or services of the Company
(including with respect to products currently under development) has not,
does not and will not infringe or misappropriate the Intellectual Property
of any third party or constitute unfair competition or trade practices
under the laws of any jurisdiction.
(i) The Company has received neither written, nor to the Company's
knowledge, oral notice from any third party that the operation of the
business of the Company or any act, product or service of the Company,
infringes or misappropriates the Intellectual Property of any third party
or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(j) To the knowledge of the Company, no person has infringed or
misappropriated or is infringing or misappropriating any Company
Intellectual Property.
(k) The Company has taken reasonable steps to protect the Company's
rights in the Company's confidential information and trade secrets that it
wishes to protect or any trade secrets or confidential information of third
parties provided to the Company, and, without limiting the foregoing, the
Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement in the form
attached hereto as Exhibit F and, except as set forth on Part 2.9(l) of the
Company Schedules, all current and former employees and contractors of the
Company have executed such an agreement.
2.10 Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or in violation of (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which the Company or any of its subsidiaries or any of their
respective properties is bound, or (ii) any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective businesses or properties is bound, except for conflicts, violations
and defaults that (individually or in the aggregate) would not cause the Company
to lose any material benefit or incur any material liability. No investigation
or review by any Governmental Entity is pending or, to the Company's knowledge,
has been threatened in a writing delivered to the Company, against the Company
or any of its subsidiaries, nor, to the Company's knowledge, has any
Governmental Entity indicated an intention to conduct an investigation of the
Company or any of its subsidiaries. There is no material agreement, judgment,
injunction, order or decree binding upon the Company or any of its subsidiaries
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
subsidiaries, any acquisition of material property by the Company or any of its
subsidiaries or the conduct of business by the Company as currently conducted.
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(b) The Company and its subsidiaries hold, to the extent legally required,
all permits, licenses, variances, exemptions, orders and approvals from
Governmental Entities that are material to and required for the operation of the
business of the Company as currently conducted (collectively, the "COMPANY
PERMITS"). The Company and its subsidiaries are in compliance in all material
respects with the terms of the Company Permits, except where the failure to be
in compliance with the terms of the Company Permits would not be material to the
Company.
2.11 Litigation. Except as disclosed in Part 2.11 of the Company
Schedules, there are no claims, suits, actions or proceedings pending or, to the
knowledge of the Company, threatened against, relating to or affecting the
Company or any of its subsidiaries, before any court, governmental department,
commission, agency, instrumentality or authority, 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 be material to the
Company. No Governmental Entity has at any time challenged or questioned in a
writing delivered to the Company the legal right of the Company to design,
manufacture, offer or sell any of its products or services in the present manner
or style thereof.
Except as disclosed in Part 2.11 of the Company Schedules, the Company has
never been subject to an audit, compliance review, investigation or like
contract review by the GSA office of the Inspector General or other Governmental
Entity or agent thereof in connection with any government contract (a
"GOVERNMENT AUDIT"), to the Company's knowledge no Government Audit is
threatened, and in the event of such Government Audit, to the knowledge of the
Company, no basis exists for a finding of noncompliance with any material
provision of any government contract or a refund of any amounts paid or owed by
any Governmental Entity pursuant to such government contract. For each item
disclosed in the Company Schedule pursuant to this Section 2.11 a true and
complete copy of all correspondence and documentation with respect thereto has
been made available to Parent.
2.12 Brokers' and Finders' Fees. Except for fees payable to X.X. Xxxxxxxxx
pursuant to an engagement letter dated January 20, 2000 a copy of which has been
provided to Parent, the Company 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.
2.13 Transactions with Affiliates. Except as set forth in the Company SEC
Reports, since September 30, 1999, no event has occurred as of February 2, 2000
that would be required to be reported by the Company pursuant to Item 404 of
Regulation S-K promulgated by the SEC. Part 2.13 of the Company Schedules
identifies each person who is an "affiliate" (as that term is used in Rule 145
promulgated under the Securities Act) of the Company as of February 2, 2000.
2.14 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section 2.14(a)(i) below (which definition shall apply only to this
Section 2.14), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under common
control with the Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded
or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by the
Company or any Affiliate for the benefit of any Employee
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(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current, former, or retired employee,
officer, or director of the Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company Employee
Plan that has been adopted or maintained by the Company, whether informally
or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
(xiii) "PENSION PLAN" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule. Part 2.14(b) of the Company Schedules contain an accurate and
complete list of each Company Employee Plan and each material Employee
Agreement. The Company does not have any legally binding plan or commitment to
establish any new Company Employee Plan, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
material Employee Agreement, nor does it have any intention or commitment to do
any of the foregoing. Since December 31, 1999 the Company has hired five
employees and has indicated in written offer letters that an aggregate of 37,000
options would be granted to these employees (the "NEW OPTIONS"); none of the
vesting terms of the New Options shall accelerate as a result of the actions
contemplated by this Agreement.
(c) Documents. The Company has provided or made available to Parent: (i)
correct and complete copies of all documents embodying each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; (iv) if the Company Employee Plan
is funded, the most recent annual and periodic accounting of Company Employee
Plan assets; (v) the most recent summary plan description together with the
summary of material modifications thereto, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and rulings relating to Company Employee
Plans and copies of all applications and correspondence to or from the IRS or
the DOL with respect to any Company Employee Plan; (vii) all material written
agreements and contracts relating to each Company Employee Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
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to the Company; (ix) all COBRA forms and related notices; and (x) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth in Part 2.14(d) of the
Company Schedules, (i) the Company has performed in all material respects all
obligations required to be performed by it under, is not in default or violation
of, and has no knowledge of any default or violation by any other party to each
Company Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination letter from the IRS with respect to each such Plan as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has remaining a
period of time under applicable Treasury regulations or IRS pronouncements in
which to apply for such a determination letter and make any amendments necessary
to obtain a favorable determination; (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; (iv) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or reasonably anticipated (other
than routine claims for benefits) against any Company Employee Plan or against
the assets of any Company Employee Plan; (v) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent, the Company or any of
its Affiliates (other than ordinary administration expenses typically incurred
in a termination event); (vi) there are no audits, inquiries or proceedings
pending or, to the knowledge of the Company or any Affiliates, threatened by the
IRS or DOL with respect to any Company Employee Plan; and (vii) neither the
Company nor any Affiliate is subject to any penalty or tax with respect to any
Company Employee Plan under Section 402(i) of ERISA or Sections 4975 through
4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or been
requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan 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 law, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) Neither the Company nor any Affiliate has, prior to the Effective Time,
and in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA or any similar provisions of
state law applicable to its Employees.
(i) Effect of Transaction. Except as set forth on Part 2.14(i) of the
Company Schedules, 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, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any former or current Employee or director.
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(j) Employment Matters. The Company: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any material payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security 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 claims or actions against the Company
under any worker's compensation policy or long-term disability policy. To the
Company's knowledge, no employee of the Company has violated any employment
contract, nondisclosure agreement or noncompetition agreement by which such
employee is bound due to such employee being employed by the Company and
disclosing to the Company or using trade secrets or proprietary information of
any other person or entity.
