AGREEMENT AND PLAN OF MERGER BY AND AMONG TECHTARGET, INC., CATAPULT ACQUISITION CORP., AND KNOWLEDGESTORM, INC. NOVEMBER 1, 2007
Exhibit 99.1
AGREEMENT
AND PLAN OF MERGER
BY
AND
AMONG
TECHTARGET,
INC.,
CATAPULT
ACQUISITION CORP.,
AND
KNOWLEDGESTORM,
INC.
NOVEMBER 1, 2007
Exhibit
99.1
Table
of Contents
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ARTICLE
I THE MERGER
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1.1
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The
Merger
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1.2
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The
Closing
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1.3
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Actions
at the Closing
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1.4
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Additional
Action
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1.5
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Conversion
of Shares
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1.6
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Dissenting
Shares.
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1.7
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Exchange
of Shares.
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1.8
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Fractional
Shares
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1.9
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Options
and Warrants.
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1.1
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Escrow
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1.11
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Certificate
of Incorporation and By-laws.
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1.12
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No
Further Rights
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1.13
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Closing
of Transfer Books
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ARTICLE
II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
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2.1
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Organization,
Qualification and Corporate Power
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2.2
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Capitalization.
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2.3
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Authorization
of Transaction
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2.4
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Noncontravention
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2.5
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Subsidiaries.
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2.6
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Financial
Statements.
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2.7
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Absence
of Certain Changes
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2.8
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Undisclosed
Liabilities
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2.9
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Tax
Matters.
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2.1
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Assets.
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2.11
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Owned
Real Property
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2.12
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Real
Property Leases
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2.13
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Intellectual
Property.
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2.14
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Privacy
and Security.
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2.15
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Contracts.
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2.16
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Accounts
Receivable
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2.17
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Powers
of Attorney
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2.18
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Insurance
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2.19
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Litigation
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2.2
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Warranties
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2.21
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Employees.
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2.22
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Employee
Benefits.
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2.23
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Environmental
Matters.
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2.24
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Legal
Compliance
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2.25
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Customers
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2.26
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Permits
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2.27
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Certain
Business Relationships With Affiliates
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2.28
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Brokers’
Fees
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2.29
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Books
and Records
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2.3
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Controls
and Procedures.
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ARTICLE
III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY
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3.1
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Organization,
Qualification and Corporate Power
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3.2
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Capitalization
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3.3
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Authorization
of Transaction
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3.4
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Noncontravention
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3.5
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Reports
and Financial Statements
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3.6
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Absence
of Material Adverse Change
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3.7
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Litigation
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3.8
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Interim
Operations of the Transitory Subsidiary
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ARTICLE
IV COVENANTS
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4.1
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Closing
Efforts
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4.2
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Governmental
and Third-Party Notices and Consents.
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4.3
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Stockholder
Approval.
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4.4
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Operation
of Business
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4.5
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Access
to Information; Additional Financial Statements.
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4.6
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Notice
of Breaches.
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4.7
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Exclusivity.
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4.8
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Expenses
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4.9
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Listing
of Merger Shares
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4.1
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FIRPTA
Tax Certificates
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4.11
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Debt.
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ARTICLE
V CONDITIONS TO CONSUMMATION OF THE
MERGER
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5.1
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Conditions
to Each Party’s Obligations
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5.2
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Conditions
to Obligations of the Buyer and the Transitory Subsidiary
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5.3
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Conditions
to Obligations of the Company
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ARTICLE
VI INDEMNIFICATION
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6.1
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Indemnification
by the Indemnifying Stockholders
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6.2
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Indemnification
by the Buyer
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6.3
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Indemnification
Claims.
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6.4
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Survival
of Representations and Warranties
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6.5
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Limitations.
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ARTICLE
VII REGISTRATION RIGHTS
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7.1
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Registration
of Shares
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7.2
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Limitations
on Registration Rights.
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7.3
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Registration
Procedures.
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7.4
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Requirements
of Qualifying Holders
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7.5
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Indemnification
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7.6
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Assignment
of Rights
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7.7
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Rule
144 Reporting
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ARTICLE
VIII TERMINATION
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8.1
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Termination
of Agreement
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8.2
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Effect
of Termination
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ARTICLE
IX DEFINITIONS
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ARTICLE
X MISCELLANEOUS
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10.1
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Press
Releases and Announcements
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10.2
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No
Third Party Beneficiaries
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10.3
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Entire
Agreement
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10.4
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Succession
and Assignment
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10.5
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Counterparts
and Facsimile Signature
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10.6
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Headings
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10.7
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Notices
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10.8
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Governing
Law
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10.9
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Amendments
and Waivers
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10.1
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Severability
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10.11
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Submission
to Jurisdiction
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10.12
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Certain
Options
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10.13
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Construction.
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Exhibit
A
- Form of Investment Representation Letter
Exhibit
B
- Opinion of Counsel to the Company
Exhibit
C
- Opinion of Counsel to the Buyer and the Transitory
Subsidiary
Exhibit
D
- Form of Escrow Agreement
Exhibit
E
- Form of Note to Buyer
Exhibit
F
- Forms of Acknowledgement and Release
Exhibit
G
- Form of Consent of Warrantholder
Exhibit
H
- Certificate of Amendment
Exhibit
99.1
AGREEMENT
AND PLAN OF MERGER
Agreement
entered into as of November 1, 2007 by and among TechTarget, Inc., a
Delaware corporation (the “Buyer”), Catapult Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of the Buyer (the
“Transitory Subsidiary”), and KnowledgeStorm, Inc., a Delaware
corporation (the “Company”).
This
Agreement contemplates a merger of the Transitory Subsidiary into the
Company. In such merger, the stockholders of the Company will receive
cash and/or common stock of the Buyer in exchange for their capital stock
of the
Company, as provided herein.
Concurrently
with the execution and delivery of this Agreement and as a condition and
inducement to the Buyer’s willingness to enter into this Agreement, the
stockholders of the Company listed on Schedule A have entered into
Investment Representation Letters in the form attached hereto as
Exhibit A.
Certain
capitalized terms used in this Agreement are defined in Article IX.
NOW,
THEREFORE, in consideration of the representations, warranties and covenants
herein contained, the Parties agree as follows.
Exhibit
99.1
ARTICLE
I
THE
MERGER
1.1 The
Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company
at
the Effective Time. From and after the Effective Time, the separate
corporate existence of the Transitory Subsidiary shall cease and the Company
shall continue as the Surviving Corporation. The Merger shall have
the effects set forth in Section 259 of the Delaware General Corporation
Law.
1.2 The
Closing. The Closing shall take place at the offices of Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx XXX, 00 Xxxxx Xxxxxx in Boston, Massachusetts,
commencing at 9:00 a.m. local time on the Closing Date.
1.3 Actions
at the Closing. At the Closing:
(a) the
Company shall deliver to the Buyer and the Transitory Subsidiary the various
certificates, instruments and documents referred to in
Section 5.2;
(b) the
Buyer
and the Transitory Subsidiary shall deliver to the Company the various
certificates, instruments and documents referred to in
Section 5.3;
(c) the
Surviving Corporation shall file with the Secretary of State of the State
of
Delaware the Certificate of Merger;
(d) the
Company shall deliver to the Buyer Investment Representation Letters signed
by
Qualifying Holders, Acknowledgement and Releases (in the form of
Exhibit F) signed by holders of then outstanding In-the-Money
Options (other than the 2007 Options) and Consents of Warrantholders (in
the
form of Exhibit G) signed by all holders of then outstanding
Warrants;
(e) the
Buyer
shall deliver to the Exchange Agent an amount in cash equal to the Maximum
Cash
Consideration;
(f) the
Company shall deliver to the Buyer the employment agreements contemplated
by
Section 5.2(i);
(g) the
Buyer, the Indemnification Representative and the Escrow Agent shall execute
and
deliver the Escrow Agreement (also to be signed by all Qualifying Holders),
and
the Buyer shall deliver to the Escrow Agent a certificate for the Escrow
Shares
being placed in escrow on the Closing Date pursuant to
Section 1.10.
1.4 Additional
Action. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion
of Shares. At the Effective Time, by virtue of the Merger and
without any action on the part of any Party or the holder of any of the
following securities:
(a) Each
Preferred Share issued and outstanding immediately prior to the Effective
Time
(other than Dissenting Shares and Preferred Shares held in the Company’s
treasury) owned of record by a Qualifying Holder shall be converted
into and represent the right to receive: (i) a number of shares
of Buyer Common Stock equal to the aggregate number of Merger Shares divided
by
the aggregate number of Outstanding Preferred Shares held by Qualifying Holders,
(ii) an amount in cash equal to the Series A Liquidation Preference
Payments in respect of such share, less the product determined by
multiplying the number of Merger Shares issuable with respect to such share
pursuant to clause (i) above by the Average Price; and (iii) an amount
in cash equal to the Cash Merger Consideration.
(b) Each
Preferred Share issued and outstanding immediately prior to the Effective
Time
(other than Dissenting Shares and Preferred Shares held in the Company’s
treasury) owned of record by a holder that is not a Qualifying Holder shall
be
converted into and represent the right to receive an amount in cash equal
to the
sum of: (i) the Series A Liquidation Preference Payments in
respect of such share (the “Cash Preference Payment”), and (ii) the
Cash Merger Consideration.
(c) Each
Common Share issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares and Common Shares held in the Company’s
treasury) shall be converted into and represent the right to receive the
Cash Merger Consideration.
(d) At
the
Closing, as contemplated by Section 1.10, the Company shall withhold, and
deposit in escrow pursuant to the Escrow Agreement, all of the Merger Shares
otherwise issuable to holders of Preferred Shares pursuant to
Section 1.5(a)(i) (the “Escrow Shares”).
(e) In
determining the aggregate number of Merger Shares issuable to each holder
under
Section 1.5(a)(i) above and the cash payable to such holder pursuant to
Section 1.5(a)(ii), all Merger Shares issuable to each holder with respect
to its Preferred Shares shall be aggregated before determining fractional
shares.
(f) For
the
avoidance of doubt, the maximum amount of consideration payable by the Buyer
to
holders of capital stock, Options and Warrants of the Company pursuant to
this
Section 1.5 and Section 1.9 shall be: (i) a number of
Merger Shares equal to $6,000,000 divided by the Average Price, and
(ii) cash in the amount of $51,850,000, less the sum of the
Transaction Expenses, and Existing SVB Debt (the “Maximum Cash
Consideration”), and this Agreement shall be construed in accordance with
the foregoing intent.
(g) Each
Company Share held in the Company’s treasury immediately prior to the Effective
Time shall be cancelled and retired without payment of any consideration
therefor.
(h) Each
share of common stock, $.001 par value per share, of the Transitory Subsidiary
issued and outstanding immediately prior to the Effective Time shall be
converted into and thereafter evidence one share of common stock, $.001 par
value per share, of the Surviving Corporation.
(i) Each
of
Buyer and the Surviving Corporation shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of shares of capital stock of the Company such amounts as it is required
to deduct and withhold with respect to the making of such payment under the
Code
or any other applicable Tax law (including as contemplated by
Section 4.10). To the extent that amounts are so withheld by the
Surviving Corporation or Buyer, as the case may be, such withheld amounts
(i) shall be remitted by Buyer or the Surviving Corporation, as the case
may be, to the applicable Governmental Entity and (ii) shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
of capital stock of the Company in respect of which such deduction and
withholding was made by the Surviving Corporation or Buyer, as the case may
be.
1.6 Dissenting
Shares.
(a) Dissenting
Shares shall not be converted into or represent the right to receive Merger
Consideration, unless the Company Stockholder holding such Dissenting Shares
shall have forfeited his, her or its right to appraisal under the Delaware
General Corporation Law or properly withdrawn, his, her or its demand for
appraisal. If such Company Stockholder has so forfeited or withdrawn
his, her or its right to appraisal of Dissenting Shares, then (i) as of the
occurrence of such event, such holder’s Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to
receive
the applicable Merger Consideration, issuable or payable in respect of such
Company Shares pursuant to Section 1.5, and (ii) promptly following
the occurrence of such event, the Buyer shall deliver to the Exchange Agent
the
Merger Consideration which such holder is entitled to receive at Closing
pursuant to Section 1.5.
(b) The
Company shall give the Buyer (i) prompt notice of any written demands for
appraisal of any Company Shares, withdrawals of such demands, and any other
instruments that relate to such demands received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Delaware General Corporation
Law. The Company shall not, except with the prior written consent of
the Buyer, make any payment with respect to any demands for appraisal of
Company
Shares or offer to settle or settle any such demands.
1.7 Exchange
of Shares.
(a) Prior
to
the Effective Time, the Buyer shall appoint the Exchange Agent to effect
the
payment of Merger Consideration (other than the Escrow Shares) in accordance
with Sections 1.5, 1.9 and 10.12. On the Closing Date, the Buyer
shall deliver (or cause to be delivered) to the Exchange Agent, in trust
for the benefit of holders of Certificates, and holders of the Options and
Warrants set forth in Sections 1.9 and 10.12, cash in an amount equal to
the Maximum Cash Consideration. As soon as practicable after the
Effective Time, the Buyer shall cause the Exchange Agent to send a notice
and a
transmittal form to each holder of a Certificate, and each holder of an Option
or Warrant entitled to receive Merger Consideration pursuant to Section 1.9
or 10.12, advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent such Certificate (or Option
or
Warrant, as applicable) in exchange for the Merger Shares and/or Cash Merger
Consideration issuable and payable pursuant to Section 1.5, 1.9 or 10.12,
as applicable. Each such holder, upon proper surrender thereof to the
Exchange Agent in accordance with the instructions in such notice, shall
be
entitled to receive in exchange therefor (subject to any taxes required to
be
withheld) the applicable Merger Consideration. Until properly
surrendered, each such Certificate (or Option or Warrant, as applicable)
shall
be deemed for all purposes to evidence only the right to receive the applicable
Merger Consideration issuable or payable pursuant to Section 1.5, 1.9 or
10.12, as applicable. Holders of Certificates shall not be entitled
to receive the applicable Merger Consideration to which they would otherwise
be
entitled until such Certificates are properly surrendered.
(b) If
any
Merger Shares are to be issued in the name of a person other than the person
in
whose name the Certificate surrendered in exchange therefor is registered,
it
shall be a condition to the issuance of such Merger Shares that (i) the
Certificate so surrendered shall be transferable, and shall be properly
assigned, endorsed or accompanied by appropriate stock powers, (ii) such
transfer shall otherwise be proper and (iii) the person requesting such
transfer shall pay to the Exchange Agent any transfer or other taxes payable
by
reason of the foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be
paid. Notwithstanding the foregoing, neither the Exchange Agent nor
any Party shall be liable to a holder of Company Shares for any Merger
Consideration issuable to such holder pursuant to Section 1.5 that are
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(c) In
the
event any Certificate shall have been lost, stolen or destroyed, upon the
making
of an affidavit of that fact by the person claiming such Certificate to be
lost,
stolen or destroyed, the Buyer shall issue in exchange for such lost, stolen
or
destroyed Certificate the applicable Merger Consideration issuable in exchange
therefor pursuant to Section 1.5. The Board of Directors of the
Buyer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate
to give
the Buyer a bond in such sum as it may direct as indemnity against any claim
that may be made against the Buyer with respect to the Certificate alleged
to
have been lost, stolen or destroyed.
(d) No
dividends or other distributions that are payable to the holders of record
of
Buyer Common Stock as of a date on or after the Closing Date shall be paid
to
former Company Stockholders entitled by reason of the Merger to receive Merger
Shares until such holders surrender their Certificates for certificates
representing the Merger Shares. Upon such surrender, the Buyer shall
pay or deliver to the persons in whose name the certificates representing
such
Merger Shares are issued any dividends or other distributions that are payable
to the holders of record of Buyer Common Stock as of a date on or after the
Closing Date and which would have been otherwise paid or delivered between
the
Effective Time and the time of such surrender; provided that no such
person shall be entitled to receive any interest on such dividends or other
distributions.
1.8 Fractional
Shares. No certificates or scrip representing fractional Merger
Shares shall be issued to former Company Stockholders upon the surrender
for
exchange of Certificates, and such former Company Stockholders shall not
be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Merger Shares that would have otherwise been issued to such former Company
Stockholders. In lieu of any fractional Merger Shares that would have
otherwise been issued, each former Company Stockholder that would have been
entitled to receive a fractional Merger Share shall, upon proper surrender
of
such person’s Certificates, receive a cash payment equal to the closing price
per share of the Buyer Common Stock on the Nasdaq National Market, as reported
by Nasdaq, on the business day immediately preceding the Closing Date,
multiplied by the fraction of a share that such Company Stockholder would
otherwise be entitled to receive.
1.9 Options
and Warrants.
(a) The
Company has taken, or will take prior to the Effective Time, all necessary
and
appropriate actions so that, consistent with and without any violation of
any
term of the Option Plan, at the Effective Time, (A) each In-the-Money
Option, other than the Change-in-Control Options and 2007 Options, shall
automatically be cancelled and terminated as of the Effective Time in exchange
for a cash payment to the holders thereof equal to the excess of the Cash
Merger
Consideration in respect of a Common Share over the per share exercise price
of
such Option, multiplied by the number of Company Shares that are subject
to such
Option immediately prior to the Effective Time, (B) each Change-in-Control
Option and Waived Option shall be cancelled and terminated without any
consideration, (C) each 2007 Option shall automatically be cancelled and
terminated in its entirety pursuant to its terms as of the Effective Time
in
exchange for a cash payment to the holder thereof equal to the excess of
the
Cash Merger Consideration in respect of a Common Share over the per share
exercise price of such Option, multiplied by the number of Common Shares
that
are subject to the vested portion of such Option immediately prior to the
Effective Time, and (D) each Out-of-the-Money Option (other than the Waived
Option) shall automatically be cancelled and terminated as of the Effective
Time
in exchange for a cash payment to the holder thereof equal to the Cash Merger
Consideration in respect of a Common Share, multiplied by the number of Common
Shares that are subject to such Option immediately prior to the Effective
Time. The cash payments described in this Section 1.9(a) shall
be subject to applicable tax withholding.
(b) The
Company has taken, or will take prior to the Effective Time, all necessary
and
appropriate actions so that, consistent with and without any violation of
any
term of the applicable warrant agreement, at the Effective Time, each Warrant
(other than the SVB Warrant) outstanding immediately prior to the Effective
Time
shall automatically be cancelled and terminated as of the Effective Time
in
exchange for a cash payment to the holders thereof equal to the excess of
the
Cash Merger Consideration in respect of a Common Share over the per share
exercise price of such Warrant, multiplied by the number of Company Shares
that
are subject to such Warrant immediately prior to the Effective
Time. The cash payments described in this Section 1.9(b) shall
be subject to applicable tax withholding.