(k) Labor. No work stoppage or labor strike against the Company is pending,
threatened or reasonably anticipated. The Company does not know 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
knowledge of the Company, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to the Company. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. The Company is not presently, nor
has it been in the past, 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 the Company.
(l) International Employee Plan. Each International Employee Plan has been
established, maintained and administered in material compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent the Company or Parent
from terminating or amending any International Employee Plan at any time for any
reason.
(m) Restricted Stock. No shares of outstanding Company Common Stock are
unvested or are subject to a repurchase option, risk of forfeiture or other
condition under any applicable restricted stock purchase agreement or other
agreement with the Company.
2.15 Environmental Matters.
(a) Hazardous Material. Except as would not result in material liability to
the Company, no underground storage tanks and no amount of any substance that
has been designated by any Governmental Entity or by applicable federal, state
or local law to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies,
(a "HAZARDOUS MATERIAL") are present, or as a result of the actions of the
Company or any of its subsidiaries or any affiliate of the Company, or, to the
Company's knowledge, as a result of any actions of any third party or otherwise,
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that the Company or any of its subsidiaries has
at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result in a
material liability to the Company (in any individual case or in the aggregate)
(i) neither the Company nor any of its subsidiaries
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has transported, stored, used, manufactured, disposed of, released or exposed
its employees or others to Hazardous Materials in violation of any law in effect
on or before the Closing Date, and (ii) neither the Company nor any of its
subsidiaries has disposed of, transported, sold, used, released, exposed its
employees or others to or manufactured any product containing a Hazardous
Material (collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of February 2, 2000 to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to the
Company's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against the Company or any of its subsidiaries in a writing delivered to the
Company concerning any Company Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of the Company or any of its subsidiaries. The
Company is not aware of any fact or circumstance which could involve the Company
or any of its subsidiaries in any environmental litigation or impose upon the
Company any material environmental liability.
2.16 Year 2000 Compliance. Except as disclosed in Part 2.16 of the Company
Schedules, the Company's products and internal systems have been designed to
ensure date and time entry recognition, calculations that accommodate same
century and multi-century formulas and date values, leap year recognition and
calculations, and date data interface values that reflect the century. The
Company's products and internal systems manage and manipulate data involving
dates and times, including single century formulas and multi-century formulas,
and do not cause an abnormal ending scenario within the application or generate
incorrect values or invalid results involving such dates.
2.17 Agreements, Contracts and Commitments. Except as otherwise set forth
in Part 2.14 or 2.17 of the Company Schedules, neither the Company nor any of
its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
greater than $100,000 with any officer, employee or member of the Company's
Board of Directors, other than those that are terminable by the Company or
any of its subsidiaries on no more than thirty (30) days' notice without
liability or financial obligation, except to the extent general principles
of wrongful termination law may limit the Company's or any of its
subsidiaries' ability to terminate employees at will;
(b) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or
license of software products in the ordinary course of business;
(c) any agreement, contract or commitment containing any covenant
limiting in any respect the right of the Company or any of its subsidiaries
to engage in any line of business or to compete with any person or granting
any exclusive distribution rights;
(d) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by the Company or any of its subsidiaries
after February 2, 2000 of a material amount of assets not in the ordinary
course of business or pursuant to which the Company has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than the Company's subsidiaries;
(e) any joint marketing or development agreement currently in force
under which the Company or any of its subsidiaries have continuing material
obligations to jointly market any product, technology or service and which
may not be canceled without penalty upon notice of 90 days or less, or any
material agreement pursuant to which the Company or any of its subsidiaries
have continuing
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material obligations to jointly develop any intellectual property that will
not be owned, in whole or in part, by the Company or any of its
subsidiaries and which may not be canceled without penalty upon notice of
90 days or less;
(f) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that
is material to the Company and its subsidiaries taken as a whole;
(g) except as set forth on Part 2.2 of Company Schedules, any
agreement or plan, including, without limitation, any stock option plan,
stock appreciation right plan or stock purchase plan, 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;
(h) any agreement, contract or commitment currently in force to sell
or distribute any Company products, service or technology except agreements
with distributors or sales representatives in the normal course of business
cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided to Parent;
(i) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit;
(j) any settlement agreement entered into within three (3) years prior
to February 2, 2000; or
(k) any other agreement, contract or commitment that has a value of
$100,000 or more individually.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), is in
breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound that are required to be
disclosed in the Company Schedules or are required to be filed with any Company
SEC Report (any such agreement, contract or commitment, a "COMPANY CONTRACT") in
such a manner as would permit any other party 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 of such breaches, violations or defaults, in the
aggregate).
2.18 [RESERVED].
2.19 Disclosure. None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
registration statement on Form S-4 (or similar successor form) to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock in the
Merger (the "REGISTRATION STATEMENT") will, at the time the Registration
Statement is filed with the SEC or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
Prospectus/Proxy Statement to be filed with the SEC as part of the Registration
Statement (the "PROSPECTUS/PROXY STATEMENT"), will, at the time the
Prospectus/Proxy Statement is mailed to the stockholders of the Company, at the
time of the Company Stockholders' Meeting or as of the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing,
the Company makes no
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representation or warranty with respect to any information supplied by the
Parent which is contained in any of the foregoing documents.
2.20 Board Approval. The Board of Directors of the Company has, as of
April 25, 2000, unanimously (i) determined that the Merger is fair to, and in
the best interests of the Company and its stockholders, (ii) approved and deemed
advisable, subject to stockholder approval, this Agreement and the transactions
contemplated hereby and (iii) determined to recommend that the stockholders of
the Company approve and adopt this Agreement and approve the Merger.
2.21 Fairness Opinion. The Company's Board of Directors has received a
verbal opinion from X.X. Xxxxxxxxx, dated as of April 25, 2000, to the effect
that as of April 25, 2000, the Exchange Ratio is fair to the Company's
stockholders from a financial point of view and has delivered to Parent such
verbal opinion. The Company has a legally enforceable agreement with X.X.
Xxxxxxxxx to provide this opinion in writing to the Company within three (3)
days of April 25, 2000 and that such opinion shall be included in the
Prospectus/Proxy Statement.
2.22 Restrictions on Business Activities. Except as set forth in Part 2.22
of the Company Schedule, there is no agreement, commitment, judgment,
injunction, order or decree binding upon the Company or to which the Company is
a party which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of the Company, any
acquisition of property by the Company or the conduct of business by the Company
as currently conducted.
2.23 Insurance. The Company maintains insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company and its subsidiaries
(collectively, the "INSURANCE POLICIES") which are of the type and in amounts
customarily carried by persons conducting businesses similar to those of the
Company and its subsidiaries. There is no material claim by the Company or any
of its subsidiaries pending under any of the material Insurance Policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds.