(c) The
Company has taken, or will take prior to the Effective Time, all necessary
and
appropriate actions so that, at the Effective Time, the SVB Warrant dated
November 6, 2002 and held by Silicon Valley Bank (the “SVB Warrant”)
shall automatically be cancelled and terminated as of the Effective Time
in
exchange for a cash payment to the holders thereof equal to the excess of
the
sum of the Cash Preference Payment and Cash Merger Consideration over the
exercise price of the SVB Warrant, multiplied by the number of Preferred
Shares
then subject to the SVB Warrant. The cash payments described in this
Section 1.9(c) shall be subject to applicable tax withholding.
(d) The
Company shall obtain, prior to the Closing, the consent from each holder
of a
Change-in-Control Option, Waived Option and Warrant to the treatment of such
Options and Warrants pursuant to the provisions of Section 1.9(a), (b) or
(c), as applicable. The Company shall use Reasonable Best Efforts to
obtain, prior to the Closing, the consent from each other holder of an
In-the-Money Option (excluding the 2007 Options) to the treatment of such
Option
pursuant to the provisions of Section 1.9(a).
1.10 Escrow. On
the Closing Date, reflecting the agreement of the Qualifying Holders pursuant
to
the Escrow Agreement, the Buyer shall deliver to the Escrow Agent a certificate
(issued in the name of the Escrow Agent or its nominee) representing the
Escrow Shares issuable pursuant to Section 1.5, for the purpose of securing
the indemnification obligations of the Indemnifying Stockholders set forth
in
this Agreement. The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement pursuant to the terms thereof. The Escrow
Shares shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor
of any
party, and shall be held and disbursed solely for the purposes and in accordance
with the terms of the Escrow Agreement.
1.11 Certificate
of Incorporation and By-laws.
(a) The
Certificate of Incorporation of the Surviving Corporation immediately following
the Effective Time shall be amended so that such Certificate of Incorporation
is
identical to the Certificate of Incorporation of the Transitory Subsidiary
immediately prior to the Effective Time, except that (i) the name of the
corporation set forth therein shall be changed to the name of the Company
and
(ii) the identity of the incorporator shall be deleted.
(b) The
By-laws of the Surviving Corporation immediately following the Effective
Time
shall be the same as the By-laws of the Transitory Subsidiary immediately
prior
to the Effective Time, except that the name of the corporation set forth
therein
shall be changed to the name of the Company.
1.12 No
Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein
or by
law.
1.13 Closing
of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are
presented to the Buyer, the Surviving Corporation or the Exchange Agent,
they
shall be cancelled and exchanged for the applicable Merger Consideration
in
accordance with Section 1.5, subject to Section 1.10 and to applicable
law in the case of Dissenting Shares.
Exhibit
99.1
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Buyer that, except as set forth in
the
Disclosure Schedule, the statements contained in this Article II are true
and correct as of the date of this Agreement and will be true and correct
as of
the Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date
(in
which case such representations and warranties will be true and correct as
of
such date). The Disclosure Schedule shall be arranged in
Sections and subSections corresponding to the numbered and lettered
Sections and subSections contained in this
Article II. The disclosures in any Section or
subSection of the Disclosure Schedule shall qualify only the corresponding
Section or subSection in this Article II.
2.1 Organization,
Qualification and Corporate Power. The Company is a corporation
duly organized, validly existing and in corporate and tax good standing under
the laws of the State of Delaware. The Company is duly qualified to
conduct business and is in corporate and tax good standing under the laws
of
each jurisdiction listed in Section 2.1 of the Disclosure Schedule, which
jurisdictions constitute the only jurisdictions in which the nature of the
Company’s businesses or the ownership or leasing of its properties requires such
qualification, except for those jurisdictions in which the failure to be
so
qualified or in good standing, individually or in the aggregate, has not
had and
would not reasonably be expected to have a Company Material Adverse
Effect. The Company has all requisite corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. The Company has furnished to the
Buyer complete and accurate copies of its Certificate of Incorporation and
by-laws. The Company is not in default under or in violation of any
provision of its Certificate of Incorporation or by-laws.
2.2 Capitalization.
(a) The
authorized capital stock of the Company consists of (i) 70,000,000 Common
Shares, of which, as of the date of this Agreement,
573,191 shares were issued and outstanding and
no shares were held in the treasury of the Company, and
(ii) 35,000,000 Preferred Shares, of which 35,000,000 shares have
been designated as Series A Convertible Preferred Stock, of which, as of
the date of this Agreement, 32,069,654 shares were issued
and outstanding. Each Preferred Share is convertible into one Common
Share.
(b) Section 2.2
of the Disclosure Schedule sets forth a complete and accurate list, as of
the
date of the Agreement, of the holders of capital stock of the Company, showing
the number of shares of capital stock, and the class or series of such shares,
held by each stockholder and (for shares other than Common Stock) the
number of Common Shares (if any) into which such shares are
convertible. Section 2.2 of the Disclosure Schedule also
indicates all outstanding Common Shares that constitute restricted stock
or that
are otherwise subject to a repurchase or redemption right, indicating the
name
of the applicable stockholder, the vesting schedule (including any acceleration
provisions with respect thereto), and the repurchase price payable by the
Company. All of the issued and outstanding shares of capital stock of
the Company has been duly authorized and validly issued and are fully paid
and
nonassessable. All of the issued and outstanding shares of capital
stock of the Company has been offered, issued and sold by the Company in
compliance with all applicable federal and state securities laws.
(c) Section 2.2
of the Disclosure Schedule sets forth a complete and accurate list, as of
the
date of this Agreement of: (i) all Company Stock Plans, indicating for each
Company Stock Plan the number of Common Shares issued to date under such
Plan,
the number of Common Shares subject to outstanding options under such Plan
and
the number of Common Shares reserved for future issuance under such Plan;
(ii) all holders of outstanding Options, indicating with respect to each
Option the Company Stock Plan under which it was granted, the number of Common
Shares subject to such Option, the exercise price, the date of grant, and
the
vesting schedule (including any acceleration provisions with respect thereto);
and (iii) all holders of outstanding Warrants, indicating with respect to
each Warrant the agreement or other document under which it was granted,
the
number of shares of capital stock, and the class or series of such shares,
subject to such Warrant, the exercise price, the date of issuance and the
expiration date thereof. The Company has provided to the Buyer
complete and accurate copies of all Company Stock Plans, forms of all stock
option agreements evidencing Options and all Warrants. All of the
shares of capital stock of the Company subject to Options and Warrants will
be,
upon issuance pursuant to the exercise of such instruments, duly authorized,
validly issued, fully paid and nonassessable.
(d) Except
as
set forth in this Section 2.2 or in Section 2.2 of the Disclosure
Schedule, (i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the Company
has no obligation (contingent or otherwise) to issue any subscription,
warrant, option, convertible security or other such right, or to issue or
distribute to holders of any shares of its capital stock any evidences of
indebtedness or assets of the Company, (iii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend
or to
make any other distribution in respect thereof, and (iv) there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company.
(e) Except
as
set forth in Section 2.2 of the Disclosure Schedule, there is no agreement,
written or oral, between the Company and any holder of its securities, or,
to
the Company’s Knowledge, among any holders of its securities, relating to the
sale or transfer (including agreements relating to rights of first refusal,
co-sale rights or “drag-along” rights), registration under the Securities Act,
or voting, of the capital stock of the Company.
(f) The
Board
of Directors of the Company has complied with its fiduciary duties to
stockholders in connection with all issuances and recapitalizations of its
capital stock, and the Company has complied with all applicable laws and
all its
contractual obligations in connection with such issuances and
recapitalizations.
2.3 Authorization
of Transaction. The Company has all requisite power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and the Buyer Note. The execution and delivery by the Company of this
Agreement and, subject to obtaining the Requisite Stockholder Approval, which
is
the only approval required from the Company Stockholders, the consummation
by
the Company of the transactions contemplated hereby and by the Buyer Note
has
been duly and validly authorized by all necessary corporate action on the
part
of the Company. Without limiting the generality of the foregoing, the
Board of Directors of the Company, at a meeting duly called and held, by
the
unanimous vote of all directors (i) determined that the Merger is
advisable, fair and in the best interests of the Company and its stockholders,
(ii) adopted this Agreement and the Certificate of Amendment in the form
attached hereto as Exhibit H (the “Certificate of Amendment”)
in accordance with the provisions of the Delaware General Corporation Law,
(iii) directed that this Agreement and the Merger be submitted to the
stockholders of the Company for their adoption and approval and resolved
to
recommend that the stockholders of the Company vote in favor of the adoption
of
this Agreement and the approval of the Merger, and (iv) determined that the
applicable Merger Consideration represents “fair market value” for purposes of
Article IV, Section 4E of Exhibit A to the Company’s
Second Amended and Restated Certificate of Incorporation, as amended to
date. This Agreement has been duly and validly executed and delivered
by the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
the
Bankruptcy and Equity Exception. The Certificate of Amendment has
been duly adopted by the stockholders of the Company.
2.4 Noncontravention. Subject
to the filing of the Certificate of Merger as required by the Delaware General
Corporation Law, neither the execution and delivery by the Company of this
Agreement or the Buyer Note, nor the consummation by the Company of the
transactions contemplated hereby or by the Buyer Note, will (a) conflict
with or violate any provision of the Certificate of Incorporation or by-laws
of
the Company, (b) require on the part of the Company any notice to or filing
with, or any permit, authorization, consent or approval of, any Governmental
Entity, (c) conflict with, result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party the right to terminate,
modify or cancel, or require any notice, consent or waiver under, any material
contract or instrument to which the Company is a party or by which the Company
is bound or to which any of their respective assets is subject, including
without limitation any agreement required to be listed on Section 2.15 of
the Disclosure Schedule, (d) result in the imposition of any Security
Interest upon any assets of the Company or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
or
any of its properties or assets.
2.5 Subsidiaries.
(a) The
Company has no Subsidiaries. The Company does not control directly or
indirectly or have any direct or indirect equity participation or similar
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business association or entity.
2.6 Financial
Statements.
(a) The
Company has provided to the Buyer the Financial Statements. The
Financial Statements (i) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and (ii) fairly
present the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for
the
periods indicated, consistent with the books and records of the Company,
except
that the unaudited interim financial statements are subject to normal and
recurring year-end adjustments which will not be material in amount or effect
and do not include footnotes.
(b) Xxxxx
Xxxxxxxx, the Company’s current auditors, is and has been at all times since its
engagement by the Company in April 2004 (x) “independent” with respect to
the Company within the meaning of Regulation S-X and (y) in compliance with
subSections (g) through (l) of Section 10A of the Exchange
Act (to the extent applicable) and the related rules of the SEC and the
Public Company Accounting Oversight Board.
(c) The
Company maintains adequate books and records reflecting its assets and
liabilities and maintains proper and adequate internal accounting
controls.
(d) The
Company has provided to the Buyer (i) a deferred revenue analysis dated
October 29, 2007 and (ii) a comparable period analysis dated
October 29, 2007; each of the foregoing is attached to
Section 2.6 of the Disclosure Schedule, and was prepared by management of
the Company in good faith and, (A) in the case of the deferred revenue
analysis, contains a complete and accurate list of all agreements with its
customers for the applicable period and the relevant treatment of the deferral
of revenue therefrom, such deferral being consistent with the Company’s past
practices, and (B) in the case of the comparable period analysis, contains
complete and accurate calculations of the amounts of revenue that had
been categorized as deferred revenue in each of the relevant periods, and
with respect to the Q4 2007 forecast contained in the comparable period
analysis, was prepared using the best information reasonably available to
it, based on reasonable assumptions and represent management’s good faith
estimate of the Company’s revenue for Q4 2007 as of October 29, 2007, as if
the Merger had not occurred, provided, however, that the Company makes no
warranty that the projection of revenue for Q4 2007 will be
achieved.
2.7 Absence
of Certain Changes. Since December 31, 2006, there has
occurred no event or development which, individually or in the aggregate,
has
had, or could reasonably be expected to have in the future, a Company Material
Adverse Effect, and since September 30, 2007, the Company has not
taken any of the actions set forth in paragraphs (a) through (n) of
Section 4.4.
2.8 Undisclosed
Liabilities. The Company does not have any liability (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities
shown on the Most Recent Balance Sheet, (b) liabilities which have arisen
since the Most Recent Balance Sheet Date in the Ordinary Course of Business
and,
(c) contractual and other liabilities incurred in the Ordinary Course of
Business which are not required by GAAP to be reflected on a balance
sheet.
2.9 Tax
Matters.
(a) The
Company has properly filed on a timely basis all Tax Returns that it was
required to file, and all such Tax Returns were true, correct and
complete. The Company is not nor has it ever been a member of a group
of corporations with which it has filed (or been required to
file) consolidated, combined or unitary Tax Returns. The Company
has paid on a timely basis all Taxes that were due and payable. The
unpaid Taxes of the Company for Tax periods through the Most Recent Balance
Sheet Date do not exceed the accruals and reserves for Taxes (excluding accruals
and reserves for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the Most Recent Balance Sheet and
all unpaid Taxes of the Company for all Tax periods commencing after the
date of
the Most Recent Balance Sheet Date arose in the Ordinary Course of
Business. The Company (i) does not have any actual or potential
liability under Treasury Regulations Section 1.1502-6 (or any comparable or
similar provision of federal, state, local or foreign law), as a transferee
or
successor, pursuant to any contractual obligation, or otherwise for any Taxes
of
any person other than the Company and (ii) is not a party to or bound by
any Tax indemnity, Tax sharing, Tax allocation or similar
agreement. All Taxes that the Company was required by law to withhold
or collect have been duly withheld or collected and, to the extent required,
have been properly paid to the appropriate Governmental Entity.
(b) The
Company has delivered or made available to the Buyer (i) complete and
correct copies of all Tax Returns of the Company relating to Taxes for all
taxable periods for which the applicable statute of limitations has not yet
expired and (ii) complete and correct copies of all private letter rulings,
revenue agent reports, information document requests, notices of proposed
deficiencies, deficiency notices, protests, petitions, closing agreements,
settlement agreements, pending ruling requests and any similar documents
submitted by, received by, or agreed to by or on behalf of the Company relating
to Taxes for all taxable periods for which the statute of limitations has
not
yet expired. The federal income Tax Returns of the Company have been
audited by the Internal Revenue Service or are closed by the applicable statute
of limitations for all taxable years through the taxable year specified in
Section 2.9(b) of the Disclosure Schedule. No examination
or audit of any Tax Return of the Company by any Governmental Entity is
currently in progress or, to the Knowledge of the Company, threatened or
contemplated. The Company has not been informed by any jurisdiction
that the jurisdiction believes that the Company was required to file any
Tax
Return that was not filed. The Company has not (x) waived any
statute of limitations with respect to Taxes or agreed to extend the period
for
assessment or collection of any Taxes, (y) requested any extension of time
within which to file any Tax Return, which Tax Return has not yet been filed,
or
(z) executed or filed any power of attorney with any taxing
authority.
(c) The
Company (i) has not made any payment, is not obligated to make any payment,
and is not a party to any agreement that could obligate it to make any payment
that may be treated as an “excess parachute payment” under Section 280G of
the Code (without regard to Sections 280G(b)(4) and 280G(b)(5) of
the Code) and (ii) is not and has not been required to make a basis
reduction pursuant to Treasury Regulation Section 1.1502-20(b) or
Treasury Regulation Section 1.337(d)-2(b).
(d) None
of
the assets of the Company (i) is property that is required to be treated as
being owned by any other person pursuant to the provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is
“tax-exempt use property” within the meaning of Section 168(h) of the
Code, (iii) directly or indirectly secures any debt the interest on which
is tax exempt under Section 103(a) of the Code or (iv) is subject
to a lease under Section 7701(h) of the Code or under any predecessor
section.
(e) There
are
no adjustments under Section 481 of the Code (or any similar adjustments
under any provision of the Code or the corresponding foreign, state or local
Tax
laws) that are required to be taken into account by the Company in any
period ending after the Closing Date by reason of a change in method of
accounting in any taxable period ending on or before the Closing Date or
as a
result of the consummation of the transactions contemplated by this
Agreement.
(f) The
Company has not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(l)(A)(ii) of the Code.
(g) The
Company has not ever participated in an international boycott as defined
in
Section 999 of the Code.
(h) The
Company is not a party to a lease that is treated as a “Section 467 rental
agreement” within the meaning of Section 467(d) of the
Code.
(i) The
Company has not distributed to its shareholders or security holders stock
or
securities of a controlled corporation, nor has stock or securities of the
Company been distributed, in a transaction to which Section 355 of the Code
applies (i) in the two (2) years prior to the date of this Agreement
or (ii) in a distribution that could otherwise constitute part of a “plan”
or “series of related transactions” (within the meaning of
Section 355(e) of the Code) that includes the transactions
contemplated by this Agreement.
(j) The
Company does not own any interest in an entity that is characterized as a
partnership for federal income Tax purposes.
(k) Section 2.9(k) of
the Disclosure Schedule sets forth each jurisdiction (other than United States
federal) in which the Company files, is required to file or has been
required to file a Tax Return or is or has been liable for any Taxes on a
“nexus” basis and each jurisdiction that has sent notices or communications of
any kind requesting information relating to the Company’s nexus with such
jurisdiction.
(l) The
Company is not and has not been a passive foreign investment company within
the
meaning of Sections 1291 through 1297 of the Code.
(m) The
Company has not incurred (or been allocated) an “overall foreign loss” as
defined in Section 904(f)(2) of the Code which has not been previously
recaptured in full as provided in Sections 904(f)(1) and/or
904(f)(3) of the Code.
(n) The
Company is not a party to a gain recognition agreement under Section 367 of
the Code.
(o) The
Company will not be required to include any item of income in, or exclude
any
item of deduction from, taxable income for any period (or any portion
thereof) ending after the Closing Date as a result of any (i) deferred
intercompany gain or any excess loss account described in Treasury Regulations
under Section 1502 of the Code (or any corresponding provision of state,
local or foreign Tax law), (ii) closing agreement as described in
Section 7121 of the Code (or any corresponding or similar provision of
state, local or foreign Tax law) executed on or prior to the Closing Date,
(iii) installment sale or other open transaction disposition made on or
prior to the Closing Date or (iv) prepaid amount received on or prior to
the Closing Date.
(p) There
are
no liens or other encumbrances with respect to Taxes upon any of the assets
or
properties of the Company, other than with respect to Taxes not yet due and
payable.