2.24 State Takeover Statutes. No state takeover statute or similar statute
or regulation applies to or purports to apply to the Merger, this Agreement and
the Company Voting Agreements or the transactions contemplated by this Agreement
and the Company Voting Agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of February 2, 2000 and as of the Closing Date, Parent and Merger Sub
represent and warrant to the Company, as follows:
3.1 Organization and Qualification; Subsidiaries. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, except
where the failure to do so would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Each of Parent and its subsidiaries is in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. Each
of Parent and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, 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 for such
failures to be so duly qualified or licensed and in good standing that would
not, either individually or in the aggregate, have a Material Adverse Effect on
Parent.
3.2 Certificate of Incorporation and Bylaws. Parent has previously
furnished to Company complete and correct copies of its Certificate of
Incorporation and Bylaws, (the "PARENT CHARTER DOCUMENTS") as
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amended to date. Such Parent Charter Documents and equivalent organizational
documents of each of its subsidiaries are in full force and effect. Parent is
not in violation of any of the provisions of the Parent Charter Documents, and
no subsidiary of Parent is in violation of any of its equivalent organizational
documents.
3.3 Capitalization. The authorized capital stock of Parent consists of (i)
250,000,000 shares of Parent Common Stock, par value $0.001 per share, and (ii)
10,000,000 shares of Preferred Stock, par value $0.001 per share ("PARENT
PREFERRED STOCK"). At the close of business on January 31, 2000 (i) 41,385,986
shares of Parent Common Stock were issued and outstanding, (ii) 0 shares of
Parent Common Stock were held in treasury by Parent or by subsidiaries of
Parent, (iii) 1,000,000 shares of Parent Common Stock were reserved for future
issuance pursuant to Parent's employee stock purchase plan, and (iv) 8,144,826
shares of Parent Common Stock were reserved for issuance upon the exercise of
outstanding options ("PARENT OPTIONS") to purchase Parent Common Stock. As of
February 2, 2000, no shares of Parent Preferred Stock were issued or
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, par value $0.001 per share, all of which, as of February 2,
2000, are issued and outstanding. All of the outstanding shares of Parent's and
Merger Sub's respective capital stock have been duly authorized and validly
issued and are fully paid and nonassessable. All shares of Parent Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, shall, and the
shares of Parent Common Stock to be issued pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares) are
owned by Parent or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever.
3.4 Authority; Non-Contravention.
(a) Parent and Merger Sub have 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 have been duly authorized by all necessary
corporate action on the part of Parent, subject only to the filing of the
Certificate of Merger pursuant to Delaware Law. This Agreement has been duly
executed and delivered by Parent and Merger Sub, and upon due execution and
delivery by the Company, constitutes a valid and binding obligation 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 and general principles of equity. The execution and delivery of this
Agreement by Parent and Merger Sub do not, and the performance of this Agreement
by Parent and Merger Sub will not, (i) conflict with Parent Charter Documents,
(ii) subject to compliance with the requirements set forth in Section 3.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or any of its subsidiaries or by which Parent or any
of its subsidiaries or any of their respective properties are 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 impair Parent'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 material properties or assets of Parent or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which Parent or any of its subsidiaries is a party
or by which Parent or any of its subsidiaries or its or any of their respective
assets are bound or affected.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity, is required to be obtained
or made by Parent in connection with the execution and delivery of this
Agreement or the consummation of the Merger, except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (ii)
the approval of the Registration Statement and the Prospectus/Proxy Statement in
accordance with the Securities Act and the Exchange
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Act, respectively, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the HSR Act, and the
securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Parent or have a material adverse
effect on the ability of the parties hereto to consummate the Merger.
3.5 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to be filed
by Parent with the SEC since December 9, 1999 and has made available to the
Company such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that Parent may file
subsequent to February 2, 2000) are referred to herein as the "PARENT SEC
REPORTS"). As of their respective dates, Parent SEC Reports (i) were prepared in
accordance and complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Reports and (ii)
did not at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of Parent's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in Parent SEC Reports (the "PARENT
FINANCIALS"), including each Parent SEC Report filed after February 2, 2000
until the Closing, (i) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of Parent and its subsidiaries as at the respective dates
thereof and the consolidated results of Parent's operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring
year-end adjustments. The balance sheet of Parent dated October 29, 1999
contained in Parent's registration statement on Form S-1 dated December 9, 1999
is hereinafter referred to as (the "PARENT BALANCE SHEET").
(c) Parent has heretofore furnished to the Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
(d) Neither Parent nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except (i)
liabilities provided for in Parent's Balance Sheet or (ii) liabilities incurred
since October 29, 1999 in the ordinary course of business, none of which is
material to the business, results of operations or financial condition of Parent
and its subsidiaries, taken as a whole.
3.6 Absence of Certain Changes or Events. Since the date of Parent Balance
Sheet there has not been: (i) any Material Adverse Effect on Parent, (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 Parent's or any of
its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by Parent of any of Parent's capital stock or any other securities
of Parent or its subsidiaries or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of Parent's or any of its subsidiaries' capital
stock, (iv) any granting by Parent or any of its subsidiaries of any increase in
compensation or fringe benefits, except for normal
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increases of cash compensation in the ordinary course of business consistent
with past practice, or any payment by Parent or any of its subsidiaries of any
bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by Parent or any of its subsidiaries of any
increase in severance or termination pay or any entry by Parent or any of its
subsidiaries into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Parent of the nature contemplated hereby, (v) entry by
Parent or any of its subsidiaries into any licensing or other agreement with
regard to the acquisition or disposition of any material Intellectual Property
(as defined in Section 2.9) other than licenses in the ordinary course of
business consistent with past practice, (vi) any amendment or consent with
respect to any licensing agreement filed or required to be filed by Parent with
the SEC, (vii) any material change by Parent in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP, or
(viii) any revaluation by Parent of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course of business.
3.7 Tax. Parent has timely filed all Tax Returns required to be filed by
it, has paid all Taxes shown thereon to be due, and has provided adequate
accruals in accordance with GAAP in its financial statements for any Taxes that
have not been paid. No audit of any Tax Return of Parent is being conducted by a
Tax authority. No extension of the statute of limitations on the assessment of
any Taxes has been granted by Parent and is currently in effect.
3.8 Compliance; Permits; Restrictions.
(a) Neither Parent nor any of its subsidiaries is, in any material respect,
in conflict with, or in default or in violation of (i) any law, rule,
regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which Parent or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or any of its subsidiaries is a
party or by which Parent or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for conflicts, violations and
defaults that (individually or in the aggregate) would not cause Parent to lose
any material benefit or incur any material liability. No investigation or review
by any Governmental Entity is pending or, to Parent's knowledge, has been
threatened in a writing delivered to Parent against Parent or any of its
subsidiaries, nor, to Parent's knowledge, has any Governmental Entity indicated
an intention to conduct an investigation of Parent or any of its subsidiaries.
There is no material agreement, judgment, injunction, order or decree binding
upon Parent or any of its subsidiaries which has or could reasonably be expected
to have the effect of prohibiting or materially impairing any business practice
of Parent or any of its subsidiaries, any acquisition of material property by
Parent or any of its subsidiaries or the conduct of business by Parent as
currently conducted.
(b) Parent and its subsidiaries hold, to the extent legally required, all
permits, licenses, variances, exemptions, orders and approvals from Governmental
Entities that are material to and required for the operation of the business of
Parent as currently conducted (collectively, the "PARENT PERMITS"). Parent and
its subsidiaries are in compliance in all material respects with the terms of
Parent Permits, except where the failure to be in compliance with the terms of
Parent Permits would not be material to Parent.
3.9 Litigation. There are no claims, suits, actions or proceedings pending
or, to the knowledge of Parent, threatened against, relating to or affecting
Parent or any of its subsidiaries, before any court, governmental department,
commission, agency, instrumentality or authority, 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 be material to
Parent. No Governmental Entity has at any time challenged or questioned in a
writing delivered to Parent the legal right of Parent to design, manufacture,
offer or sell any of its products or services in the present manner or style
thereof. As of February 2, 2000, to the knowledge of Parent, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that
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would reasonably be expected to, cause or provide a bona fide basis for a
director or executive officer of Parent to seek indemnification from Parent.
3.10 Agreements, Contracts and Commitments. As of February 2, 2000,
neither Parent nor any of its subsidiaries, nor to Parent's knowledge any other
party to a material Contract of Parent, is in breach, violation or default under
such Contract, and neither Parent nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any material Contract of Parent in such a manner
as would permit any other party to cancel or terminate any such material
Contract of Parent, or would permit any other party to seek material damages or
other remedies (for any or all of such breaches, violations or defaults, in the
aggregate).
3.11 Registration Statement; Proxy Statement. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (i) the Registration Statement will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; and (ii) the Proxy
Statement/Prospectus will, at the dates mailed to the stockholders of Company,
at the time of the Company Stockholders' Meeting and as of the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
promulgated by the SEC thereunder. Notwithstanding the foregoing, Parent makes
no representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
3.12 Board Approval. The Board of Directors of Parent has, as of February
2, 2000, approved the issuance of shares of Parent Common Stock and the payment
of an aggregate of in connection with the Merger.
3.13 Benefit Plans. To the extent eligible, employees of the Company may
participate and/or receive options and stock under the Parent's 1998 Stock
Option Plan and 1998 Employee Stock Plan, pursuant to applicable laws.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Company. During the period from February 2,
2000 and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, the Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business, in all material respects, in the usual, regular
and ordinary course, in substantially the same manner as heretofore conducted
and in compliance with all applicable laws and regulations, 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 subject to good faith disputes over
such obligations, and use its 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 and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
In addition, except as permitted by the terms of this Agreement, and except
as provided in Article 4 of the Company Schedules, without the prior written
consent of Parent, during the period from February 2, 2000 and continuing until
the earlier of the termination of this Agreement pursuant to its
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terms or the Effective Time, the Company shall not do any of the following and
shall not permit its subsidiaries to do any of the following:
(a) Except for the acceleration of the vesting of stock options
pursuant to pre-existing contractual arrangement as set forth in Part
2.2(b) of the Company Schedules, waive any stock repurchase rights,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee,
consultant, director or other stock plans or authorize cash payments in
exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on
February 2, 2000 and as previously disclosed in writing or made available
to Parent, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company
Intellectual Property, or enter into grants to future patent rights, other
than non-exclusive licenses in the ordinary course of business and
consistent with past practice;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of the Company or its subsidiaries, except
repurchases of unvested shares at cost in connection with the termination
of the employment relationship with any employee pursuant to stock option
or purchase agreements in effect on January 20, 2000;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber, any
shares of capital stock or any securities convertible into shares of
capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any
character obligating it to issue any such shares or convertible securities,
other than (i) stock options pursuant to the Company Stock Option Plans
granted to employees of the Company to purchase 1,200,000 shares (as
appropriately adjusted for stock splits and the like) of Company Common
Stock with strike prices equal to the fair market value of the Company
Common Stock at the time of grant and otherwise with vesting schedules and
other terms subject to Section 5; (ii) issuance of shares of the Company
Common Stock in connection with the prior acquisitions of the Company, as
set forth in Part 4.1 of the Company Schedules; and (iii) issuance of
shares by the Company Common Stock pursuant to the exercise of stock
options therefor outstanding as of January 20, 2000 or granted pursuant to
the preceding clause (i);
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries) except to the extent required to
comply with the Company's obligations hereunder, required by law or
required by the rules and regulations of Nasdaq;
(h) Except as set forth on Part 4.1 of the Company Schedules and
except for the acquisition of Question Exchange, Inc. pursuant to the terms
of a certain Agreement and Plan of Merger dated January 27, 2000, acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
business of the Company or enter into any material joint ventures,
strategic partnerships or alliances;
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(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate,
to the business of the Company, except sales of inventory and used
equipment in the ordinary course of business consistent with past practice;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than in connection with the
financing of ordinary course trade payables consistent with past practice;
(k) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment
contract or collective bargaining agreement (other than offer letters and
letter agreements entered into in the ordinary course of business
consistent with past practice with employees who are terminable "at will"),
pay any special bonus or special remuneration to any director or employee,
or increase the salaries or wage rates or fringe benefits (including rights
to severance or indemnification) of its directors, officers, employees or
consultants other than in the ordinary course of business, consistent with
past practice, or change in any material respect any management policies or
procedures;
(l) Except for payments made in connection with the acquisition of
Question Exchange, Inc., make any payments outside of the ordinary course
of business consistent with past practices in excess of $50,000
individually or in the aggregate;
(m) Modify, amend or terminate any Company Contract or other material
contract or agreement to which the Company or any subsidiary thereof is a
party or waive, release or assign any material rights or claims thereunder;
(n) Enter into any contracts, agreements, or obligations relating to
the distribution, sale, license or marketing by third parties of the
Company's products or products licensed by the Company other than in the
ordinary course of business consistent with past practice;
(o) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(p) Take any action that could reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code; or
(q) Agree in writing or otherwise to take any of the actions described
in (a) through (p) above.