(q) No
holder
of Company Shares holds any Common Shares that are non-transferable and subject
to a substantial risk of forfeiture within the meaning of Section 83 of the
Code with respect to which a valid election under Section 83(b) of the
Code has not been made.
(r) The
Company has not engaged in any “listed transaction” for purposes of Treasury
Regulation Sections 1.6011-4(b)(2) or 301.6111-2(b)(2) or any
analogous provision of state or local law.
2.10 Assets.
(a) The
Company is the true and lawful owner, and has good title to, all of the material
assets (tangible or intangible) purported to be owned by the Company, free
and clear of all Security Interests. The Company owns or leases all
tangible assets sufficient for the conduct of its businesses as presently
conducted and as presently proposed to be conducted by the Company (within
12 months after the Closing as if the Merger had not
occurred). Each such tangible asset is free from material defects,
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it presently is used.
(b) Each
material item of equipment, motor vehicle and other asset that the Company
has
possession of pursuant to a lease agreement or other contractual arrangement
is
in such condition that, upon its return to its lessor or owner under the
applicable lease or contract, the obligations of the Company to such lessor
or
owner will have been discharged in full.
2.11 Owned
Real Property. The Company does not own and has never owned any
real property.
2.12 Real
Property Leases. Section 2.12 of the Disclosure Schedule
lists all Leases and lists the term of such Lease, any extension and expansion
options, the square footage of the premises subject thereto and the rent
payable
thereunder. The Company has delivered to the Buyer complete and
accurate copies of the Leases. With respect to each
Lease:
(a) subject
to the Bankruptcy and Equity Exception, such Lease is legal, valid, binding,
enforceable and in full force and effect;
(b) subject
to the Bankruptcy and Equity Exception, such Lease will be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior
to
the Closing;
(c) neither
the Company, nor to the Knowledge of the Company, any other party, is in
breach
or violation of, or default under, any such Lease, and no event has occurred,
is
pending or, to the Knowledge of the Company, is threatened, which, after
the
giving of notice, with lapse of time, or otherwise, would constitute a breach
or
default by the Company or, to the Knowledge of the Company, any other party
under such Lease;
(d) there
are
no disputes, oral agreements or forbearance programs in effect as to such
Lease;
(e) the
Company has not assigned, transferred, conveyed, mortgaged, deeded in trust
or
encumbered any interest in the leasehold or subleasehold;
(f) to
the
Knowledge of the Company, all facilities leased or subleased thereunder are
supplied with utilities and other services adequate for the operation of
said
facilities; and
(g) the
Company is not aware of any Security Interest, easement, covenant or other
restriction applicable to the real property subject to such lease which would
reasonably be expected to materially impair the current uses or the occupancy
by
the Company of the property subject thereto.
2.13 Intellectual
Property.
(a) Company
Registrations. Section 2.13(a) of the Disclosure
Schedule lists all Company Registrations, in each case enumerating specifically
the applicable filing or registration number, title, jurisdiction in which
filing was made or from which registration issued, date of filing or issuance,
names of all current applicant(s) and registered owners(s), as
applicable. All assignments of Company Registrations to the Company
have been properly executed and recorded. All Company Registrations
are valid and enforceable and all issuance, renewal, maintenance and other
payments that are or have become due with respect thereto have been timely
paid
by or on behalf of the Company. There are no third party domain name
applications or registrations, or other Intellectual Property filings, foreign
or domestic, that conflict with, violate or infringe upon any Intellectual
Property Registrations or Company applications for such
registration. With respect to each item of Company Owned Intellectual
Property that is subject to a Company Registration, any necessary registration,
maintenance and renewal fees in connection therewith have been paid and any
necessary documents and certificates in connection therewith have been filed
with the relevant patent, trademark or copyright authorities or any other
appropriate registrar, including, without limitation, any domain name registrar,
in the United States or applicable foreign jurisdiction where the Company
Registration is filed, for the purposes of securing or maintaining rights
in
such Intellectual Property.
(b) Prosecution
Matters. There are no inventorship challenges, opposition or
nullity proceedings or interferences declared, commenced or provoked, or
to the
Knowledge of the Company, threatened, with respect to any Patent Rights included
in the Company Registrations. The Company has complied with their duty of
candor
and disclosure to the United States Patent and Trademark Office and any relevant
foreign patent office with respect to all patent and trademark applications
filed by or on behalf of the Company and have made no material misrepresentation
in such applications or in any Company Registrations. The Company has
no knowledge of any information that would preclude the Company from having
clear title to the Company Registrations or affecting the patentability or
enforceability of any Company Registrations.
(c) Ownership;
Sufficiency. Each item of Company Intellectual Property will be
owned or available for use by the Surviving Corporation immediately following
the Closing on identical terms and conditions as it was immediately prior
to the
Closing. The Company is the sole and exclusive owner of all Company
Owned Intellectual Property, free and clear of any Security
Interests. All joint owners of the Company Owned Intellectual
Property are listed in Section 2.13(c) of the Disclosure
Schedule. The Company has disclosed to the Buyer accurately and
completely all Intellectual Property that is used in the Company’s
business. Except for the Company Licensed Intellectual Property, the
Company is the sole and exclusive owner of all right, title and interest
in and
to all Company Intellectual Property that is used in the business (with no
breaks in the chain of title thereof), free and clear of any Security
Interest. The Company is not under any contractual obligation to pay
any royalty or other compensation to any third party or to obtain any approval
or consent from any third party for the use of any Company Intellectual Property
used in its business as it is currently conducted. The Company
Intellectual Property constitutes all Intellectual Property necessary
(i) to Exploit the Customer Offerings in the manner so done currently and
planned to be done by the Company (within 12 months after the Closing as if
the Merger had not occurred), (ii) to Exploit the Internal Systems as they
are currently used by the Company and (iii) otherwise to conduct the
Company’s business in the manner currently conducted and planned to be conducted
by the Company (within 12 months after the Closing as if the Merger had not
occurred).
(d) Protection
Measures. The Company has taken customary measures to protect
the proprietary nature of each item of Company Owned Intellectual Property,
and
to maintain in confidence all trade secrets and confidential information
comprising a part thereof. No complaint relating to an improper use
or disclosure, or a breach in the security, of any such information has been
made or, to the Knowledge of the Company, threatened against the
Company. To the Company’s Knowledge, there has been no:
(i) unauthorized disclosure of any third party proprietary or confidential
information in the possession, custody or control of the Company, or
(ii) breach of the Company’s security procedures wherein confidential
information has been disclosed to a third person. The Company has
taken reasonable steps to police the quality of all offerings and services
sold,
distributed or marketed under each of its Trademarks and has enforced adequate
quality control measures to ensure that no Trademarks that it has licensed
to
others shall be deemed to be abandoned.
(e) Infringement
by Company. None of the Customer Offerings, Internal Systems or
Company Intellectual Property, or the past, current or currently planned
(within
12 months after the Closing, as if the Merger had not occurred)
Exploitation thereof by the Company or by any Customer or user thereof, or
any
other activity undertaken by them in connection with the business of the
Company, infringes or violates, or constitutes a misappropriation of, any
Intellectual Property rights of any third
party. Section 2.13(e) of the Disclosure Schedule lists any
complaint, claim or notice, or threat of any of the foregoing (including
any
notification that a license under any patent is or may be required), received
by
the Company alleging any such infringement, violation or misappropriation
and
any request or demand for indemnification or defense received by the Company
from any reseller, distributor, customer, user or any other third party;
and the
Company has provided to the Buyer copies of all such complaints, claims,
notices, requests, demands or threats, as well as any legal opinions, studies,
market surveys and analyses relating to any alleged or potential infringement,
violation or misappropriation.
(f) Infringement
of Company Rights. To the Knowledge of the Company, no person
(including, without limitation, any current or former employee of, or consultant
to, the Company) is infringing, violating or misappropriating any of the
Company Owned Intellectual Property or any Company Licensed Intellectual
Property which is exclusively licensed to the Company. The Company
has provided to the Buyer copies of all correspondence, analyses, legal
opinions, complaints, claims, notices or threats concerning the infringement,
violation or misappropriation of any Company Owned Intellectual
Property.
(g) Outbound
IP Agreements. Section 2.13(g) of the Disclosure
Schedule identifies each material license, covenant or other agreement pursuant
to which the Company has assigned, transferred, licensed,
distributed or otherwise granted any right or access to any person, or
covenanted not to assert any right, with respect to any past, existing or
future
Company Intellectual Property (other than non-disclosure agreements and
click-through or browse-wrap licenses to Customer Offerings). The
Company has not agreed to indemnify any person against any infringement,
violation or misappropriation of any Intellectual Property rights with respect
to any Customer Offerings, the Internal Systems or any third party Intellectual
Property rights. The Company is not a member of nor party to an
agreement for, any patent pool, industry standards body, trade association
or
other organization pursuant to which it is obligated to license any existing
or
future Intellectual Property to any person.
(h) Inbound
IP Agreements. Section 2.13(h) of the Disclosure
Schedule identifies (i) each item of Company Licensed Intellectual Property
and the license or agreement pursuant to which the Company Exploits it
(excluding commercially available, off-the-shelf software programs that are
part
of the Internal Systems or Customer Offerings and are licensed by the Company
pursuant to “shrink wrap” or other mass market or standard licenses, the total
fees associated with which are less than $25,000) and (ii) each
agreement, contract, assignment or other instrument pursuant to which the
Company has obtained any joint or sole ownership interest in or to each item
of
Company Owned Intellectual Property. No third party inventions,
methods, services, materials, processes or software are included in or required
to Exploit the Customer Offerings or Internal Systems. None of the
Customer Offerings or Internal Systems includes “shareware,” “freeware” or other
Software or other material that was obtained by the Company from third parties
other than pursuant to the license agreements listed in
Section 2.13(h) of the Disclosure Schedule or, in the case of Internal
Systems, pursuant to commercially available, off-the-shelf software programs
that are part of the Internal Systems or Customer Offerings and are licensed
by
the Company pursuant to “shrink wrap” or other mass market or standard
licenses.
(i) Source
Code. The Company has not licensed, distributed or disclosed,
and knows of no distribution or disclosure by others (including its former
or
current employees or contractors) of, the Company Source Code to any person
other than Company personnel, except pursuant to the agreements listed in
Section 2.13(i) of the Disclosure Schedule, and the Company has taken
customary physical and electronic security measures intended to prevent
unauthorized disclosure of such Company Source Code. No event has
occurred, and no circumstance or condition exists, that (with or without
notice
or lapse of time, or both) will, or is reasonably expected to, result in
the disclosure or release of such Company Source Code by the Company or escrow
agent(s) or any other person to any third party, nor will the consummation
of the transactions contemplated hereby result in such disclosure or
release..
(j) Authorship. All
of the Content and other Intellectual Property comprising, incorporated in
or
bundled with the Customer Offerings or Internal Systems have been designed,
authored, developed and tested by employees of the Company within the scope
of
their employment or by independent contractors of the Company who have executed
valid and binding agreements containing terms expressly assigning to the
Company
all right, title and interest in such copyrightable materials to the Company,
and waiving their non-assignable rights (including moral rights) in favor
of the Company and its permitted assigns and licensees, to the extent legally
permissible.
(k) Client
and User Data. The Company has all right, title and interest in and to all
of its client information and related client or user data, and all of its
proprietary databases and data collections, including without limitation
the
User Database (collectively, “Proprietary Information”). Any
use or transfer of the Proprietary Information as contemplated under this
Agreement will not violate the rights of any third party or result in the
breach
of any agreement to which the Company is a party or which otherwise governs
the
Company’s actions with respect thereto. Section 2.13(k) of the
Disclosure Schedule lists any complaint, claim or notice, or threat of any
of
the foregoing, of any violation or misappropriation and any client or user
data.
(l) Open
Source Code. Section 2.13(l) of the Disclosure
Schedule lists all Open Source Materials that the Company has utilized in
any
way in the Exploitation of Company Offerings or Internal Systems and describes
generally the manner in which such Open Source Materials have been utilized
by
the Company, including, without limitation, whether and how the Open Source
Materials have been modified and/or distributed by the Company. The
Company has not (i) incorporated Open Source Materials into, or combined
Open Source Materials with, the Customer Offerings or the Internal Systems;
(ii) distributed Open Source Materials in conjunction with any other
software developed or distributed by the Company; or (iii) used Open Source
Materials that create, or purport to create, obligations for the Company
with
respect to the Customer Offerings or the Internal Systems or grant, or purport
to grant, to any third party, any rights or immunities under Intellectual
Property rights (including, but not limited to, using any Open Source Materials
that require, as a condition of Exploitation of such Open Source Materials,
that
other Software incorporated into, derived from or distributed with such Open
Source Materials be (x) disclosed or distributed in source code form,
(y) licensed for the purpose of making derivative works, or
(z) redistributable at no charge or minimal charge).
(m) Employee
and Contractor Assignments. Each current and former employee of
the Company and each current and former independent contractor of the Company
has executed a valid and binding written agreement expressly assigning to
the
Company all right, title and interest in any inventions, whether or not
patentable, and works of authorship, created, developed, conceived and/or
reduced to practice during the term of such employee’s employment or as part of
such independent contractor’s work for the Company, and all Intellectual
Property rights therein, and has waived all moral rights therein to the extent
legally permissible.
(n) Quality. The
Customer Offerings and the Internal Systems are free from significant defects
in
design and conform in all material respects to the published specifications
therefor, if any. The Customer Offerings and the Internal Systems do
not contain any disabling device, virus, worm, back door, Trojan horse or
other
disruptive or malicious code that may or are intended to impair their intended
performance or otherwise permit unauthorized access to, hamper, delete or
damage
any computer system, software, network or data. The Company has not
received any written warranty claims, contractual terminations or requests
for
settlement or refund due to the failure of the Customer Offerings or the
Internal Systems to meet their specifications or otherwise to
satisfy end user needs or for harm or damage to any third party.
2.14 Privacy
and Security.
(a) Without
limiting the generality of Section 2.24, the Company has taken commercially
reasonable steps to prevent the violation by the Company of the rights of
any
person or entity with respect to Personally Identifiable Information provided
under international, U.S. and state law, rules and regulations, including
all
rights respecting privacy generally and the obtaining, storing, using or
transmitting of Personally Identifiable Information (“PII”) of any type,
whether by electronic means or otherwise.
(b) The
Company has taken commercially reasonable steps to protect the confidentiality,
integrity and security of their software, databases, systems, networks and
internet sites and all information stored or contained therein (including
any
PII), or transmitted thereby from unauthorized or improper access, modification,
transmittal or use.
(c) The
Company has complied with (i) all applicable privacy laws and regulations
applicable to PII submitted through websites, (ii) disclosures to visitors
to and users of the Websites, with respect to the use or distribution of,
and
access to, all data in connection with the “opt-in” elections of each such
visitor or user and all other registration procedures conducted by the Company,
and (iii) any contractual requirements relating to the use of
PII.
2.15 Contracts.
(a) Section 2.15
of the Disclosure Schedule lists the following agreements (written or
oral) to which the Company is a party as of the date of this
Agreement:
(i) any
agreement (or group of related agreements) for the lease of personal
property from or to third parties;
(ii) any
agreement (or group of related agreements) for the purchase or sale of
products or for the furnishing or receipt of services (A) which calls for
performance over a period of more than one year, (B) which involves more
than the sum of $50,000, or (C) in which the Company has granted “most
favored nation” pricing provisions or exclusive marketing or distribution rights
relating to any products, services or territory or has agreed to purchase
a
minimum quantity of goods or services or has agreed to purchase goods or
services exclusively from a certain party;
(iii) any
agreement concerning the establishment or operation of a partnership, joint
venture or limited liability company;
(iv) any
agreement (or group of related agreements) under which it has created,
incurred, assumed or guaranteed indebtedness (including capitalized lease
obligations) or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
(v) any
agreement for the disposition of any significant portion of the assets or
business of the Company (other than sales of products in the Ordinary Course
of
Business) or any agreement for the acquisition of the assets or business of
any other entity (other than purchases of inventory or components in the
Ordinary Course of Business);
(vi) any
agreement concerning confidentiality, other than non-disclosure agreements
pursuant to which confidentiality is the Company’s principal
obligation thereunder;
(vii) any
employment agreement or consulting agreement, other than confidentiality
and
assignment of inventions agreements;
(viii) any
agreement involving any current or former officer, director or stockholder
of
the Company or an Affiliate thereof, other than restrictive covenants
agreements, option agreements or restricted stock agreements in the Company’s
standard forms, copies of which have been provided to the Buyer;
(ix) any
agreement under which the consequences of a default or termination would
reasonably be expected to have a Company Material Adverse Effect;
(x) any
agreement which contains any provisions requiring the Company to indemnify
any
other party (excluding indemnities contained in agreements for the purchase,
sale or license of products entered into in the Ordinary Course of
Business);
(xi) any
agreement that would reasonably be expected to have the effect of prohibiting
or
impairing the conduct of the business of the Company as currently conducted
and
as currently proposed to be conducted by the Company (within 12 months
after the Closing, as if the Merger had not occurred);
(xii) any
agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its technology or products, or providing services
to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or any segment of the market or
line
of business, or otherwise providing for any “exclusivity”
requirement;
(xiii) any
agreement under which the Company guarantees or warranties a minimum level
of
performance or a minimum service level, or under which a penalty applies
in the
event that a performance target or service level is not satisfied;
(xiv) any
agreement which would entitle any third party to receive a license or any
other
right to intellectual property of the Buyer or any of the Buyer’s Affiliates
(other than the Company) following the Closing; and
(xv) any
other
agreement (or group of related agreements) involving more than
$50,000.
(b) The
Company has delivered to the Buyer a complete and accurate copy of each
agreement listed in Section 2.13 or Section 2.15 of the Disclosure
Schedule. With respect to each agreement so
listed: (i) subject to the Bankruptcy and Equity Exception, the
agreement is legal, valid, binding and enforceable and in full force and
effect;
(ii) subject to the Bankruptcy and Equity Exception, the agreement will be
legal, valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing; and (iii) neither the Company nor, to the
Knowledge of the Company, any other party, is in breach or violation of,
or
default under, any such agreement, and no event has occurred, is pending
or, to
the Knowledge of the Company, is threatened, which, after the giving of notice,
with lapse of time, or otherwise, would constitute a breach or default by
the
Company, to the Knowledge of the Company, any other party under such
agreement.
2.16 Accounts
Receivable. All accounts receivable of the Company reflected on
the Most Recent Balance Sheet (other than those paid since such date) are
valid receivables subject to no setoffs or counterclaims and are current
and
collectible (within 120 calendar days after the date on which it first became
due and payable), net of any bad debt reserve shown on the Most Recent Balance
Sheet. All accounts receivable of the Company that have arisen since
the Most Recent Balance Sheet Date are valid receivables subject to no setoffs
or counterclaims and are collectible (within 90 calendar days after the date
on
which it first became due and payable).