4.2 Conduct of Business by Parent. During the period from February 2, 2000
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, except as permitted by the terms of this
Agreement and except as provided in Section 4.2 of the Parent Schedule, without
the prior written consent of Company, Parent shall not engage in any action that
could reasonably be expected to cause the Merger to fail to qualify as a
"reorganization" under Section 368(a) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement; Registration Statement; Other Filings. As
promptly as practicable after the execution of this Agreement, the Company and
Parent will prepare and file with the SEC, the Prospectus/Proxy Statement and
Parent will prepare and file with the SEC the Registration Statement in which
the Prospectus/Proxy Statement will be included as a prospectus. Each of Parent
and Company shall provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable judgment of
the providing party or its counsel, may be required or appropriate for inclusion
in the Proxy Statement/Prospectus and the Registration Statement, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and
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auditors in the preparation of the Proxy Statement/Prospectus and the
Registration Statement. Each of the Company and Parent will respond to any
comments of the SEC, will use its respective commercially reasonable efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing and the Company will cause the
Prospectus/Proxy Statement to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. As promptly as practicable after February 2, 2000, each of the Company and
Parent will prepare and file (i) with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice ("DOJ") Notification and Report Forms relating to the transactions
contemplated herein as required by the HSR Act, as well as comparable pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed to by the parties (the
"ANTITRUST FILINGS") and (ii) any other filings required to be filed by it under
the Exchange Act, the Securities Act or any other Federal, state or foreign laws
relating to the Merger and the transactions contemplated by this Agreement (the
"OTHER FILINGS"). The Company and Parent each shall promptly supply the other
with any information which may be required in order to effectuate any filings
pursuant to this Section 5.1. Each of the Company and Parent will notify the
other promptly upon the receipt of any comments from the SEC or its staff or any
other government officials in connection with any filing made pursuant hereto
and of any request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, the Prospectus/Proxy
Statement or any Antitrust Filings or Other Filing or for additional information
and will supply the other with copies of all correspondence between such party
or any of its representatives, on the one hand, and the SEC, or its staff or any
other government officials, on the other hand, with respect to the Registration
Statement, the Prospectus/Proxy Statement, the Merger or any Antitrust Filing or
Other Filing. Each of the Company and Parent will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under this
Section 5.1 to comply in all material respects with all applicable requirements
of law and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Prospectus/Proxy Statement, the Registration Statement or any Antitrust Filing
or Other Filing, the Company or Parent, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, and/or mailing to stockholders of the Company
and/or Parent, such amendment or supplement.
5.2 Meeting of Company Stockholders.
(a) Promptly after February 2, 2000, the Company will take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene a meeting of the Company's stockholders to consider
adoption and approval of this Agreement and approval of the Merger (the "COMPANY
STOCKHOLDERS' MEETING") to be held as promptly as practicable, and in any event
(to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement. The Company will use
its commercially reasonable efforts to solicit from its stockholders proxies in
favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action necessary or advisable to secure the vote
or consent of its stockholders required by the rules of Nasdaq or Delaware Law
to obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, with Parent's prior written consent, the Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to the Company's stockholders in advance of a vote on the Merger and
this Agreement or, if as of the time for which the Company Stockholders' Meeting
is originally scheduled (as set forth in the Prospectus/Proxy Statement) there
are insufficient shares of Company Common Stock represented (either in person or
by proxy) to constitute a quorum necessary to conduct the business of the
Company's Stockholders' Meeting. The Company shall ensure that the Company
Stockholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited by the Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with the Delaware Law, the
Company's Certificate of Incorporation and Bylaws, the rules of Nasdaq and all
other applicable legal requirements. The Company's obligation to call, give
notice of, convene and hold the Company Stockholders' Meeting in accordance with
this Section 5.2(a) shall not be
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limited to or otherwise affected by the commencement, disclosure, announcement
or submission to the Company of any Acquisition Proposal (as defined below), or
by any withdrawal, amendment or modification of the recommendation of the Board
of Directors of the Company with respect to the Merger and/or this Agreement.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the Company
shall unanimously recommend that the Company's stockholders vote in favor of and
adopt and approve this Agreement and approve the Merger at the Company
Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include a
statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Stockholders'
Meeting; and (iii) neither the Board of Directors of the Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of the Company that the Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(c) Nothing in this Agreement shall prevent the Board of Directors of the
Company from withholding, withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger if (i) a Superior Offer (as defined below)
is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "NOTICE OF SUPERIOR OFFER") advising Parent
that the Company has received a Superior Offer, specifying the material terms
and conditions of such Superior Offer and identifying the person or entity
making such Superior Offer, (iii) Parent shall not have, within five (5)
business days of Parent's receipt of the Notice of Superior Proposal, made an
offer that the Company Board by a majority vote determines in its good faith
judgment (after consultation with a financial adviser of nationally recognized
reputation) to be at least as favorable to the Company's stockholders as such
Superior Proposal (it being agreed that the Company Board shall convene a
meeting to consider any such offer by Parent promptly following the receipt
thereof), (iv) the Board of Directors of the Company concludes in good faith,
after consultation with its outside counsel, that, in light of such Superior
Offer, the withholding, withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of the Company to
comply with its fiduciary obligations to the Company's stockholders under
applicable law and (v) neither the Company nor any of its representatives shall
have violated any of the restrictions set forth in Section 5.5 or this Section
5.2. The Company shall provide Parent with at least three business days prior
notice (or such lesser prior notice as provided to the members of the Company's
Board of Directors but in no event less than twenty-four hours) of any meeting
of the Company's Board of Directors at which the Company's Board of Directors is
reasonably expected to consider any Acquisition Transaction (as defined below).
Nothing contained in this Agreement shall limit the Company's obligation to hold
and convene the Company Stockholders' Meeting (regardless of whether the
unanimous recommendation of the Board of Directors of the Company shall have
been withdrawn, amended or modified). For purposes of this Agreement "SUPERIOR
OFFER" shall mean an unsolicited, bona fide written offer made by a third party
to consummate any of the following transactions: (i) a merger or consolidation
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction hold none of the equity interest in the
surviving or resulting entity of such transaction or (ii) the acquisition by any
person or group (including by way of a tender offer or an exchange offer),
directly or indirectly, of ownership of 100% of the then outstanding shares of
capital stock of the Company, in each case on terms that the Board of Directors
of the Company determines, in its reasonable judgment (based on the written
advice of a financial adviser of nationally recognized reputation) to be more
favorable to the Company stockholders from a financial point of view than the
terms of the Merger; provided, however, that any such offer shall not be deemed
to be a "Superior Offer" if any financing required to consummate the transaction
contemplated by such offer is not committed.
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(d) Nothing contained in this Agreement shall prohibit the Company or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
5.3 Registration Rights. Parent shall use its best efforts to amend that
certain First Amended and Restated Registration Rights Agreement dated June 16,
1999 so that each Company Affiliate shall (a) receive registration rights for
Parent-initiated secondary public offerings of Parent Common Stock, such that in
the aggregate, the Company Affiliates shall receive the right to sell no less
than twenty percent (20%) of the selling stockholder component of the first
Parent-initiated secondary offering of Parent Common Stock and pari passu rights
on subsequent Parent-initiated secondary offering; and (b) be subject to a
market stand-off provision for the period from the date of filing such
Parent-initiated secondary offering through the ninetieth day following the
closing of such Parent-initiated secondary offering; provided, however that a
Company Affiliate which does not participate as a selling stockholder in such
Parent-initiated secondary offering shall only be subject to a market stand-off
provision for the period from the date of filing such Parent-initiated secondary
offering through the thirtieth day following the closing of such
Parent-initiated secondary offering. In addition, Parent shall not provide more
than 10 days' notice to any Company Affiliate prior to the filing of any
Parent-initiated secondary offering.
5.4 Confidentiality; Access to Information.
(a) The parties acknowledge that the Company and Parent have previously
executed a Confidentiality Agreement, dated as of January 14, 2000 (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Access to Information. Each of the Company and Parent will afford the
other and the other's accountants, counsel and other representatives reasonable
access during normal business hours to the properties, books, records and
personnel during the period prior to the Effective Time to obtain all
information concerning its business, including the status of product development
efforts, properties, results of operations and personnel, as such other party
may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 5.4 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.5 No Solicitation.