2.17 Powers
of Attorney. There are no outstanding powers of attorney executed
on behalf of the Company.
2.18 Insurance. Section 2.18
of the Disclosure Schedule lists each insurance policy (including fire, theft,
casualty, comprehensive general liability, workers compensation, business
interruption, environmental, product liability and automobile insurance policies
and bond and surety arrangements) to which the Company is a party, all of
which are in full force and effect. Such insurance policies are of
the type and in amounts customarily carried by organizations conducting
businesses or owning assets similar to those of the Company. There is
no material claim pending under any such policy as to which coverage has
been
questioned, denied or disputed by the underwriter of such policy. All
premiums due and payable under all such policies have been paid, the Company
may
not be liable for retroactive premiums or similar payments, and the Company
is
otherwise in compliance in all material respects with the terms of such
policies.
2.19 Litigation. There
is no Legal Proceeding which is pending or has been threatened in writing
against the Company. There are no judgments, orders or decrees outstanding
against the Company. Since January 1, 2004, there has not been any
Legal Proceeding that (a) resulted in a judgment, order or decree against,
or
settlement by, the Company (whether or not such judgment, order, decree or
settlement was paid, in whole or in part, by an insurer or other third party)
or
(b) resulted in any equitable relief or order of specific performance in
respect
of the Company.
2.20 Warranties. No
product or service manufactured, sold, leased, licensed or delivered by the
Company is subject to any guaranty, warranty, right of return, right of credit
or other indemnity other than the applicable standard terms and conditions
of
sale or lease of the Company, which are set forth in Section 2.20 of the
Disclosure Schedule.
2.21 Employees.
(a) Section 2.21
of the Disclosure Schedule contains a list of all employees of the Company
whose
current annual rate of compensation exceeds $50,000 per year, along with
the position and the annual rate of compensation of each such
person. Each current or past employee of the Company has entered into
a confidentiality/assignment of inventions agreement with the Company, a
copy or
form of which has previously been made available to the
Buyer. Section 2.21 of the Disclosure Schedule contains a list
of all employees of the Company who are a party to a non-competition agreement
with the Company; a copy or form of which has previously been made available
to
the Buyer. All of the agreements referenced in the two preceding
sentences will be legal, valid, binding and enforceable and in full force
and
effect immediately following the Closing in accordance with the terms thereof
as
in effect immediately prior to the Closing, subject to the Bankruptcy and
Equity
Exception and subject to the potential unenforceability of non-competition
and
related covenants under Georgia law. Section 2.21 of the
Disclosure Schedule contains a list of all employees of the Company who,
to the
Company’s Knowledge, are not citizens of the United States. To the
Knowledge of the Company, no key employee or group of employees has any plans
to
terminate employment with the Company.
(b) The
Company is not a party to or bound by any collective bargaining agreement,
nor
has any of them experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has no
Knowledge of any organizational effort made or threatened, either currently
or
within the past two years, by or on behalf of any labor union with respect
to
employees of the Company.
(c) Section 2.21(c)
of the Disclosure Schedule contains a list of all independent contractors
currently engaged by the Company to whom the Company has paid or expects
to pay
total consideration in excess of $50,000 annually, along with the position,
date of retention and rate of remuneration for each such person or
entity. Except as set forth in Section 2.21(c) of the Disclosure
Schedule, none of such independent contractors is a party to a written agreement
or contract with the Company. Each such independent contractor has
entered into the Company’s standard form of confidentiality, non-solicitation
and intellectual property agreement with the Company, a copy of which has
previously been made available to the Buyer.
(d) Section 2.21(d)
of the Disclosure Schedule sets forth a list of each employee of the Company
who
is providing services in the United States and who holds a temporary work
authorization (“Work Permit”), including H-1B, TN, X-0, X-0, X-0, X-0 or
J-1 visa status or Employment Authorization Document (“EAD”) work
authorizations, setting forth the name of such employee, the type of Work
Permit
and the length of time remaining on such Work Permit. With respect to
each Work Permit, all of the information that the Company provided to the
United
States Department of Labor (“DOL”) and the United States Department of
Homeland Security (“DOHS”) in the applications for such Work Permit was,
to the Knowledge of the Company, true and complete at the time of filing
such
applications and the Company continues to adhere to its obligations
thereunder. The Company received the appropriate notice of approval
or other evidence of authorized employment from the DOHS, the DOL, the
Department of State or other relevant Governmental Entity with respect to
each
such Work Permit. The Company has not received any written notice
from the DOHS or any other Governmental Entity that any Work Permit has been
revoked. There is no action pending or, to the Knowledge of the
Company, threatened to revoke or adversely modify the terms of any of the
Work
Permits.
(e) The
Company has withheld and paid to the appropriate Governmental Entity or is
holding for payment not yet due to such Governmental Entity all amounts required
to be withheld from its employees and is not liable for any arrears of wages,
Taxes, penalties or other sums for failure to comply with any of the
foregoing.
(f) The
Company has not incurred, and to the Company’s Knowledge, no circumstances exist
under which the Company would reasonably be expected to incur, any liability
arising from the misclassification of employees as consultants or independent
contractors, or from the misclassification of consultants or independent
contractors as employees.
2.22 Employee
Benefits.
(a) Section 2.22(a) of
the Disclosure Schedule contains a complete and accurate list of all Company
Plans. Complete and accurate copies of (i) all Company Plans
which have been reduced to writing, (ii) written summaries of all unwritten
Company Plans, (iii) all related trust agreements, insurance contracts and
summary plan descriptions, and (iv) the annual reports filed on IRS Form
5500 for the last three plan years and (for all funded plans) the plan
financial statements for the last three plan years for each Company Plan,
have
been delivered to the Buyer.
(b) Each
Company Plan has been administered in all material respects in accordance
with
its terms and each of the Company and the ERISA Affiliates has in all material
respects met its obligations with respect to each Company Plan and has made
all
required contributions thereto. The Company, each ERISA Affiliate and
each Company Plan are in compliance in all material respects with the currently
applicable provisions of ERISA and the Code and the regulations thereunder
(including Section 4980 B of the Code, Subtitle K, Chapter 100 of the
Code and Sections 601 through 608 and Section 701 et seq. of
ERISA). All filings and reports as to each Company Plan required to
have been submitted to the Internal Revenue Service or to the United States
Department of Labor have been duly submitted. No Company Plan has
assets that include securities issued by the Company or any ERISA
Affiliate.
(c) There
are
no Legal Proceedings (except claims for benefits payable in the normal operation
of the Company Plans and proceedings with respect to qualified domestic
relations orders) against or involving any Company Plan or asserting any
rights or claims to benefits under any Company Plan that could give rise
to any
material liability.
(d) All
the
Company Plans that are intended to be qualified under
Section 401(a) of the Code have received or are the subject of
opinion, advisory, or determination letters from the Internal Revenue Service
to
the effect that such Company Plans are qualified and the plans and the trusts
related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, no such
opinion, advisory or determination letter has been revoked and revocation
has
not been threatened, and no act or omission has occurred, that would reasonably
be expected to adversely affect its qualification or materially increase
its
cost. Each Company Plan which is required to satisfy
Section 401(k)(3) or Section 401(m)(2) of the Code has been
tested for compliance with, and satisfies the requirements of
Section 401(k)(3) and Section 401(m)(2) of the Code for each
plan year ending prior to the Closing Date, or appropriate corrective action
has
been taken.
(e) Neither
the Company, nor any ERISA Affiliate has ever maintained an Employee Benefit
Plan subject to Section 412 of the Code or Title IV of ERISA.
(f) At
no
time has the Company, or any ERISA Affiliate been obligated to contribute
to any
“multiemployer plan” (as defined in Section 4001(a)(3) of
ERISA).
(g) There
are
no unfunded obligations under any Company Plan providing health or welfare
benefits after termination of employment to any employee of the Company (or
to
any beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation of
health
coverage required to be continued under Section 4980B of the Code or other
applicable law and insurance conversion privileges under state
law. The assets of each Company Plan which is funded are reported at
their fair market value on the books and records of such Company
Plan.
(h) No
act or
omission has occurred and no condition exists with respect to any Company
Plan
that would subject the Company, or any ERISA Affiliate to (i) any material
fine, penalty, tax or liability of any kind imposed under ERISA or the Code
or
(ii) any contractual indemnification or contribution obligation protecting
any fiduciary, insurer or service provider with respect to any Company Plan
that
could give rise to any material liability.
(i) No
Company Plan is funded by, associated with or related to a “voluntary employee’s
beneficiary association” within the meaning of Section 501(c)(9) of
the Code.
(j) Each
Company Plan is terminable unilaterally by the Company at any time without
material liability or expense to the Company or such Company Plan as a result
thereof (other than for benefits accrued through the date of termination
and
reasonable administrative expenses related thereto) and no Company Plan,
plan documentation or agreement, summary plan description or other written
communication distributed generally to employees by its terms prohibits the
Company from amending or terminating any such Company Plan.
(k) Section 2.22(k) of
the Disclosure Schedule discloses each: (i) agreement with any stockholder,
director, executive officer or other key employee of the Company (other than
the
Option Plan and Options) (A) the benefits of which are contingent, or the
terms of which are altered, upon the occurrence of a transaction involving
the
Company of the nature of any of the transactions contemplated by this Agreement,
(B) providing any term of employment or compensation guarantee or
(C) providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee;
(ii) agreement, plan or arrangement under which any person may receive
payments from the Company that may be subject to the tax imposed by
Section 4999 of the Code or included in the determination of such person’s
“parachute payment” under Section 280G of the Code; and
(iii) agreement or plan binding the Company, including any stock option
plan, stock appreciation right plan, restricted stock plan, stock purchase
plan,
severance benefit plan or Company Plan (other than the Option Plan or Options),
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
(l) Section 2.22(l) of
the Disclosure Schedule sets forth the policy of the Company with respect
to
accrued vacation, accrued sick time and earned time off.
(m) Each
Company Plan that is a “nonqualified deferred compensation plan” (as defined in
Code Section 409A(d)(1)) has been operated since January 1, 2005 in
good faith compliance with Code Section 409A and applicable provisions of
IRS Notice 2005-1, any other generally applicable guidance published with
an
effective date prior to January 1, 2008 as defined under
IRS Notice 2007-86 and Treas. Dec. 9321 (2007-19 IRB 1123 (Apr. 10,
2007)). No Company Plan that is a “nonqualified deferred compensation
plan” has been materially modified (as determined under Notice
2005-1) after October 3, 2004. No event has occurred that would
be treated by Code Section 409A(b) as a transfer of property for
purposes of Code Section 83. No Option outstanding under any
Company Plan that was granted or became vested after December 31, 2004
or was materially modified (as determined under Notice 2005-1) after
October 23, 2004 has an exercise price that is or may be less than the
fair market value of the underlying stock as of the date such Option was
granted
or has any feature for the deferral of compensation other than the deferral
of
recognition of income until the later of exercise or disposition of such
Option
or the time the stock acquired pursuant to the exercise of the Option first
becomes substantially vested.
(n) The
Company has no liabilities or obligations (including for failing to provide
any
notice) pursuant to the Worker Adjustment and Retraining Notification Act
(“WARN”) and any other similar state and foreign law applicable to any
layoff or plant closing relating to the Company that has occurred, or will
occur, prior to the Closing. The Company has provided to Buyer a list
of all employees whose employment was terminated within 90 days prior to
the
Effective Time, which list designates whether the termination was a discharge
for cause, a discharge for other than cause, a voluntary departure or
retirement; and the Company shall update that list as of the
Closing.
2.23 Environmental
Matters.
(a) the
Company has complied in all material respects with all applicable Environmental
Laws. There is no pending or, to the Knowledge of the Company,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request
by
any Governmental Entity, relating to any Environmental Law involving the
Company.
(b) The
Company does not have any liabilities or obligations arising from the release
of
any Materials of Environmental Concern into the environment.
(c) The
Company is not a party to or bound by any court order, administrative order,
consent order or other agreement between the Company and any Governmental
Entity
entered into in connection with any legal obligation or liability arising
under
any Environmental Law.
(d) Set
forth
in Section 2.23(d) of the Disclosure Schedule is a list of all
documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Company (whether conducted by or on
behalf of the Company or a third party, and whether done at the initiative
of
the Company or directed by a Governmental Entity or other third party) which
the
Company has possession of or access to. A complete and accurate copy
of each such document has been provided to the Buyer.
2.24 Legal
Compliance. The Company is currently conducting, and has at all
times since January 1, 2004 conducted, its business in compliance in
all material respects with each applicable law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity. The Company has not received any written notice
or communication from any Governmental Entity alleging noncompliance with
any
applicable law, rule or regulation.
2.25 Customers. Section 2.25
of the Disclosure Schedule sets forth a list of (a) each Customer that
accounted for more than five percent (5%) of the consolidated revenues of
the
Company during each quarter of the last full fiscal year and each quarter
during
the interim period through the Most Recent Balance Sheet Date and the amount
of
revenues accounted for by such Customer during each such quarter. No
such customer has notified the Company in writing within the past year that
it
will stop, or decrease the rate of, buying services, of the
Company.
2.26 Permits. Section 2.26
of the Disclosure Schedule sets forth a list of all Permits issued to or
held by
the Company. Such listed Permits are the only Permits that are
required for the Company to conduct its respective business as presently
conducted or as proposed to be conducted by the Company (within 12 months
after the Closing, as if the Merger had not occurred), except for those the
absence of which, individually or in the aggregate, have not had and would
not
reasonably be expected to have a Company Material Adverse
Effect. Each such Permit is in full force and effect; the Company is
in compliance in all material respects with the terms of each such Permit;
and,
to the Knowledge of the Company, no suspension or cancellation of such Permit
is
threatened and there is no basis for believing that such Permit will not
be
renewable upon expiration. Each such Permit will continue in full
force and effect immediately following the Closing.
2.27 Certain
Business Relationships With Affiliates. No Affiliate of the
Company (a) owns any property or right, tangible or intangible, which is
used in the business of the Company, (b) has any claim or cause of action
against the Company, or (c) owes any money to, or is owed any money by, or
has guaranteed any indebtedness of, the Company. Section 2.27 of
the Disclosure Schedule describes any commercial transactions or relationships
between the Company and any Affiliate thereof (other than the Company) which
occurred or have existed since the beginning of the time period covered by
the
Financial Statements.
2.28 Brokers’
Fees. The Company does not have any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to
the
transactions contemplated by this Agreement, except for the fees and expenses
of
The Jordan, Xxxxxxxx Group, Inc.
2.29 Books
and Records. The minute books and other similar records of the
Company contain in all material respects complete and accurate records of
all
actions taken at any meetings of the Company’s stockholders, Board of Directors
or any committee thereof and of all written consents executed in lieu of
the
holding of any such meeting. The books and records of the Company
accurately reflect in all material respects the assets, liabilities, business,
financial condition and results of operations of the Company and have been
maintained in accordance with good business and bookkeeping
practices. Section 2.29 of the Disclosure Schedule contains a
list of all bank accounts and safe deposit boxes of the Company and the names
of
persons having signature authority with respect thereto or access
thereto.
2.30 Controls
and Procedures.
(a) The
Company maintains books and records which, in reasonable detail, accurately
and
fairly reflect the transactions and dispositions of the assets of the Company
and maintains a system of internal control over financial reporting which
provides reasonable assurance that (i) transactions are executed with
management’s authorization, (ii) transactions are recorded as necessary to
permit preparation of the consolidated financial statements of the Company
and
to maintain accountability for the Company’s consolidated assets,
(iii) access to assets of the Company is permitted only in accordance with
management’s authorization, and (iv) the reporting of assets of the Company
is compared with existing assets at reasonable intervals.
(b) The
Company has not, since July 30, 2002, extended or maintained credit, arranged
for the extension of credit, modified or renewed an extension of credit,
in the
form of a personal loan or otherwise, to or for any director or executive
officer of the Company.
Exhibit
99.1
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
AND
THE TRANSITORY SUBSIDIARY
Each
of
the Buyer and the Transitory Subsidiary represents and warrants to the Company
that the statements contained in this Article III are true and correct as
of the date of this Agreement and will be true and correct as of the Closing
as
though made as of the Closing, except to the extent such representations
and
warranties are specifically made as of a particular date (in which case such
representations and warranties will be true and correct as of such
date):
3.1 Organization,
Qualification and Corporate Power. Each of the Buyer and the
Transitory Subsidiary is a corporation duly organized, validly existing and
in
good standing under the laws of the state of its incorporation. The
Buyer is duly qualified to conduct business and is in corporate and tax good
standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing
would not have a Buyer Material Adverse Effect. The Buyer has all
requisite corporate power and authority to carry on the businesses in which
it
is engaged and to own and use the properties owned and used by
it. The Buyer has furnished or made available to the Company complete
and accurate copies of its Certificate of Incorporation and
by-laws.
3.2 Capitalization. The
authorized capital stock of the Buyer consists of
(a) 100,000,000 shares of Buyer Common Stock, of which
40,406,753 shares were issued and outstanding as of
September 30, 2007, and (b) 5,000,000 shares of Preferred
Stock, $.001 par value per share, of which no shares are issued or
outstanding. The rights and privileges of each class of the Buyer’s capital
stock are set forth in the Buyer’s Certificate of Incorporation. All
of the issued and outstanding shares of Buyer Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable. All of the Merger Shares will be, when issued on the
terms and conditions of this Agreement, duly authorized, validly issued,
fully
paid and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the Buyer’s Certificate of
Incorporation or by-laws or any agreement to which the Buyer is a party or
is
otherwise bound.
3.3 Authorization
of Transaction. Each of the Buyer and the Transitory Subsidiary
has all requisite power and authority to execute and deliver this Agreement
and
(in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery by
the Buyer and the Transitory Subsidiary of this Agreement and (in the case
of
the Buyer) the Escrow Agreement and the consummation by the Buyer and the
Transitory Subsidiary of the transactions contemplated hereby and thereby
have
been duly and validly authorized by all necessary corporate action on the
part
of the Buyer and Transitory Subsidiary, respectively. This Agreement
has been duly and validly executed and delivered by the Buyer and the Transitory
Subsidiary and constitutes a valid and binding obligation of the Buyer and
the
Transitory Subsidiary, enforceable against them in accordance with its
terms.
3.4 Noncontravention. Subject
to compliance with the applicable requirements of the Securities Act and
any
applicable state securities laws, the Exchange Act and the filing of the
Certificate of Merger as required by the Delaware General Corporation Law,
neither the execution and delivery by the Buyer or the Transitory Subsidiary
of
this Agreement or (in the case of the Buyer) the Escrow Agreement, nor the
consummation by the Buyer or the Transitory Subsidiary of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any
provision of the charter or by-laws of the Buyer or the Transitory Subsidiary,
(b) require on the part of the Buyer or the Transitory Subsidiary any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity, (c) conflict with, result in breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party any right to terminate,
modify or cancel, or require any notice, consent or waiver under, any material
contract or instrument to which the Buyer or the Transitory Subsidiary is
a
party or by which either is bound or to which any of their assets are subject,
or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Buyer or the Transitory Subsidiary or any of
their
properties or assets.
3.5 Reports
and Financial Statements. The Buyer has previously furnished or
made available to the Company complete and accurate copies, as amended or
supplemented, of its Registration Statement on Form S-1 (Reg. No. 333-140503)
and each other form, report, statement or schedule and other document filed
or
furnished by it with the SEC since February 7, 2007 (collectively, the
“Buyer Reports”). The Buyer Reports include all of the
documents required to be filed or furnished by the Buyer under Section 13
or subSections (a) or (c) of Section 14 of the Exchange Act
with the SEC from May 16, 2007 through the date of this
Agreement. The Buyer Reports were prepared in accordance with the
applicable requirements of the Securities Act, the Exchange Act, the
Xxxxxxxx-Xxxxx, and, in each case, the rules and regulations promulgated
thereunder complied in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder when filed. As
of their respective dates, and, if amended, as of the date of each such
amendment, the Buyer Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they
were made, not misleading. The financial statements of the Buyer
included in the Buyer Reports (i) complied as to form in all material
respects with applicable accounting requirements and the published rules
and
regulations of the SEC with respect thereto when filed, (ii) were prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto,
and
in the case of quarterly financial statements, as permitted by Form 10-Q
under the Exchange Act), and (iii) fairly present in all material respects
the consolidated financial condition, results of operations and cash flows
of
the Buyer and its subsidiaries as of the respective dates thereof and for
the
periods referred to therein.
3.6 Absence
of Material Adverse Change. Since June 30, 2007, there
has not occurred any Buyer Material Adverse Effect.
3.7 Litigation. Except
as disclosed in the Buyer Reports, as of the date of this Agreement, there
is no
Legal Proceeding which is pending or, to the Buyer’s knowledge, threatened
against the Buyer or any subsidiary of the Buyer which, individually or in
the
aggregate, would reasonably be expected to have a Buyer Material Adverse
Effect
or which in any manner challenges or seeks to prevent, enjoin, alter or delay
the transactions contemplated by this Agreement.
3.8 Interim
Operations of the Transitory Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities
other
than as contemplated by this Agreement.
Exhibit
99.1
ARTICLE
IV
COVENANTS
4.1 Closing
Efforts. Each of the Parties shall use its Reasonable Best
Efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated by this Agreement, including
using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
4.2 Governmental
and Third-Party Notices and Consents.
(a) Each
Party shall use its Reasonable Best Efforts to obtain, at its expense, all
waivers, permits, consents, approvals or other authorizations from Governmental
Entities, and to effect all registrations, filings and notices with or to
Governmental Entities, as may be required for such Party to consummate the
transactions contemplated by this Agreement and to otherwise comply with
all
applicable laws and regulations in connection with the consummation of the
transactions contemplated by this Agreement.
(b) The
Company shall use its Reasonable Best Efforts to obtain, at its expense,
all
such waivers, consents or approvals from third parties, and to give all such
notices to third parties, as are required to be listed in the Disclosure
Schedule; provided, that, this Section 4.2(b) shall not require the
Company to make any material cash or other payments to such third parties
in
order to obtain such consent (other than any such payments required pursuant
to
the terms of any existing agreements between the Company and such third
parties).
4.3 Stockholder
Approval.
(a) As
expeditiously as possible following the execution of this Agreement and in
any
event within five (5) business days after the execution of this Agreement,
the Company shall mail the Disclosure Statement to the Company
Stockholders. The Disclosure Statement shall include (i) a
summary of the Merger and this Agreement (which summary shall include a summary
of the terms relating to the indemnification obligations of the Indemnifying
Stockholders, the escrow arrangements and the authority of the Indemnification
Representative, and a statement that the adoption of this Agreement by the
stockholders of the Company shall constitute approval of such
terms), (ii) a statement that appraisal rights are available for the
Company Shares pursuant to Section 262 of the Delaware General Corporation
Law and a copy of such Section 262, and all other relevant
information. Buyer shall supply all information reasonably required
by the Company for purposes of the Disclosure Statement. The Company
shall use its Reasonable Best Efforts to, as promptly as reasonably possible
following the execution of this Agreement, secure and cause to be filed with
the
Company written consents from Company Stockholders necessary to secure the
Requisite Stockholder Approval. As promptly as reasonably possible
following its receipt of the Requisite Stockholder Approval, the Company
shall
deliver to the Buyer a certificate executed on behalf of the Company by its
Secretary and certifying that the Requisite Stockholder Approval has been
obtained, together with copies of the written consents evidencing such Requisite
Stockholder Approval. The Company shall also send, pursuant to
Sections 228 and 262(d) of the Delaware General Corporation Law, a
written notice to all stockholders of the Company that did not execute such
written consent informing them that this Agreement and the Merger were adopted
and approved by the stockholders of the Company and that appraisal rights
are
available for their Company Shares pursuant to Section 262 of the Delaware
General Corporation Law (which notice shall include a copy of such
Section 262), and shall promptly inform the Buyer of the date on which such
notice was sent.
(b) The
Company, acting through its Board of Directors, shall include in the Disclosure
Statement the unanimous recommendation of its Board of Directors that the
stockholders of the Company vote in favor of the adoption of this Agreement
and
the approval of the Merger.
(c) The
Company shall ensure that the Disclosure Statement does not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order
to make the statements made, in light of the circumstances under which they
were
made, not misleading (provided that the Company shall not be responsible
for the accuracy or completeness of any information concerning the Buyer
or the
Transitory Subsidiary furnished by the Buyer in writing for inclusion in
the
Disclosure Statement).
(d) The
Buyer
shall ensure that any information furnished by the Buyer to the Company in
writing for inclusion in the Disclosure Statement does not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order
to make the statements made, in light of the circumstances under which they
were
made, not misleading.
4.4 Operation
of Business. Except as contemplated by this Agreement, during the
period from the date of this Agreement to the Closing, the Company shall
conduct
its operations in the Ordinary Course of Business and in compliance with
all
applicable laws and regulations and, to the extent consistent therewith,
use its
Reasonable Best Efforts to preserve intact its current business organization,
keep its physical assets in good working condition, keep available the services
of its current officers and employees and preserve its relationships with
material customers, suppliers and others having business dealings with it
to the
end that its goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, prior to
the Closing, the Company shall not, without the written consent of the
Buyer:
(a) issue
or
sell any stock or other securities of the Company or any options, warrants
or
rights to acquire any such stock or other securities (except pursuant to
the
conversion or exercise of Preferred Shares, Options or Warrants outstanding
on
the date hereof), or amend any of the terms of (including the vesting
of) any Options, Warrants or restricted stock agreements, or repurchase or
redeem any stock or other securities of the Company (except from former
employees, directors or consultants in accordance with agreements providing
for
the repurchase of shares at their original issuance price in connection with
any
termination of employment with or services to the Company);
(b) split,
combine or reclassify any shares of its capital stock; or declare, set aside
or
pay any dividend or other distribution (whether in cash, stock or property
or
any combination thereof) in respect of its capital stock;
(c) except
as
permitted by Section 4.11(a), create, incur or assume any indebtedness
(including obligations in respect of capital leases); assume, guarantee,
endorse
or otherwise become liable or responsible (whether directly, contingently
or
otherwise) for the obligations of any other person or entity; or make any
loans, advances or capital contributions to, or investments in, any other
person
or entity;
(d) enter
into, adopt or amend any Employee Benefit Plan (except as may be required
by
law) or any employment or severance agreement or arrangement of the type
described in Section 2.22(k) or (except for normal increases in the
Ordinary Course of Business for employees who are not Affiliates) increase
in any manner the compensation or fringe benefits of, or materially modify
the
employment terms of, its directors, officers or employees, generally or
individually, or pay any bonus or other benefit to its directors, officers
or
employees (except for existing payment obligations listed in Section 2.22
of the Disclosure Schedule) or hire any new officers or (except in the
Ordinary Course of Business) any new employees;
(e) acquire,
sell, lease, license or dispose of any assets or property, other than purchases
and sales of assets or licenses of products or services to customers and
partners in the Ordinary Course of Business;
(f) mortgage
or pledge any of its property or assets or subject any such property or assets
to any Security Interest;
(g) discharge
or satisfy any Security Interest or pay any obligation or liability other
than
in the Ordinary Course of Business;
(h) amend
its
charter, by-laws or other organizational documents (except as contemplated
by
this Agreement);
(i) change
its accounting methods, principles or practices, except insofar as may be
required by a generally applicable change in GAAP, or make any new elections,
or
changes to any current elections, with respect to Taxes;
(j) enter
into, amend, terminate, take or omit to take any action that would constitute
a
violation of or default under, or waive any rights under, any contract or
agreement of a nature required to be listed in Section 2.12,
Section 2.13 or Section 2.15 of the Disclosure Schedule (other than
customer or partner agreements entered into in the Ordinary Course of Business
or amendments that do not materially increase the Company’s
obligations);
(k) make
or
commit to make any capital expenditures in excess of $50,000 in the
aggregate;
(l) institute
or settle any Legal Proceeding;
(m) issue
any
invoice or otherwise conduct any billing activity with respect to services
scheduled to be performed after November 1, 2007;
(n) take
any
action or fail to take any action permitted by this Agreement with the Knowledge
that such action or failure to take action would result in (i) any of the
representations and warranties of the Company set forth in this Agreement
becoming untrue or (ii) any of the conditions to the Merger set forth in
Article V not being satisfied; or
(o) agree
in
writing or otherwise to take any of the foregoing actions.
4.5 Access
to Information; Additional Financial Statements.
(a) The
Company shall permit representatives of the Buyer to have full access (at
all
reasonable times during working hours, and with reasonable notice, and in
a
manner so as not to interfere with the normal business operations of the
Company) to all premises, properties, financial, tax and accounting records
(including the work papers of the Company’s independent accountants), contracts,
other records and documents, and personnel, of or pertaining to the
Company.
(b) Within
15
calendar days after the end of each month ending prior to the Closing, the
Company shall furnish to the Buyer an unaudited income statement for such
month
and a balance sheet as of the end of such month, prepared on a basis consistent
with the Financial Statements. Such financial statements shall
present fairly the financial condition and results of operations of the Company
on a consolidated basis as of the dates thereof and for the periods covered
thereby, and shall be consistent with the books and records of the
Company.
(c) Prior
to
the Closing, the Company shall (i) provide such information (to the extent
available to the Company), assistance and cooperation as the Buyer may
reasonably request in connection with any of the Buyer’s filings with the SEC,
(ii) use commercially reasonable efforts to cause the officers of the
Company to execute any reasonably necessary officers’ certificates or management
representation letters to the Company’s accountants to issue unqualified reports
with respect to the financial statements to be included in any of the Buyer’s
filings with the SEC, (iii) request from the present and former independent
accountants of the Company that they (A) cooperate with and assist the
Buyer in preparing financial statements with respect to the Company for
inclusion by the Buyer in its filings with the SEC, including, without
limitation, in compliance with the applicable provisions of Regulation S-X
and
Form 8-K, and (B) take work papers available to the Buyer and its
representatives (subject to the Buyer entering into any customary agreements
reasonably required or requested by the accountants in connection with the
provision of such work papers).
(d) Within
15 days following the Closing, the Company shall deliver to the Buyer
historical financial statements for the Company for, in a form that complies
with what is required by Item 9.01 of Form 8-K and Regulation S-X of the
SEC for
a business acquisition required to be described in answer to Item 2.01 of
Form 8-K, including financial statements of the Company for the nine-month
periods ended September 30, 2006 and 2007, including necessary
footnotes, and such other information required in order for the Buyer to
prepare
the pro forma financial information required by Item 9.01 of Form 8-K
or otherwise required by the SEC for filings by Buyer with the SEC.
4.6 Notice
of Breaches.
(a) From
the
date of this Agreement until the Closing, the Company shall promptly deliver
to
the Buyer supplemental information concerning events or circumstances occurring
subsequent to the date hereof which would render any representation, warranty
or
statement in this Agreement or the Disclosure Schedule inaccurate or incomplete
in any material respect at any time after the date of this Agreement until
the
Closing. No such supplemental information shall be deemed to avoid or
cure any misrepresentation or breach of warranty or constitute an amendment
of
any representation, warranty or statement in this Agreement or the Disclosure
Schedule.
(b) From
the
date of this Agreement until the Closing, the Buyer shall promptly deliver
to
the Company supplemental information concerning events or circumstances
occurring subsequent to the date hereof which would render any representation
or
warranty in this Agreement inaccurate or incomplete in any material respect
at
any time after the date of this Agreement until the Closing. No such
supplemental information shall be deemed to avoid or cure any misrepresentation
or breach of warranty or constitute an amendment of any representation or
warranty in this Agreement.
4.7 Exclusivity.
(a) The
Company shall not, and the Company shall require each of its officers,
directors, employees, representatives and agents not to, directly or indirectly,
(i) initiate, solicit, encourage or otherwise facilitate any inquiry,
proposal, offer or discussion with any party (other than the
Buyer) concerning any merger, reorganization, consolidation,
recapitalization, business combination, liquidation, dissolution, share
exchange, sale of stock, sale of material assets or similar business transaction
involving the Company, or any division of the Company, (ii) furnish any
non-public information concerning the business, properties or assets of the
Company, or any division of the Company to any party (other than the
Buyer) or (iii) engage in discussions or negotiations with any party
(other than the Buyer) concerning any such transaction.
(b) The
Company shall immediately notify any party with which discussions or
negotiations of the nature described in paragraph (a) above were
pending that the Company is terminating such discussions or
negotiations. If the Company receives any inquiry, proposal or offer
of the nature described in paragraph (a) above, the Company shall,
within one business day after such receipt, notify the Buyer of such inquiry,
proposal or offer, including the identity of the other party and the terms
of
such inquiry, proposal or offer.
4.8 Expenses. Except
as set forth in Article VI and the Escrow Agreement, each of the Parties
shall bear its own costs and expenses (including legal and accounting fees
and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
4.9 Listing
of Merger Shares. The Buyer shall, if required by the rules of
The Nasdaq Stock Market, file with The Nasdaq Stock Market a Notification
Form
for Listing Additional Shares with respect to the shares of Buyer Common
Stock
issuable in connection with the Merger.
4.10 FIRPTA
Tax Certificates. Within two (2) calendar days prior to the
Closing, the Company shall deliver or cause to be delivered to the Buyer
a
certification that the Company is not a foreign person in accordance with
the
Treasury Regulations under Section 1445 of the Code. If the
Company has not provided the certification described above to the Buyer on
or
before the Closing Date, the Buyer shall be permitted to reduce the dollar
amount set forth in Section 1.5(b)(i) by an amount equal to any
required withholding Tax under Section 1445 of the Code.
4.11 Debt.
(a) The
Company represents and warrants to the Buyer that the total amount of its
indebtedness to Silicon Valley Bank as of October 2, 2007, including accrued
but
unpaid interest, equaled $2,178,840.12 (“Existing SVB
Debt”). Additionally, following said date and prior to the
Closing Date, the Company may incur up to $300,000 of additional indebtedness
to
Silicon Valley Bank (or such greater amount as shall be approved by Buyer,
in
writing, in its sole discretion), subject to the restriction set forth in
Section 4.11(b) (the “Incremental Indebtedness”). The
parties acknowledge and agree that such Incremental Indebtedness, unlike
the
Existing SVB Debt, will not be deducted from the Cash Merger
Consideration, but, subject to the Section 4.11(b), shall be
paid, or caused to be paid, by the Buyer upon Closing.
(b) The
Company agrees that any Incremental Indebtedness shall not exceed the aggregate
unbilled amounts attributable to contractually committed services scheduled
to
be rendered by the Company after November 1, 2007.
(c) Upon
the
Closing, the Buyer shall, or shall cause the Company to, repay the Company’s
then outstanding indebtedness to Silicon Valley Bank (subject to the limitations
of Section 4.11(a)).
(d) At
any
time on or after the date of this Agreement and prior to the earlier of the
termination of this Agreement or the Closing, the Company may borrow up to
$250,000 from the Buyer (the “Buyer Debt”), such debt to be evidenced by
a note executed by the Company in the form attached hereto as
Exhibit E; provided, however, that (i) the
Company shall not expend any of the proceeds of such borrowings prior to
November 7, 2007 and (ii) the Company may expend the proceeds of such
borrowings only to the extent that the total of all Incremental Indebtedness
and
all such expenditures out of the proceeds of such borrowings do not exceed
the
aggregate amounts attributable to contractually committed services scheduled
to
be rendered by the Company after November 1, 2007.
(e) If,
at
the Closing, it is determined by mutual written agreement of the parties
that
the total amount of all Incremental Indebtedness incurred pursuant to
Section 4.11(a) and all expenditures by the Company out of the proceeds of
the Buyer Debt exceeded the aggregated unbilled amounts attributable to
contractually committed services scheduled to be rendered by the Company
after
November 1, 2007, and if the condition set forth in
Section 5.2(m) is waived by the Buyer, then the aggregate Cash Merger
Consideration shall be reduced by the amount of such excess.
Exhibit
99.1
ARTICLE
V
CONDITIONS
TO CONSUMMATION OF THE MERGER
5.1 Conditions
to Each Party’s Obligations. The respective obligations of each
Party to consummate the Merger are subject to the satisfaction of the following
condition:
(a) this
Agreement and the Merger shall have received the Requisite Stockholder
Approval.