(a) From and after February 2, 2000 until the Effective Time or termination
of this Agreement pursuant to Article VII, the Company and its subsidiaries will
not, nor will they authorize or permit any of their respective officers,
directors, affiliates or employees or any investment banker, attorney or other
advisor or representative retained by any of them to, directly or indirectly,
(i) solicit, initiate, knowingly encourage or induce the making, submission or
announcement of any Acquisition Proposal (as hereinafter defined), (ii)
participate in any discussions or negotiations regarding, or furnish to any
person other than Parent any non-public 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, except as to the existence of these provisions, (iv) subject to
Section 5.2(c) 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 Transaction;
provided, however, that after receipt of an unsolicited, written, bona fide
Acquisition Proposal that the Board of Directors of the Company reasonably
concludes may constitute a Superior Offer, the Company may submit to the party
making such Acquisition Proposal a written list of questions, the sole purpose
of which is to elicit clarifications as to the material terms of the Acquisition
Proposal so as to enable the Board of Directors of the Company to make a
determination whether such Acquisition Proposal is in fact a Superior Offer (it
being agreed that any correspondence with such party shall be limited to
questions and such questions shall be limited to the purpose of clarifying the
material terms of such Acquisition Proposal and shall not solicit or encourage
any new Acquisition Proposal or any change to the Acquisition Proposal, and it
being further agreed that the Company shall provide Parent with a copy of any
correspondence to be delivered
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pursuant to this Section 5.5(a) at least 24 hours prior to sending such
correspondence to any third party). The Company and its subsidiaries will
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with 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 officer, director
or employee of the Company or any of its subsidiaries or any investment banker,
attorney or other advisor or representative of the Company or any of its
subsidiaries shall be deemed to be a breach of this Section 5.5 by the Company.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any offer
or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For purposes of this Agreement, "ACQUISITION
TRANSACTION" shall mean any transaction or series of related transactions
involving: (A) any purchase from the Company or acquisition 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 5% interest in the total outstanding
voting securities of the Company or any of its subsidiaries or 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 5% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the
Company; (B) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 5% of the assets of the Company; or (C)
any liquidation or dissolution of the Company.
(b) In addition to the obligations of the Company set forth in paragraph
(a) of this Section 5.5, the Company as promptly as practicable shall advise
Parent orally and in writing of any Acquisition Proposal or any request for
non-public information which the Company reasonably believes would lead to an
Acquisition Proposal or to any Acquisition Transaction, or any inquiry with
respect to or which the Company reasonably should believe would lead to any
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person or group making
any such request, Acquisition Proposal or inquiry. The Company will keep Parent
informed as promptly as practicable in all material respects of the status and
details (including material amendments or proposed material amendments) of any
such Acquisition Proposal, request or inquiry.
5.6 Public Disclosure. Parent and the Company will consult with each
other, and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or any Acquisition Proposal and will not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by law or any listing agreement with a national securities exchange. The parties
have agreed to the text of the joint press release announcing the signing of
this Agreement.
5.7 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all 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 reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article VI to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of 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
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entered by any court or other Governmental Entity vacated or reversed and (v)
the execution or delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In connection with and without limiting the foregoing, the Company
and its Board of Directors shall, if any state takeover statute or similar
statute or regulation is or becomes applicable to the Merger, this Agreement or
any of the transactions contemplated by this Agreement, use all reasonable
efforts to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger, this Agreement and the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require Parent or the Company or any
subsidiary or affiliate thereof to agree to any divestiture by itself or any of
its affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of any of
them to conduct their businesses or to own or exercise control of such assets,
properties and stock.
(b) The Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate,
or any failure of the Company to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement, in each case, such that the conditions set forth in
Section 6.3(a) or 6.3(b) would not be satisfied, provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) Parent shall give prompt notice to the Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming untrue or
inaccurate, or any failure of Parent or Merger Sub to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.2(a) or 6.2(b) would not be satisfied, provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.8 Third Party Consents. As soon as practicable following February 2,
2000, Parent and the Company will each use its commercially reasonable efforts
to obtain any consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
5.9 Stock Options and Employee Benefits.
(a) At the Effective Time, each then outstanding Company Option, whether or
not exercisable at the Effective Time and regardless of the respective exercise
prices thereof, will be assumed by Parent. Each Company Option so assumed by
Parent under this Agreement will continue to have, and be subject to, the same
terms and conditions set forth in the applicable Company Stock Option Plan (and
any applicable stock option agreement for such Company Option) immediately prior
to the Effective Time (including, without limitation, any repurchase rights or
vesting provisions), except that (i) each Company Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded down to the nearest whole cent. Each assumed
Company Option shall be vested immediately following the Effective Time as to
the same percentage of the total number of shares subject thereto as it was
vested as of the Effective Time (taking into consideration the effect of the
Merger on the vesting of such assumed Company Options); provided
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however, that the Company shall take all best efforts so that no Company Option
shall vest in excess of 50% of the unvested portion immediately prior to the
Effective Time as a result of the Merger.
(b) It is intended that Company Options assumed by Parent shall qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent Company Options qualified as incentive stock
options immediately prior to the Effective Time and the provisions of this
Section 5.9 shall be applied consistent with such intent.
(c) It is intended that prior to Closing, the Company shall place into
escrow with an escrow agent and form of escrow agreement reasonably acceptable
to Parent shares of Company Common Stock (the "ESCROW SHARES") which would have
been issued by the Company in connection with its prior acquisitions as set
forth on Part 4.1 of the Company Schedules. Upon Closing, such Escrow Shares
shall be converted into shares of Parent Common Stock in accordance with the
terms of this Agreement and be released from escrow in accordance with the terms
of the respective acquisition agreements.
(d) Prior to the Effective Time, the Company shall grant stock options
pursuant to the Company 1999 Stock Option Plan to purchase an aggregate of
1,200,000 shares (as appropriately adjusted for stock splits and the like) of
Company Common Stock to such persons and in such amounts as to which Parent
shall have agreed, with strike prices equal to the fair market value of the
Company Common Stock at the time of grant, with no acceleration of vesting
triggered by this Merger, with 25% of the option vested 12 months from the date
of grant and 1/48 per month thereafter. These options shall only be granted to
employees of the Company and in such individual amounts as set forth on a
written schedule approved in writing by Parent prior to the granting of such
options ("OPTION SCHEDULE"); provided, however that no New Options shall be
included on the Option Schedule.
(e) For purposes of determining eligibility to participate, vesting, and
accrual or entitlement to benefits where length of service is relevant under any
employee benefit plan or arrangement of Parent, the Surviving Corporation, or
any of their respective subsidiaries or affiliates, the employees, officers,
directors, and consultants of the Company as of the Effective Time ("AFFECTED
EMPLOYEES") shall receive service credit for service with the Company (and any
predecessors thereto) to the same extent that such service credit was granted
under the Company Employee Plans, subject to no duplication of benefits;
provided, however, that this paragraph shall not apply to any of Parent's equity
benefit plans.