5.2 Conditions
to Obligations of the Buyer and the Transitory Subsidiary. The
obligation of each of the Buyer and the Transitory Subsidiary to consummate
the
Merger is subject to the satisfaction (or waiver by the Buyer) of the
following additional conditions:
(a) the
number of Dissenting Shares shall not exceed 1% of the number of outstanding
Common Shares as of the Effective Time (calculated after giving effect to
the
conversion into Common Shares of all outstanding Preferred Shares);
(b) the
Company shall have obtained at their own expense (and shall have provided
copies
thereof to the Buyer) all of the consents (if any) listed on
Schedule 5.2(b) of the Disclosure Schedule;
(c) the
representations and warranties of the Company set forth in the first sentence
of
Section 2.1 and in Section 2.3 and any representations and warranties
of the Company set forth in this Agreement that are qualified as to materiality
shall be true and correct in all respects, and all other representations
and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects, in each case as of the date of this Agreement and
as
of the Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date
(in
which case such representations and warranties shall be true and correct
as of
such date); provided, however, that the
representations and warranties made in Section 2.2(a) shall be true
and correct as of the Closing Date, except for immaterial inaccuracies, and
shall not be subject to the qualification set forth above;
(d) the
Company shall have performed or complied with in all material respects its
agreements and covenants required to be performed or complied with under
this
Agreement as of or prior to the Closing;
(e) no
Legal
Proceeding shall be pending wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of the
transactions contemplated by this Agreement, (ii) cause the transactions
contemplated by this Agreement to be rescinded following consummation or
(iii) have, individually or in the aggregate, a Company Material Adverse
Effect, and no such judgment, order, decree, stipulation or injunction shall
be
in effect;
(f) the
Company shall have delivered to the Buyer and the Transitory Subsidiary the
Company Certificate;
(g) each
of
the Qualifying Holders shall have executed and delivered to the Buyer an
Investment Representation Letter in the form attached hereto as
Exhibit A and the Buyer shall have no reason to believe that the
statements set forth therein are not true and shall be reasonably satisfied
that
the issuance and sale of the Merger Shares is exempt from the registration
requirements of the Securities Act;
(h) the
Buyer
shall have received from counsel to the Company an opinion in substantially
the
form attached hereto as Exhibit B, addressed to the Buyer dated as
of the Closing Date;
(i) the
Company shall have entered into employment agreements with Xxxxxxx Xxxxxxxxx
and
Xxxxxxx Xxxxx and shall have entered into Severance and Non-Compete Agreements
with Xxxxx Xxx and Xxxxx Xxxxxxxx, in each case upon the terms mutually agreed
upon prior to the date of this Agreement;
(j) all
holders of Change-in-Control Options and the Waived Options shall have executed
and delivered a consent to the treatment of such Options pursuant to
Section 1.9(a); and holders of then outstanding In-the-Money Options
(excluding Change-in-Control Options and 2007 Options), exercisable for at
least
90% in the aggregate of all Common Shares subject to all then outstanding
In-the-Money Options (excluding Change-in-Control Options and 2007 Options),
shall have executed and delivered an Acknowledgement and Release in the form
attached hereto as Exhibit F;
(k) all
holders of then outstanding Warrants shall have executed and delivered to
the
Company a Consent of Warrantholder in the form attached hereto as
Exhibit G;
(l) the
Company shall have duly filed the Certificate of Amendment with the Secretary
of
State of the State of Delaware;
(m) Buyer
shall be reasonably satisfied that the total amount of Incremental Indebtedness
incurred pursuant to Section 4.11(a) and expenditures by the Company out of
the proceeds of the Buyer Debt did not exceed the aggregate unbilled amounts
attributable to contractually committed services scheduled to be rendered
by the
Company after November 1, 2007; and
(n) the
Buyer
shall have received such other certificates and instruments (including
certificates of good standing of the Company in its jurisdiction of organization
and the various foreign jurisdictions in which they are qualified, certified
charter documents, certificates as to the incumbency of officers and the
adoption of authorizing resolutions) as it shall reasonably request in
connection with the Closing.
5.3 Conditions
to Obligations of the Company. The obligation of the Company to
consummate the Merger is subject to the satisfaction of the following additional
conditions:
(a) the
representations and warranties of the Buyer and the Transitory Subsidiary
set
forth in the first sentence of Section 3.1 and in Section 3.3 and any
representations and warranties of the Buyer and the Transitory Subsidiary
set
forth in this Agreement that are qualified as to materiality shall be true
and
correct in all respects, and all other representations and warranties of
the
Buyer and the Transitory Subsidiary set forth in this Agreement shall be
true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing as though made as of the Closing, except
to the
extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall
be true
and correct as of such date);
(b) each
of
the Buyer and the Transitory Subsidiary shall have performed or complied
with in
all material respects its agreements and covenants required to be performed
or
complied with under this Agreement as of or prior to the Closing;
(c) no
Legal
Proceeding shall be pending wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of the
transactions contemplated by this Agreement or (ii) cause the transactions
contemplated by this Agreement to be rescinded following consummation, and
no
such judgment, order, decree, stipulation or injunction shall be in
effect;
(d) the
Buyer
shall have delivered to the Company the Buyer Certificate;
(e) the
Company shall have received from counsel to the Buyer and the Transitory
Subsidiary an opinion in substantially the form attached hereto as
Exhibit C, addressed to the Company and dated as of the Closing
Date; and
(f) the
Company shall have received such other certificates and instruments (including
certificates of good standing of the Buyer and the Transitory Subsidiary
in
their jurisdiction of organization, certified charter documents, certificates
as
to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the
Closing.
Exhibit
99.1
ARTICLE
VI
INDEMNIFICATION
6.1 Indemnification
by the Indemnifying Stockholders. The Indemnifying Stockholders
shall, severally and not jointly, indemnify the Buyer in respect of, and
hold it
harmless against, any and all Damages incurred or suffered by the Surviving
Corporation or the Buyer or any Affiliate thereof resulting from, relating
to or
constituting:
(a) any
breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Company contained in this Agreement or
any
other agreement or instrument furnished by the Company to the Buyer pursuant
to
this Agreement, including without limitation the Company
Certificate;
(b) any
failure to perform any covenant or agreement of the Company contained in
this
Agreement or any agreement or instrument furnished by the Company to the
Buyer
pursuant to this Agreement;
(c) any
claim
by a stockholder or former stockholder, or holder of any options, warrants
or
other rights to acquire capital stock, of the Company, or any other person
or
entity, seeking to assert, or based upon: (i) ownership or
rights to ownership of any shares of stock of the Company or options therefor;
(ii) any rights of a stockholder (other than the right of holders of record
on the Effective Time to receive the applicable Merger Consideration pursuant
to
this Agreement or appraisal rights under the applicable provisions of the
Delaware General Corporation Law), including, without limitation, any option,
preemptive rights or rights to notice or to vote; (iii) any rights under
the Certificate of Incorporation or By-laws of the Company; (iv) any claim
by a holder of an Option or Warrant that such holder is entitled to rights
or to
treatment different from that provided for in this Agreement; or (v) any
claim that his, her or its shares were wrongfully repurchased or recapitalized
by the Company;
(d) any
Dissenting Share Payments;
(e) any
Transaction Expenses or Existing SVB Debt in excess of the amount shown on
the
Company Certificate; and
(f) the
matters disclosed in Item 1 of Section 2.19 of the Disclosure
Schedule, the matters disclosed in Items 4 and 5 of
Section 2.15(a)(vii) of the Disclosure Schedule, and the matters disclosed
in Items 1 and 2 of Section 2.9(a) of the Disclosure Schedule, but
only to the extent the Damages for which the Indemnifying Stockholders would
be
liable under this Section 6.1(f) exceed $300,000.
6.2 Indemnification
by the Buyer. The Buyer shall indemnify the Indemnifying
Stockholders in respect of, and hold them harmless against, any and all Damages
incurred or suffered by the Indemnifying Stockholders resulting from, relating
to or constituting:
(a) any
breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Buyer or the Transitory Subsidiary contained
in this Agreement or any other agreement or instrument furnished by the Buyer
or
the Transitory Subsidiary to the Company pursuant to this Agreement;
or
(b) any
failure to perform any covenant or agreement of the Buyer or the Transitory
Subsidiary contained in this Agreement or any agreement or instrument furnished
by the Buyer or the Transitory Subsidiary to the Company pursuant to this
Agreement.
6.3 Indemnification
Claims.
(a) An
Indemnified Party shall give written notification to the Indemnifying Party
of
the commencement of any Third Party Action. Such notification shall
be given within 20 calendar days after receipt by the Indemnified Party of
notice of such Third Party Action, and shall describe in reasonable detail
(to
the extent known by the Indemnified Party) the facts constituting the basis
for such Third Party Action, the date Damages were either paid or allegedly
arose or were accrued, and the amount of the claimed damages; provided,
however, that no delay or failure on the part of the Indemnified
Party in
so notifying the Indemnifying Party shall relieve the Indemnifying Party
of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within
20 calendar days after delivery of such notification, the Indemnifying
Party may, upon written notice thereof to the Indemnified Party, assume control
of the defense of such Third Party Action; provided that (i) the
Indemnifying Party may only assume control of such defense if (A) it
acknowledges in writing to the Indemnified Party that any damages, fines,
costs
or other liabilities that may be assessed against the Indemnified Party in
connection with such Third Party Action constitute Damages for which the
Indemnified Party shall be indemnified pursuant to this Article VI and
(B) the amount of Damages reasonably expected to be incurred by the
Indemnified Party if the Third Party Action is determined adversely to it
is
less than or equal to the amount of Damages for which the Indemnifying Party
is
liable under this Article VI and (ii) the Indemnifying Party may not
assume control of the defense of a Third Party Action involving criminal
liability or in which injunctive or other equitable relief is sought against
the
Indemnified Party. If the Indemnifying Party does not, or is not
permitted under the terms hereof to, so assume control of the defense of
a Third
Party Action, the Indemnified Party shall control such defense. The
Non-controlling Party may participate in, but not control, such defense,
but
shall do so at its own expense. The Controlling Party shall keep the
Non-controlling Party advised of the status of such Third Party Action and
the
defense thereof and shall consider in good faith recommendations made by
the
Non-controlling Party with respect thereto. The Non-controlling Party
shall furnish the Controlling Party with such information as it may have
with
respect to such Third Party Action (including copies of any summons, complaint
or other pleading which may have been served on such party and any written
claim, demand, invoice, billing or other document evidencing or asserting
the
same) and shall otherwise cooperate with and assist the Controlling Party
in the defense of such Third Party Action. The fees and expenses of
counsel to the Indemnified Party with respect to a Third Party Action shall
be
considered Damages for purposes of this Agreement if (i) the Indemnified
Party controls the defense of such Third Party Action pursuant to the terms
of
this Section 6.3(a) or (ii) the Indemnifying Party assumes
control of such defense and the Indemnified Party reasonably concludes that
the
Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such Third Party
Action. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any Third Party Action without
the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld, conditioned or delayed. The Indemnified Party shall not
agree to any settlement of, or the entry of any judgment arising from, any
such
Third Party Action without the prior written consent of the Indemnifying
Party,
which shall not be unreasonably withheld, conditioned or delayed.
(b) In
order
to seek indemnification under this Article VI, an Indemnified Party shall
deliver a Claim Notice to the Indemnifying Party. If the Indemnified
Party is the Buyer, the Indemnifying Party shall deliver a copy of the Claim
Notice to the Escrow Agent.
(c) Within
20 calendar days after delivery of a Claim Notice, the Indemnifying Party
shall deliver to the Indemnified Party a Response, in which the Indemnifying
Party shall: (i) agree that the Indemnified Party is entitled to
receive all of the Claimed Amount (in which case the Response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party
of
the Claimed Amount, by check or by wire transfer; provided that if the
Indemnified Party is the Buyer, the Indemnifying Party and the Indemnified
Party
shall deliver to the Escrow Agent, within three days following the delivery
of
the Response, a written notice executed by both parties instructing the Escrow
Agent to distribute to the Buyer such number of Escrow Shares as have an
aggregate Value equal to the Claimed Amount), (ii) agree that the
Indemnified Party is entitled to receive the Agreed Amount (in which case
the
Response shall be accompanied by a payment by the Indemnifying Party to the
Indemnified Party of the Agreed Amount, by check or by wire transfer;
provided that if the Indemnified Party is the Buyer, the Indemnifying
Party and the Indemnified Party shall deliver to the Escrow Agent, within
three
days following the delivery of the Response, a written notice executed by
both
parties instructing the Escrow Agent to distribute to the Buyer such number
of
Escrow Shares as have an aggregate Value equal to the Agreed Amount), or
(iii) dispute that the Indemnified Party is entitled to receive any of the
Claimed Amount. For purposes of this Article VI, the “Value” of any Escrow
Shares delivered in satisfaction of an indemnity claim shall be the Average
Price (subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or similar event affecting the Buyer Common
Stock
after the Closing), multiplied by the number of such Escrow Shares.
(d) During
the 30 calendar day period following the delivery of a Response that reflects
a
Dispute, the Indemnifying Party and the Indemnified Party shall use good
faith
efforts to resolve the Dispute. If the Dispute is not resolved within
such 30 calendar day period, the Indemnifying Party and the Indemnified Party
shall discuss in good faith the submission of the Dispute to binding
arbitration, and if the Indemnifying Party and the Indemnified Party agree
in
writing to submit the Dispute to such arbitration, then the provisions of
Section 6.3(e) shall become effective with respect to such
Dispute. The provisions of this Section 6.3(d) shall not
obligate the Indemnifying Party and the Indemnified Party to submit to
arbitration or any other alternative dispute resolution procedure with respect
to any Dispute, and in the absence of an agreement by the Indemnifying Party
and
the Indemnified Party to arbitrate a Dispute, such Dispute shall be resolved
in
a state or federal court sitting in Boston, Massachusetts, in accordance
with
Section 10.11. If the Indemnified Party is the Buyer, the
Indemnifying Party and the Indemnified Party shall deliver to the Escrow
Agent,
promptly following the resolution of the Dispute (whether by mutual agreement,
arbitration, judicial decision or otherwise), a written notice executed by
both
parties instructing the Escrow Agent as to what (if any) portion of the
Escrow Shares shall be distributed to the Buyer and/or the Indemnifying
Stockholders (which notice shall be consistent with the terms of the resolution
of the Dispute).
(e) If,
as
set forth in Section 6.3(d), the Indemnified Party and the Indemnifying
Party agree to submit any Dispute to binding arbitration, the arbitration
shall
be conducted by a single arbitrator (the “Arbitrator”) in accordance
with the Commercial Rules in effect from time to time and the following
provisions:
(i) In
the
event of any conflict between the Commercial Rules in effect from time to
time
and the provisions of this Agreement, the provisions of this Agreement shall
prevail and be controlling.
(ii) The
parties shall commence the arbitration by jointly filing a written submission
with the Boston, Massachusetts office of the AAA in accordance with Commercial
Rule 5 (or any successor provision).
(iii) No
depositions or other discovery shall be conducted in connection with the
arbitration.
(iv) As
soon
as practicable, after the conclusion of the arbitration hearing, the Arbitrator
shall prepare and distribute to the parties a writing setting forth the arbitral
award and the Arbitrator’s reasons therefor. Any award rendered by
the Arbitrator shall be final, conclusive and binding upon the parties, and
judgment thereon may be entered and enforced in any court of competent
jurisdiction (subject to Section 10.11), provided that the
Arbitrator shall have no power or authority to grant injunctive relief, specific
performance or other equitable relief.
(v) The
Arbitrator shall have no power or authority, under the Commercial Rules or
otherwise, to (x) modify or disregard any provision of this Agreement,
including the provisions of this Section 6.3(e), or (y) address or
resolve any issue not submitted by the parties.
(vi) In
connection with any arbitration proceeding pursuant to this Agreement, each
party shall bear its own costs and expenses, except that the fees and costs
of
the AAA and the Arbitrator, the costs and expenses of obtaining the facility
where the arbitration hearing is held, and such other costs and expenses
as the
Arbitrator may determine to be directly related to the conduct of the
arbitration and appropriately borne jointly by the parties (which shall not
include any party’s attorneys’ fees or costs, witness fees (if any), costs of
investigation and similar expenses) shall be shared equally by the
Indemnified Party and the Indemnifying Party.
(f) Notwithstanding
the other provisions of this Section 6.3, if a third party asserts (other
than by means of a lawsuit) that an Indemnified Party is liable to such
third party for a monetary or other obligation which may constitute or result
in
Damages for which such Indemnified Party may be entitled to indemnification
pursuant to this Article VI, and such Indemnified Party reasonably
determines that it has a valid business reason to fulfill such obligation,
then
(i) such Indemnified Party shall be entitled to satisfy such obligation,
without prior notice to or consent from the Indemnifying Party, (ii) such
Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VI, and (iii) such
Indemnified Party shall be reimbursed, in accordance with the provisions
of this
Article VI, for any such Damages for which it is entitled to
indemnification pursuant to this Article VI (subject to the right of the
Indemnifying Party to dispute the Indemnified Party’s entitlement to
indemnification, or the amount for which it is entitled to indemnification,
under the terms of this Article VI).
(g) For
purposes of this Section 6.3 and the second and third sentences of
Section 6.4, (i) if the Indemnifying Stockholders comprise the
Indemnifying Party, any references to the Indemnifying Party (except provisions
relating to an obligation to make any payments) shall be deemed to refer to
the Indemnification Representative, and (ii) if the Indemnifying
Stockholders comprise the Indemnified Party, any references to the Indemnified
Party (except provisions relating to an obligation to make or a right to
receive
any payments) shall be deemed to refer to the Indemnification
Representative. The Indemnification Representative shall have full
power and authority on behalf of each Indemnifying Stockholder to take any
and
all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the Indemnifying Stockholders under
this
Article VI. The Indemnification Representative shall have no
liability to any Indemnifying Stockholder for any action taken or omitted
on
behalf of the Indemnifying Stockholders pursuant to this
Article VI.
6.4 Survival
of Representations and Warranties. All representations and
warranties that are covered by the indemnification agreements in
Section 6.1(a) and Section 6.2(a) shall (a) survive the
Closing and (b) shall expire on the date 18 months following the
Closing Date, except that the representations and warranties set forth in
Sections 2.1, 2.2, 2.3, 3.1, 3.2 and 3.3 shall survive the Closing without
limitation. If an Indemnified Party delivers to an Indemnifying
Party, before expiration of a representation or warranty, either a Claim
Notice
based upon a breach of such representation or warranty, or an Expected Claim
Notice based upon a breach of such representation or warranty, then the
applicable representation or warranty shall survive until, but only for purposes
of, the resolution of any claims arising from or related to the matter covered
by such notice. If the legal proceeding or written claim with respect
to which an Expected Claim Notice has been given is definitively withdrawn
or
resolved in favor of the Indemnified Party, the Indemnified Party shall promptly
so notify the Indemnifying Party; and if the Indemnified Party has delivered
a
copy of the Expected Claim Notice to the Escrow Agent and Escrow Shares have
been retained in escrow after the Termination Date (as defined in the Escrow
Agreement) with respect to such Expected Claim Notice, the Indemnifying
Party and the Indemnified Party shall promptly deliver to the Escrow Agent
a
written notice executed by both parties instructing the Escrow Agent to
distribute such retained Escrow Shares to the Indemnifying Stockholders in
accordance with the terms of the Escrow Agreement. The rights to
indemnification set forth in this Article VI shall not be affected by
(i) any investigation conducted by or on behalf of an Indemnified Party or
any knowledge acquired (or capable of being acquired) by an Indemnified
Party, whether before or after the date of this Agreement or the Closing
Date
(including through supplements to the Disclosure Schedule permitted by
Section 4.6), with respect to the inaccuracy or noncompliance with any
representation, warranty, covenant or obligation which is the subject of
indemnification hereunder or (ii) any waiver by an Indemnified Party of any
closing condition relating to the accuracy of representations and warranties
or
the performance of or compliance with agreements and covenants.
6.5 Limitations.
(a) Notwithstanding
anything to the contrary herein, (i) the aggregate liability of the
Indemnifying Stockholders for Damages under this Article VI shall not
exceed the amount of the Escrow Shares, and (ii) the Buyer shall not be
entitled to be indemnified for any Damages under this Article VI unless the
aggregate of all Damages for which the Buyer would, but for this
clause (ii), be entitled to indemnification exceeds $250,000, at which
point the Buyer shall be entitled to be indemnified for its aggregate Damages,
and not just those in excess of $250,000, and (iii) each Indemnifying
Stockholder shall only be liable for his, her or its pro rata share (determined
in accordance with the Escrow Agreement) of the Damages for which the
Indemnifying Stockholders are liable under this Article VI; provided
that the limitations set forth in this sentence shall not apply to a claim
pursuant to Section 6.1(a) relating to a breach of the representations
and warranties set forth in Sections 2.2 or 2.3 and provided further
that clause (ii) above shall not apply to a claim under
Section 6.1(c), (e) or (f). For purposes solely of this
Article VI, all representations and warranties of the Company in
Article II (other than Section 2.7) shall be construed as if the
term “material” and any reference to “Company Material Adverse Effect” (and
variations thereof) were omitted from such representations and
warranties.
(b) Notwithstanding
anything to the contrary herein, (i) the aggregate liability of the Buyer
for Damages under this Article VI shall not exceed $6,000,000, and
(ii) the Indemnifying Stockholders shall not be entitled to be indemnified
for any Damages under this Article VI unless the aggregate of all Damages
for
which the Indemnifying Stockholders would, but for this clause (ii), be entitled
to indemnification exceeds $250,000, at which point the Indemnifying
Stockholders shall be entitled to be indemnified for their aggregate Damages,
and not just those in excess of $250,000; provided that the limitation
set forth in this sentence shall not apply to a claim pursuant to
Section 6.2(a) relating to a breach of the representations and
warranties set forth in Sections 3.2 or 3.3. For purposes solely
of this Article VI, all representations and warranties of the Buyer and the
Transitory Subsidiary in Article III (other than Sections 3.5 and 3.6)
shall be construed as if the term “material” and any reference to “Buyer
Material Adverse Effect” (and variations thereof) were omitted from such
representations and warranties.
(c) The
Escrow Agreement shall be the sole and exclusive means for the Buyer to collect
any Damages for which it is entitled to indemnification under this
Article VI.
(d) Except
with respect to claims based on fraud or intentional misrepresentation, after
the Closing, the rights of the Indemnified Parties under this Article VI
and the Escrow Agreement shall be the exclusive remedy of the Indemnified
Parties with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant
or
agreement contained in this Agreement.
(e) No
Indemnifying Stockholder shall have any right of contribution against the
Company or the Surviving Corporation with respect to any breach by the Company
of any of its representations, warranties, covenants or agreements.
(f) Any
Damages relating to a claim pursuant to Section 6.1 shall be reduced by the
amount of any insurance proceeds received by the Buyer or Surviving Corporation
under a policy or policies maintained by the Company prior to the Closing
with
respect to such claim. Buyer shall use commercially reasonable
efforts to collect any such proceeds; provided, however, that it
shall not be required to commence any legal proceedings in connection with
such
efforts.
(g) Any
indemnification payment made pursuant to Article VI shall be treated as an
adjustment to the purchase price for federal, state, local and foreign income
tax purposes.
Exhibit
99.1
ARTICLE
VII
REGISTRATION
RIGHTS
7.1 Registration
of Shares. The Buyer shall use its Reasonable Best Efforts to
become eligible to file a Registration Statement on Form S-3 under the
Securities Act and to file the Stockholder Registration Statement as soon
as
practicable after it becomes eligible to file a Registration Statement on
Form
S-3 under the Securities Act. The Buyer shall use Reasonable Best
Efforts to cause the Stockholder Registration Statement to be declared effective
by the SEC as soon as practicable after it is filed. The Buyer shall
cause the Stockholder Registration Statement to remain effective until the
date
one year after the Closing Date.
7.2 Limitations
on Registration Rights.
(a) The
Buyer
may, by written notice to each of the Qualifying Holders, (i) delay the
filing or effectiveness of the Stockholder Registration Statement or
(ii) suspend the Stockholder Registration Statement after effectiveness and
require that the Qualifying Holders immediately cease sales of shares pursuant
to the Stockholder Registration Statement, in each case for a period not
to
exceed 120 days and not more than one time in any 12 month period, in the
event that (A) the Buyer files a registration statement (other than a
registration statement on Form S-8 or its successor form) with the SEC for
a public offering of its securities or (B) the Buyer is engaged in any
activity or transaction or preparations or negotiations for any activity
or
transaction that the Buyer desires to keep confidential for business reasons,
if
the Buyer determines in good faith that the public disclosure requirements
imposed on the Buyer under the Securities Act in connection with the Stockholder
Registration Statement would require disclosure of such activity, transaction,
preparations or negotiations.
(b) If
the
Buyer delays or suspends the Stockholder Registration Statement or requires
the
Qualifying Holders to cease sales of shares pursuant to paragraph
(a) above, the Buyer shall, as promptly as practicable following the
termination of the circumstance which entitled the Buyer to do so and in
any
event within 120 days after it shall have given notice of such delay or
suspension, take such actions as may be necessary to file the Stockholder
Registration Statement, cause it to come effective or reinstate its
effectiveness and, if the Stockholder Registration Statement shall be effective,
give written notice to all Qualifying Holders authorizing them to resume
sales
pursuant to the Stockholder Registration Statement. If as a result
thereof the prospectus included in the Stockholder Registration Statement
has
been amended or supplemented to comply with the requirements of the Securities
Act, the Buyer shall enclose such amended or supplemented prospectus with
the
notice to Qualifying Holders given pursuant to this paragraph (b), and the
Qualifying Holders shall thereafter make no offers or sales of shares pursuant
to the Stockholder Registration Statement by means of a prospectus other
than
such amended or supplemented prospectus.
7.3 Registration
Procedures.
(a) In
connection with the filing by the Buyer of the Stockholder Registration
Statement, the Buyer shall prepare and file with the SEC such amendments
and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement and shall furnish to each
Qualifying Holder such number of copies of prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such
other documents as may be reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included
in
such registration statement.
(b) The
Buyer
shall use its Reasonable Best Efforts to register or qualify the Registrable
Securities covered by the Stockholder Registration Statement under the
securities laws of each state of the United States; provided,
however, that the Buyer shall not be required in connection with
this
paragraph (b) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction.
(c) The
Buyer
shall use its Reasonable Best Efforts to cause all such Registrable Securities
required to be registered hereunder to be listed on each securities exchange
and
trading system (if any) on which similar securities issued by the Buyer are
then
listed.
(d) The
Buyer
shall notify each Qualifying Holder of Registrable Securities covered by
the
Stockholder Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening
of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or
omits to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading in the light of the circumstances
then existing.
(e) If
the
Buyer has delivered preliminary or final prospectuses to the Qualifying Holders
and after having done so the prospectus is amended or supplemented to comply
with the requirements of the Securities Act, the Buyer shall promptly notify
the
Qualifying Holders and shall promptly provide the qualifying Holders with
amended or supplemented prospectuses which shall comply with the requirements
of
the Securities Act, if requested by the Buyer, the Qualifying Holders shall
immediately discontinue making offers or sales of shares under the Stockholder
Registration Statement until such amended or supplemented prospectus is
available.
(f) The
Buyer
shall pay the expenses incurred by it in complying with its obligations under
this Article VII, including all registration and filing fees, exchange
listing fees, fees and expenses of counsel for the Buyer, and fees and expenses
of accountants for the Buyer, but excluding (i) any brokerage fees, selling
commissions or underwriting discounts incurred by the Qualifying Holders in
connection with sales under the Stockholder Registration Statement and
(ii) the fees and expenses of any counsel retained by Qualifying
Holders.
7.4 Requirements
of Qualifying Holders. The Buyer shall not be required to include
any Merger Shares in the Stockholder Registration Statement unless:
(a) the
Qualifying Holder owning such shares furnishes to the Buyer in writing such
information regarding such Qualifying Holder and the proposed sale of Merger
Shares by such Qualifying Holder as the Buyer may reasonably request in writing
in connection with the Stockholder Registration Statement or as shall be
required in connection therewith by the SEC or any state securities law
authorities;
(b) such
Qualifying Holder shall have provided to the Buyer its written
agreement:
(i) to
indemnify the Buyer and each of its directors and officers against, and hold
the
Buyer and each of its directors and officers harmless from, any losses, claims,
damages, expenses or liabilities (including reasonable attorneys fees) to
which
the Buyer or such directors and officers may become subject by reason of
any
statement or omission in the Stockholder Registration Statement made in reliance
upon, and in conformity with, a written statement by such Qualifying Holder
furnished pursuant to this Section 7.4 expressly for use in connection with
such Stockholder Registration Statement, provided that the total amount
payable by a Qualifying Holder pursuant to such indemnity shall not exceed
the
aggregate net proceeds received by such Qualifying Holder in the offering
of
such Merger Shares; and
(ii) to
report
to the Buyer sales made pursuant to the Stockholder Registration
Statement.
7.5 Indemnification. The
Buyer agrees to indemnify and hold harmless each Qualifying Holder whose
shares
are included in the Stockholder Registration Statement, the partners, members,
officers and directors of each Qualifying Holder, and each person, if any,
who
controls such qualifying Holder within the meaning of the Securities Act
or
Exchange Act against any losses, claims, damages, expenses or liabilities
to
which they may become subject by reason of any untrue statement or alleged
untrue statement of a material fact contained in the Stockholder Registration
Statement or any omission or allegedly omission to state therein a fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, expenses or liabilities arise
out of or are based upon information furnished to the Buyer by or on behalf
of
such Qualifying Holder for use in the Stockholder Registration
Statement. The Buyer shall have the right to assume the defense and
settlement of any claim or suit for which the Buyer may be responsible for
indemnification under this Section 7.5.
7.6 Assignment
of Rights. A Qualifying Holder may not assign any of its rights
under this Article VII except in connection with the transfer of some or
all of his, her or its Merger Shares to an immediate family member, or trust
for
their benefit or, in the case of a partnership, limited liability company
or
corporation, to its partners, members or stockholders, respectively, pursuant
to
a pro rata distribution of its Merger Shares, provided each such
transferee agrees in a written instrument delivered to the Buyer to be bound
by
the provisions of this Article VII.
7.7 Rule
144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit the
sale
of the Registrable Securities to the public without registration, the Buyer
agrees to:
(a) use
Reasonable Best Efforts to file with the SEC in a timely manner all reports
and
other documents required of the Buyer under the Securities Act and the Exchange
Act; and
(b) furnish
to any Qualifying Holder, so long as the Qualifying Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Buyer as
to its compliance with the reporting requirements of said Rule 144 and of
the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Buyer and (iii) such other reports and
documents of the Buyer as a Qualifying Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Qualifying Holder
to sell
any such securities without registration.
Exhibit
99.1
ARTICLE
VIII
TERMINATION
8.1 Termination
of Agreement. The Parties may terminate this Agreement prior to
the Closing (whether before or after Requisite Stockholder Approval), as
provided below:
(a) the
Parties may terminate this Agreement by mutual written consent;
(b) the
Buyer
may terminate this Agreement by giving written notice to the Company if the
Requisite Stockholder Approval obtained by written consents in lieu of a
meeting, such written consents in form and substance reasonably satisfactory
to
Buyer, is not delivered to Buyer within 24 hours after the execution and
delivery of this Agreement by each of the parties hereto;
(c) the
Buyer
may terminate this Agreement by giving written notice to the Company in the
event the Company is in breach of any representation, warranty or covenant
contained in this Agreement, and such breach (i) individually or in
combination with any other such breach, would cause the conditions set forth
in
clauses (c) or (d) of Section 5.2 not to be satisfied and
(ii) is not cured within 20 calendar days following delivery by the Buyer
to the Company of written notice of such breach;
(d) the
Company may terminate this Agreement by giving written notice to the Buyer
in
the event the Buyer or the Transitory Subsidiary is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach (i) individually or in combination with any other such breach, would
cause the conditions set forth in clauses (c) or (d) of
Section 5.3 not to be satisfied and (ii) is not cured within 20
calendar days following delivery by the Company to the Buyer of written notice
of such breach;
(e) any
Party
may terminate this Agreement by giving written notice to the other Parties
at
any time after the stockholders of the Company has voted on whether to approve
this Agreement and the Merger in the event this Agreement and the Merger
failed
to receive the Requisite Stockholder Approval;
(f) the
Buyer
may terminate this Agreement by giving written notice to the Company if the
Closing shall not have occurred on or before December 31, 2007 by reason of
the failure of any condition precedent under Section 5.1 or 5.2 (unless the
failure results primarily from a breach by the Buyer or the Transitory
Subsidiary of any representation, warranty or covenant contained in this
Agreement); or
(g) the
Company may terminate this Agreement by giving written notice to the Buyer
if
the Closing shall not have occurred on or before December 31, 2007 by
reason of the failure of any condition precedent under Section 5.1 or 5.3
(unless the failure results primarily from a breach by the Company of any
representation, warranty or covenant contained in this Agreement).
8.2 Effect
of Termination. If any Party terminates this Agreement pursuant
to Section 8.1, all obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party for willful breaches of this Agreement prior to such
termination).
Exhibit
99.1
ARTICLE
IX
DEFINITIONS
For
purposes of this Agreement, each of the following terms shall have the meaning
set forth below.
“2007
Options” shall mean those certain Options noted as “2007 Options” in
Item 3 of Section 2.2(c) of the Disclosure Schedule.
“AAA”
shall mean the American Arbitration Association.
“Accredited
Investor” means an “accredited investor” within the meaning of
Regulation D promulgated under the Securities Act.
“Affiliate”
shall mean any affiliate, as defined in Rule 12b-2 under the Securities Exchange
Act of 1934.
“Affiliated
Group” shall mean a group of corporations with which the Company has filed
(or was required to file) consolidated, combined, unitary or similar Tax
Returns.
“Affiliated
Period” shall mean any period in which the Company was a member of an
Affiliated Group.
“Aggregate
Exercise Prices” shall mean the aggregate exercise prices of all
In-the-Money Options (other than the Change-in-Control Options and portions
of
the 2007 Options that are unvested immediately prior to the Effective Time)
and
all Warrants outstanding immediately prior to the Effective Time.
“Agreed
Amount” shall mean part, but not all, of the Claimed Amount.
“Arbitrator”
shall have the meaning set forth in Section 6.3(e).
“Average
Price” means $16.675.
“Bankruptcy
and Equity Exception” means any limitation on the enforceability
of an agreement due to laws relating to bankruptcy, reorganization, moratorium,
insolvency, creditors’ rights, or other similar laws, or by the availability of
injunctive relief, specific performance and other equitable
remedies.
“Buyer”
shall have the meaning set forth in the first paragraph of this
Agreement.
“Buyer
Certificate” shall mean a certificate to the effect that each of the
conditions specified in clauses (a) through (e) (insofar as
clause (e) relates to Legal Proceedings involving the Buyer or the
Transitory Subsidiary) of Section 5.3 is satisfied in all
respects.
“Buyer
Common Stock” shall mean the shares of common stock, $.001 par value
per share, of the Buyer.
“Buyer
Debt” shall have the meaning set forth in Section 4.11(d).
“Buyer
Material Adverse Effect” shall mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on,
the
business, assets, liabilities, capitalization, prospects (within 12 months
after the Closing), condition (financial or other), or results of operations
of
the Buyer. For the avoidance of doubt, the parties agree that the
terms “material”, “materially” or “materiality” as used in this Agreement with
an initial lower case “m” shall have their respective customary and ordinary
meanings, without regard to the meaning ascribed to Buyer Material Adverse
Effect; provided, however, in no event shall any of the following,
alone or in combination, be deemed to constitute, nor shall any of the following
be taken into account in determining whether there has been or will be, a
Buyer
Material Adverse Effect: (A) any effect resulting from
compliance with the terms and conditions of this Agreement; or (B) any
effect resulting from changes affecting any of the industries in which the
Buyer
operates generally, including changes in laws generally applicable to businesses
in such industry or changes in GAAP; (C) any effect resulting from changes
in general economic or political conditions or the securities markets in
general
(whether as a result of acts of terrorism, war (whether or not declared),
armed
conflicts, environmental disaster or otherwise), provided any such change
referred to clause (B) or (C) does not have a disproportionate effect on
Buyer.
“Buyer
Reports” shall mean the meaning set forth in Section 3.5.
“Cash
Merger Consideration” means (i) $51,850,000 plus the Aggregate
Exercise Prices and, less the sum of the aggregate amount of cash payable
by Buyer to holders of Preferred Shares pursuant to Sections 1.5(a)(ii) and
1.5(b)(i), the SVB Preference, the Transaction Expenses and the Existing
SVB
Debt, divided by (ii) the Fully Diluted Company Shares.
“Cash
Preference Payment” shall have the meaning set forth in
Section 1.5(b).
“CERCLA”
shall mean the federal Comprehensive Environmental Response, Compensation
and
Liability Act of 1980, as amended.
“Certificate
of Amendment” shall have the meaning set forth in
Section 2.3.
“Certificate
of Merger” shall mean the certificate of merger or other appropriate
documents prepared and executed in accordance with Section 251(c) of
the Delaware General Corporation Law.
“Certificates”
shall mean stock certificates that, immediately prior to the Effective Time,
represented Company Shares.
“Change
in Control Bonus Plan” means the plan, disclosed in Section 2.7 of the
Disclosure Schedule, providing for payments of up to $239,950 to employees
of
the Company.
“Change-in-Control
Options” shall mean the Options dated on or about
December 21, 2006, for an aggregate of 834,560 Common Shares,
noted as “Change-in-Control Options” in Item 3 of Section 2.2(c) of
the Disclosure Schedule.