(f) Parent shall assume and honor, or shall cause the Surviving Corporation
to assume and honor, in accordance with their terms, all written employment,
retention, consulting, bonus, severance and termination plans and agreements
(including change in control provisions) of Affected Employees provided or made
available to Parent on or prior to the Effective Time.
5.10 Form S-8. If available for use by Parent, Parent agrees to file a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Stock Options as soon as is reasonably
practicable after the Effective Time, and in no event later than 45 days after
the Effective Time and shall use its commercially reasonable efforts to have
such registration statement become effective and to maintain the effectiveness
of such registration statement for so long as such options remain outstanding.
5.11 Indemnification.
(a) From and after the Effective Time, Parent will, and will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of the Effective Time (the "INDEMNIFIED PARTIES").
The Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
Certificate of Incorporation and Bylaws of the Company as in effect on February
2, 2000, which provisions will not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of the
Company, unless such modification is required by law.
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(b) For a period of three years after the Effective Time, Parent will cause
the Surviving Corporation to use its commercially reasonable efforts to maintain
in effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy on terms comparable to those applicable to
the current directors and officers of the Company; provided, however, that in no
event will Parent or the Surviving Corporation be required to expend in excess
of 150% of the annual premium currently paid by the Company for such coverage
(or such coverage as is available for such 150% of such annual premium).
5.12 Invention Assignment Agreement. The Company shall use its best
efforts to have all employees and independent contractors execute, respectively,
that certain Employee Agreement attached hereto as Exhibit F and that certain
Contractor Agreement attached hereto as Exhibit G. The Company shall pay each
such employee and independent contractor one hundred (100) dollars
contemporaneously with such execution.
5.13 Nasdaq Listing. Parent agrees to authorize for listing on Nasdaq the
shares of Parent Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger, upon official notice of issuance.
5.14 Company Affiliate Agreement. Set forth on Exhibit B is a list of
those persons who may be deemed to be, in the Company's reasonable judgment,
affiliates of the Company within the meaning of Rule 145 promulgated under the
Securities Act (each a "COMPANY AFFILIATE"). The Company will provide Parent
with such information and documents as Parent reasonably requests for purposes
of reviewing such list. Contemporaneously herewith, the Company shall deliver or
cause to be delivered to Parent, from each Company Affiliate an executed
affiliate agreement in substantially the form attached hereto as Exhibit C (the
"COMPANY AFFILIATE AGREEMENT"), each of which will be in full force and effect
as of the Effective Time. Parent will be entitled to place appropriate legends
on the certificates evidencing any Parent Common Stock to be received by a
Company Affiliate pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, consistent with the terms of the Company Affiliate Agreement.
5.15 Option Assumption Agreement. The Company shall use its best efforts
to cause each holder of a Company Option to execute and deliver to Parent an
option assumption agreement in form delivered to the Company by Parent (the
"OPTION ASSUMPTION AGREEMENT").
5.16 1999 Stock Option Plan. The Company shall include in the
Proxy/Prospectus a proposal for its stockholders to increase the number of
shares authorized under the Company's 1999 Stock Option Plan so that no less
than 1,200,000 shares of Company Common Stock are available for grant to the
individual employees on the Option Schedule, prior to the Closing (the "OPTION
INCREASE").
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 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:
(a) Company Stockholder Approval. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of the Company.
(b) Registration Statement Effective; Proxy Statement. The SEC shall
have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose, and no
similar proceeding in respect of the Prospectus/Proxy Statement, shall have
been initiated or threatened in writing by the SEC.
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(c) No Order; HSR Act. 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. All waiting periods, if any, under the HSR Act relating to the
transactions contemplated hereby will have expired or terminated early and
all material foreign antitrust approvals required to be obtained prior to
the Merger in connection with the transactions contemplated hereby shall
have been obtained.
(d) Tax Opinions. Parent and the Company shall each have received
written opinions from their respective tax counsel (Xxxxxx Xxxxxxx Xxxxxxxx
& Xxxxxx, Professional Corporation, and Xxxxxxxx, Xxxxxxx and Xxxxxxx, a
Professional Corporation, respectively), in form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a
tax-free reorganization within the meaning of Section 368(a) of the Code
and such opinions shall not have been withdrawn; provided, however, that if
the counsel to either Parent or the Company does not render such opinion,
this condition shall nonetheless be deemed to be satisfied with respect to
such party if counsel to the other party renders such opinion to such
party. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock to be issued in
the Merger shall have been authorized for listing on Nasdaq, subject to
notice of issuance.
6.2 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:
(a) Representations and Warranties. Each representation and warranty
of Parent and Merger Sub contained in this Agreement (i) shall have been
true and correct as of February 2, 2000 and (ii) shall be true and correct
on and as of the Closing Date with the same force and effect as if made on
the Closing Date except, (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on Parent or Merger Sub; and (B) for
those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct
(subject to the qualifications set forth in the preceding clause (A)) as of
such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based on
the word, "material" or other similar phrases contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the Parent Schedules 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.
(b) 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.
(c) Material Adverse Effect. No Material Adverse Effect with respect
to Parent shall have occurred since February 2, 2000.
6.3 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:
(a) Representations and Warranties. Each representation and warranty
of the Company contained in this Agreement (i) shall have been true and
correct as of February 2, 2000 and (ii) shall be true and correct on and as
of the Closing Date with the same force and effect as if made on and as of
the Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material
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Adverse Effect on the Company; provided, however, such Material Adverse
Effect qualification shall be inapplicable with respect to the
representations and warranties contained in Sections 2.2(a) and (b), 2.3,
2.20, 2.21 and 2.22, and (B) for those representations and warranties which
address matters only as of a particular date (which representations shall
have been true and correct (subject to the qualifications set forth in the
preceding clause (A)) as of such particular date) (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, (i) all "Material Adverse Effect" qualifications and other
qualifications based on the word, "material" or other similar phrases
contained in such representations and warranties shall be disregarded and
(ii) any update of or modification to the Company Schedules 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 an authorized officer of the
Company.
(b) Agreements and Covenants. The 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 the Chief Financial Officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect
to the Company and its subsidiaries shall have occurred since December 31,
1999.
(d) Consents. The Company shall have obtained all consents, waivers
and approvals required in connection with the consummation of the
transactions contemplated hereby in connection with the agreements,
contracts, licenses or leases set forth on Schedule 6.3(e).
(e) Registration Rights Agreement. The Company Registration Rights
Agreement shall have been terminated and none of the shares of Company
Common Stock shall have registration rights, except pursuant to contractual
arrangements with Parent.
(f) 1999 Stock Option Plan. The Option Increase shall have been duly
approved by the requisite vote under applicable law by the stockholders of
the Company.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approvals of the
stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have been
consummated by June 30, 2000 (the "END DATE") for any reason; provided,
however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose action or failure to act
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 material breach of this Agreement;
(c) 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 nonappealable;
(d) by either the Company or Parent if the required approval of the
stockholders of the Company contemplated by this Agreement shall not have
been obtained by reason of the failure to obtain the required vote at a
meeting of the Company stockholders duly convened therefore or at any
adjournment thereof; provided, however, that the right to terminate this
Agreement under this
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Section 7.1(d) shall not be available to the Company where the failure to
obtain the Company stockholder approval shall have been caused by (i) the
action or failure to act of the Company and such action or failure to act
constitutes a breach by the Company of this Agreement or (ii) a breach of
the Company Voting Agreement by any party thereto other than Parent.
(e) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of the
Company) if a Company Triggering Event (as defined below) shall have
occurred;
(f) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Section 6.2(a) or Section
6.2(b) 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 representations and warranties or
breach by Parent is curable by Parent through the exercise of its
commercially reasonable efforts, then the Company may not terminate this
Agreement under this Section 7.1(f) prior to End Date, provided Parent
continues to exercise commercially reasonable efforts to cure such breach
(it being understood that the Company may not terminate this Agreement
pursuant to this paragraph (f) if it shall have materially breached this
Agreement or if such breach by Parent is cured prior to the End Date);
(g) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) 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 Company's representations and warranties or
breach by the Company is curable by the Company through the exercise of its
commercially reasonable efforts, then Parent may not terminate this
Agreement under this Section 7.1(g) prior to the End Date, provided the
Company continues to exercise commercially reasonable efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (g) if it shall have materially breached this
Agreement or if such breach by the Company is cured prior to the End Date);
(h) by Parent, upon a breach of the provisions in Section 5.5 of this
Agreement.
For the purposes of this Agreement, a "COMPANY TRIGGERING EVENT" shall be
deemed to have occurred if: (i) the Board of Directors of the Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its unanimous recommendation in favor of,
the adoption and approval of the Agreement or the approval of the Merger; (ii)
the Company shall have failed to include in the Prospectus/Proxy Statement the
unanimous recommendation of the Board of Directors of the Company in favor of
the adoption and approval of the Agreement and the approval of the Merger; (iii)
the Board of Directors of the Company fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Merger within ten (10) days after Parent requests in writing
that such recommendation be reaffirmed; (iv) the Board of Directors of the
Company or any committee thereof shall have approved or recommended any
Acquisition Proposal; or (v) a tender or exchange offer relating to securities
of the Company shall have been commenced by a Person unaffiliated with Parent
and the Company shall not have sent to its securityholders pursuant to Rule
14e-2 promulgated under the Securities Act, within ten (10) business days after
such tender or exchange offer is first published sent or given, a statement
disclosing that the Company recommends rejection of such tender or exchange
offer.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 5.4(a), this Section 7.2, Section 7.3 and Article 8 (general
provisions), each of which shall survive
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the termination of this Agreement, and (ii) nothing herein shall relieve any
party from liability for any willful breach of this Agreement. No termination of
this Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, 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; provided, however, that Parent and the Company shall
share equally all fees and expenses, other than attorneys' and accountants fees
and expenses, incurred in relation to the printing and filing (with the SEC) of
the Prospectus/Proxy Statement (including any preliminary materials related
thereto) and the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto.
(b) Company Payments. In the event that this Agreement is terminated by
Parent or the Company, as applicable, pursuant to Sections 7.1(b), (d) or (g),
the Company shall promptly, but in no event later than two days after the date
of such termination, pay Parent a fee equal to $30,000,000 in immediately
available funds (the "TERMINATION FEE"); provided, that in the case of
termination under Section 7.1(b) or 7.1(d), such payment shall be made only if
following February 2, 2000 and prior to the termination of this Agreement, a
third party has publicly announced an Acquisition Proposal and within 15 months
following the termination of this Agreement a Company Acquisition (as defined
below) is consummated or the Company enters into an agreement providing for a
Company Acquisition. The Company acknowledges that the agreements contained in
this Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(b), and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company for
the amounts set forth in this Section 7.3(b), the Company shall pay to Parent
its reasonable costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set forth in
this Section 7.3(b) at the prime rate of The Chase Manhattan Bank in effect on
the date such payment was required to be made. Payment of the fees described in
this Section 7.3(b) shall not be in lieu of damages incurred in the event of
breach of this Agreement. For the purposes of this Agreement "COMPANY
ACQUISITION" shall mean any of the following transactions (other than the
transactions contemplated by this Agreement); (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction hold less than 50% of the
aggregate equity interests in the surviving or resulting entity of such
transaction, (ii) a sale or other disposition by the Company of assets
representing in excess of 50% of the aggregate fair market value of the
Company's business immediately prior to such sale or (iii) the acquisition by
any person or group (including by way of a tender offer or an exchange offer or
issuance by the Company), directly or indirectly, of beneficial ownership or a
right to acquire beneficial ownership of shares representing in excess of 50% of
the voting power of the then outstanding shares of capital stock of the Company.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent and the Company.
7.5 Extension; Waiver. At any time prior to the Effective Time 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. 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.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of the Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
VA Linux Systems, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. X'Xxxxx, Esq.
Xxxxx X. XxXxxxxx, Esq.
Xxxx X. XxXxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) if to the Company, to:
Xxxxxxx.Xxx, Inc.
00 Xxxxx Xxxx
Xxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
8.3 Interpretation; Knowledge.
(a) 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
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"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein to
"THE BUSINESS OF" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
(b) For purposes of this Agreement the term "KNOWLEDGE" means with respect
to a party hereto, with respect to any matter in question, that any of the Chief
Executive Officer, Chief Financial Officer, General Counsel or Controller of
such party, has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT"when
used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is materially adverse to the business,
assets (including intangible assets), capitalization, financial condition or
results of operations of such entity taken as a whole with its subsidiaries
provided however, that none of the following, in and of itself, shall be deemed
to have a Material Adverse Effect: (i) an event, violation, inaccuracy,
circumstance or other matter that results from conditions affecting the U.S.
economy in general; (ii) an event, violation, inaccuracy, circumstance or other
matter that results from the taking of any action expressly required by the
Agreement; (iii) a decline in Parent's Common Stock.
(d) For purposes of this Agreement, the term "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.
8.4 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
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Schedules and the
Parent Schedules (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 Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder, except as specifically provided in
Section 5.11.
8.6 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.
8.7 Other Remedies; Specific Performance. 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 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.
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8.8 Governing Law. This Agreement 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.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. 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.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY OR MERGER SUB
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[remainder of page intentionally left blank; signature page follows
immediately hereafter]
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SIGNATURE PAGE
IN WITNESS WHEREOF, VA Linux and Xxxxxxx.Xxx have caused this Amendment to
be executed by their duly authorized representatives as of the day and year
first above written.
VA LINUX SYSTEMS, INC.
By: /s/ XXXX X. XXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President, Finance and
Chief Financial Officer
XXXXXXX.XXX, INC.
By: /s/ XXXXX X. XXXXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
*** AMENDED AND RESTATED REORGANIZATION AGREEMENT ***
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