“Claim
Notice” shall mean written notification which contains (i) a
description of the Damages incurred or reasonably expected to be incurred
by the
Indemnified Party and the Claimed Amount of such Damages, to the extent then
known, (ii) a statement that the Indemnified Party is entitled to
indemnification under Article VI for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment in the
amount of such Damages.
“Claimed
Amount” shall mean the amount of any Damages incurred or reasonably expected
to be incurred by the Indemnified Party.
“Closing”
shall mean the closing of the transactions contemplated by this
Agreement.
“Closing
Date” shall mean the date two business days after the satisfaction or waiver
of all of the conditions to the obligations of the Parties to consummate
the
transactions contemplated hereby (excluding the delivery at the Closing of
any
of the documents set forth in Article V), or such other date as may be
mutually agreeable to the Parties.
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
“Commercial
Rules” shall mean the Commercial Arbitration Rules of the AAA.
“Common
Shares” shall mean the shares of common stock, $.001 par value per
share, of the Company.
“Company”
shall have the meaning set forth in the first paragraph of this
Agreement.
“Company
Certificate” shall mean a certificate (i) to the effect that each of
the conditions specified in clause (a) of Section 5.1 and clauses
(a) through (e) (insofar as clause (e) relates to Legal
Proceedings involving the Company) of Section 5.2 is satisfied in all
respects, (ii) certifying as to the amount of Transaction Expenses,
(iii) certifying as to the amount of the Series A Liquidation
Preference Payments as of the Effective Time, (iv) certifying as to the amount
of the Existing SVB Debt as of the Closing, and (v) certifying as to the
specific allocation of the Merger Consideration among Company Stockholders
pursuant to Section 1.5 and holders of Options and Warrants pursuant to
Section 1.9. Buyer shall be entitled to rely conclusively on the
Company Certificate for purposes of its allocation of the Merger Consideration
hereunder.
“Company
Intellectual Property” shall mean shall the Company Owned Intellectual
Property and the Company Licensed Intellectual Property.
“Company
Licensed Intellectual Property” shall mean all Intellectual Property that is
licensed to the Company by any third party.
“Company
Material Adverse Effect” shall mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on,
(i) the business, assets, liabilities, capitalization, prospects (within
12 months after the Closing, as if the Merger had not occurred), condition
(financial or other), or results of operations of the Company, taken as a
whole,
(ii) the ability of the Buyer to operate the business of the Company
immediately after the Closing or (iii) the ability of the officers of the
Buyer, following the Closing, to certify without qualification to the
Buyer’s financial statements or SEC reports as they relate to the business or
operations previously conducted by the Company. For the avoidance of doubt,
the
parties agree that the terms “material”, “materially” or “materiality” as used
in this Agreement with an initial lower case “m” shall have their respective
customary and ordinary meanings, without regard to the meaning ascribed to
Company Material Adverse Effect; provided, however, in no event
shall any of the following, alone or in combination, be deemed to constitute,
nor shall any of the following be taken into account in determining whether
there has been or will be, a Company Material Adverse
Effect: (A) any effect resulting from compliance with the terms
and conditions of this Agreement; (B) any effect resulting from changes
affecting any of the industries in which the Company operates generally,
including changes in laws generally applicable to businesses in such industry
or
changes in GAAP; or (C) any effect resulting from changes in general
economic or political conditions or the securities markets in general (whether
as a result of acts of terrorism, war (whether or not declared, provided
any
such change referred to in clause (B) or (C) does not have a
disproportionate effect on the Company.
“Company
Owned Intellectual Property” shall mean all Intellectual Property owned or
purported to be owned by the Company, in whole or in part.
“Company
Plan” shall mean any Employee Benefit Plan currently maintained, or
contributed to, by the Company, or any ERISA Affiliate for the benefit of
employees or former employees.
“Company
Registrations” shall mean Intellectual Property Registrations that are
registered or filed in the name of the Company, alone or jointly with
others.
“Company
Shares” shall mean the Common Shares and the Preferred Shares,
together.
“Company
Source Code” shall mean the human readable form of the Software included in
the Customer Offerings or Internal Systems.
“Company
Stock Plan” shall mean any stock option plan or other stock or
equity-related plan of the Company.
“Company
Stockholders” shall mean the stockholders of record of the Company
immediately prior to the Effective Time.
“Content”
shall mean all text, video, audio, images and pictures displayed on one or
more
of the Websites, whether created or developed by: (1) the Company,
(2) any user of a Website or (3) any third-party contributor to a
Website.
“Controlling
Party” shall mean the party controlling the defense of any Third Party
Action.
“Customer”
shall mean each third party that has entered into an agreement with the Company
for the provision of a Customer Offering.
“Customer
Offerings” shall mean (a) the products offerings that the Company
(i) currently develops, markets, distributes, makes available, sells or
licenses to third parties, or (ii) has developed, marketed, distributed,
made available, sold or licensed to third parties within the previous
six years, or (iii) currently plans to develop, market, distribute,
make available, sell or license to third parties in the 12 month period
after the Effective Time (as if the Merger had not occurred) and (b) the
service offerings that the Company (i) currently provides or makes
available to third parties, or (ii) has provided or made available to third
parties within the previous six years, or (iii) currently plans to
provide or make available to third parties in the 12 month period after the
Effective Time (as if the Merger had not occurred). For purposes
hereof, “Customer Offerings” shall include, but not be limited to, the
following: (i) the network of approximately 185 Websites of the
Company, (ii) the proprietary content, search and lead management platforms
of the Company, (iii) the directory of enterprise technology, including
product and solution listings, research, webcasts, demos and rich media of
the
Company, and (iv) the “Results360™” reporting tools, ROI Software
calculators and other performance assessment Software tools and solutions
of the
Company.
“Damages”
shall mean any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), diminution in value, monetary damages,
fines, fees, penalties, interest obligations, deficiencies, losses and expenses
(including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation, arbitration or other
dispute resolution proceedings relating to a Third Party Action or an
indemnification claim under Article VI), other than those costs and
expenses of arbitration of a Dispute which are to be shared equally by the
Indemnified Party and the Indemnifying Party as set forth in
Section 6.3(e)(vi).
“Designated
Person” shall mean any Indemnifying Stockholder or affiliate thereof, or any
officer, employee or director of the Company, or any Indemnifying Stockholder
or
affiliate thereof.
“Directories”
shall mean all directories of enterprise technology of the Company, including
product and solution listings, research, webcasts, demos and rich
media.
“Disclosure
Schedule” shall mean the disclosure schedule provided by the Company to the
Buyer on the date hereof and accepted in writing by the Buyer.
“Disclosure
Statement” shall mean a written information statement containing the
information prescribed by Section 4.3(a).
“Dispute”
shall mean the dispute resulting if the Indemnifying Party in a Response
disputes its liability for all or part of the Claimed Amount.
“Dissenting
Shares” shall mean Company Shares held as of the Effective Time by a Company
Stockholder who has not voted such Company Shares in favor of the adoption
of
this Agreement and with respect to which appraisal shall have been duly demanded
and perfected in accordance with Section 262 of the Delaware General
Corporation Law and not effectively withdrawn or forfeited prior to the
Effective Time.
“Dissenting
Share Payments” shall mean (i) any payment in respect of Dissenting
Shares in excess of the consideration that otherwise would have been payable
in
respect of such shares in accordance with this Agreement, and (ii) any
reasonable costs and expenses (including reasonable attorneys’ fees and expenses
in connection with any action or proceeding) in respect of any Dissenting
Shares
(other than payment for such shares).
“Documentation”
shall mean printed, visual or electronic materials, reports, white papers,
documentation, specifications, designs, flow charts, code listings,
instructions, user manuals, frequently asked questions, release notes, recall
notices, error logs, diagnostic reports, marketing materials, packaging,
labeling, service manuals and other information describing the use, operation,
installation, configuration, features, functionality, pricing, marketing
or
correction of a product, whether or not provided to end users.
“Effective
Time” shall mean the time at which the Surviving Corporation files the
Certificate of Merger with the Secretary of State of the State of
Delaware.
“Employee
Benefit Plan” shall mean any “employee pension benefit plan” (as defined in
Section 3(2) of ERISA), any “employee welfare benefit plan” (as
defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation.
“Environmental
Law” shall mean any federal, state or local law, statute, rule, order,
directive, judgment, Permit or regulation or the common law relating to the
environment, occupational health and safety, or exposure of persons or property
to Materials of Environmental Concern. As used above, the term
“release” shall have the meaning set forth in CERCLA.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“ERISA
Affiliate” shall mean any entity which is, or at any applicable time was, a
member of (1) a controlled group of corporations (as defined in
Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or
(3) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or included the
Company.
“Escrow
Agreement” shall mean an escrow agreement in substantially the form attached
hereto as Exhibit C.
“Escrow
Agent” shall mean such institution as shall be mutually agreed upon by Buyer
and the Company.
“Escrow
Shares” has the meaning set forth in Section 1.5(d).
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended.
“Exchange
Agent” shall mean such institution as shall be mutually agreed upon by Buyer
and the Company.
“Existing
SVB Debt” shall have the meaning set forth in
Section 4.11(a).
“Expected
Claim Notice” shall mean a notice that, as a result of a legal proceeding
instituted by or written claim made by a third party, an Indemnified Party
reasonably expects to incur Damages for which it is entitled to indemnification
under Article VI.
“Exploit”
shall mean develop, design, test, modify, make, use, sell, have made, used
and
sold, import, reproduce, market, distribute, commercialize, support, maintain,
correct and create derivative works of.
“Financial
Statements” shall mean:
(a) the
audited consolidated balance sheets and statements of income, changes in
stockholders’ equity and cash flows of the Company as of the end of and for each
of the last three fiscal years, and
(b) the
Most
Recent Balance Sheet and the unaudited consolidated statements of income
and
cash flows for the nine months ended as of
September 30, 2006 and 2007, which are appended to Section 2.6 of
the Disclosure Schedule.
“Fully
Diluted Company Shares” shall mean all Company Shares issued and outstanding
immediately prior to the Effective Date, plus all Company Shares issuable
upon exercise of all Options (other than the Change-in-Control Options and
portions of the 2007 Options that are not vested immediately prior to the
Effective Time) and Warrants outstanding immediately prior to the Effective
Time.
“GAAP”
shall mean United States generally accepted accounting principles.
“Governmental
Entity” shall mean any court, arbitrational tribunal, administrative agency
or commission or other governmental or regulatory authority or
agency.
“Indemnification
Representative” shall mean Xxxx Xxxxxx.
“Indemnified
Party” shall mean a party entitled, or seeking to assert rights, to
indemnification under Article VI.
“Indemnifying
Party” shall mean the party from whom indemnification is sought by the
Indemnified Party.
“Indemnifying
Stockholders” shall mean all holders of Preferred Shares that are Qualifying
Holders.
“In-the-Money
Options” mean all Options outstanding immediately prior to the Effective
Time with an exercise price per Common Share less than the Cash Merger
Consideration.
“Intellectual
Property” shall mean the following subsisting throughout the
world:
(a) Patent
Rights;
(b) Trademarks
and all goodwill in the Trademarks;
(c) copyrights,
designs, data and database rights and registrations and applications for
registration thereof, including moral rights of authors;
(d) inventions,
invention disclosures, statutory invention registrations, trade
secrets and confidential business information, know-how, manufacturing and
product processes and techniques, research and development information,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, whether
patentable or nonpatentable, whether copyrightable or noncopyrightable and
whether or not reduced to practice; and
(e) other
proprietary rights relating to any of the foregoing and to any Website, Content,
User Database and Directories used by the Company (including remedies against
infringement thereof and rights of protection of interest therein under the
laws
of all jurisdictions).
“Intellectual
Property Registrations” means Patent Rights, registered Trademarks,
registered copyrights and designs, Domain filings and applications for each
of
the foregoing.
“Internal
Systems” shall mean the Company Software and the Company computer,
communications and network hardware and equipment (both desktop and
enterprise-wide), laboratory equipment, materials and test, calibration and
measurement apparatus used by the Company in its business or operations to
develop, provide, distribute, support, maintain or test the Customer Offerings,
whether located on the premises of the Company or hosted at a third party
site. For purposes of this Agreement, “Internal Systems” shall
include, but not be limited to, the Company’s Software used internally for its
(i) lead assessment, performance and/or generation platform,
(ii) marketing campaign management systems, (iii) content management
platform, (iv) reporting tools and products and (v) internet search
capabilities.
“Knowledge”
of a person or entity means the knowledge of such person or
entity. “To the Company’s Knowledge” means the Knowledge of Xxxxx
Xxx, Xxxx Xxxxx or Xxxx Xxxxxxxxx.
“Lease”
shall mean any lease or sublease pursuant to which the Company leases or
subleases from another party any real property.
“Legal
Proceeding” shall mean any action, suit, proceeding, claim, arbitration or
investigation before any Governmental Entity or before any
arbitrator.
“Materials
of Environmental Concern” shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide
and
Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined
under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or Article containing such
material) listed or subject to regulation under any law, statute, rule,
regulation, order, Permit, or directive due to its potential, directly or
indirectly, to harm the environment or the health of humans or other living
beings.
“Maximum
Cash Consideration” shall have the meaning set forth in
Section 1.5(f).
“Merger”
shall mean the merger of the Transitory Subsidiary with and into the Company
in
accordance with the terms of this Agreement.
“Merger
Consideration” means, as applicable, the Merger Shares, the aggregate Cash
Preference Payments and the aggregate Cash Merger Consideration
“Merger
Shares” means a number of shares of Buyer Common Stock equal to $6,000,000
divided by the Average Price.
“Most
Recent Balance Sheet” shall mean the unaudited consolidated balance sheet of
the Company as of the Most Recent Balance Sheet Date.
“Most
Recent Balance Sheet Date” shall mean
September 30, 2007.
“Non-controlling
Party” shall mean the party not controlling the defense of any Third Party
Action.
“Open
Source Materials” means all Software that is distributed under a similar
distribution model where the source code form of the Software is available
for
no charge and, as a condition of further distribution of such software or
any
derivative thereof, that (i) the source code for the software and
derivative work be provided or made available without charge, (ii) the
source code and derivative work be licensed for the purpose of free use and
making further derivative works, and (iii) the software cannot be
redistributed under terms inconsistent with those applicable to the rights
under
which the licensee was entitled to use or modify the original software,
including, but not limited to, Software distributed under the GNU General
Public
License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License
(MPL), or any other license described by the Open Source Initiative as set
forth
on xxx.xxxxxxxxxx.xxx.
“Option”
shall mean each option to purchase or acquire Common Shares, whether issued
by
the Company pursuant to the Option Plan or otherwise.
“Option
Plan” shall mean the Company’s Amended and Restated Stock Incentive Plan, as
amended.
“Ordinary
Course of Business” shall mean the ordinary course of business consistent
with past custom and practice (including with respect to frequency and
amount).
“Out-of-the-Money
Options” shall mean all Options outstanding immediately prior to the
Effective Time with an exercise price per Common Share equal to or greater
than
the Cash Merger Consideration.
“Outstanding
Preferred Shares” means all Preferred Shares issued and outstanding
immediately prior to the Effective Time.
“Parties”
shall mean the Buyer, the Transitory Subsidiary and the Company.
“Patent
Rights” shall mean all patents, patent applications, utility models, design
registrations and certificates of invention and other governmental grants
for
the protection of inventions or industrial designs (including all related
continuations, continuations-in-part, divisionals, reissues and reexaminations)
filed by or on behalf of the Company.
“Permits”
shall mean all permits, licenses, registrations, certificates, orders,
approvals, franchises, variances and similar rights issued by or obtained
from
any Governmental Entity (including those issued or required under Environmental
Laws and those relating to the occupancy or use of owned or leased real
property).
“Personally
Identifiable Information” means data that identifies or locates a particular
person, including but not limited to name, address, telephone number, electronic
mail address, social security number, bank account number or credit card
number.
“Preferred
Shares” shall mean the shares of preferred stock, $.001 par value per
share, of the Company.
“Proprietary
Information” shall have the meaning set forth in
Section 2.13(k).
“Qualifying
Holder” shall mean a holder of Outstanding Preferred Shares who has prior to
or within four (4) days after the date of this Agreement delivered an Investment
Representation Letter substantially in the form attached hereto as
Exhibit A pursuant to which such holder has represented among other
things, that it is an Accredited Investor.
“Reasonable
Best Efforts” shall mean best efforts, to the extent commercially
reasonable.
“Registrable
Securities” shall mean the Merger Shares and any shares of Buyer Common
Stock or other securities issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or
other
distribution with respect to, in exchange for, or in replacement of, such
Merger
Shares.
“Requisite
Stockholder Approval” shall mean the adoption of this Agreement and the
approval of the Merger by (a) a majority of the votes represented by the
outstanding Company Shares entitled to vote on this Agreement and the Merger,
(b) a majority of the votes represented by the outstanding Preferred Shares
entitled to vote on this Agreement and the Merger.
“Response”
shall mean a written response containing the information provided for in
Section 6.3(c).
“Xxxxxxxx-Xxxxx
Act” shall mean the Xxxxxxxx-Xxxxx Act of 2002.
“SEC”
shall mean the Securities and Exchange Commission.
“Securities
Act” shall mean the Securities Act of 1933, as amended.
“Security
Interest” shall mean any mortgage, pledge, security interest, encumbrance,
charge or other lien (whether arising by contract or by operation of law),
other
than (i) mechanic’s, materialmen’s, and similar liens, (ii) liens
arising under worker’s compensation, unemployment insurance, social security,
retirement, and similar legislation, in each case arising in the Ordinary
Course
of Business of the Company and not material to the Company, and (iii) in
the case of Intellectual Property, licenses to customers in the Ordinary
Course
of Business.
“Series A
Liquidation Preference Payments” shall have the meaning set forth in
Article IV, Exhibit A, Section 4A of the Certificate of
Incorporation, as amended, of the Company, as in effect on the date of this
Agreement.
“Software”
shall mean computer software code, applications, utilities, development tools,
diagnostics, databases and embedded systems, whether in source code, or object
code form.
“Stockholder
Registration Statement” shall mean a registration statement on Form S-3 (or
a successor form) covering the resale to the public by the Qualifying Holders
of
the Registrable Securities.
“Subsidiary”
shall mean any corporation, partnership, trust, limited liability company
or
other non-corporate business enterprise in which the Company (or another
Subsidiary) holds stock or other ownership interests representing
(a) more than 50% of the voting power of all outstanding stock or ownership
interests of such entity or (b) the right to receive more than 50% of the
net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution
of
such entity.
“Surviving
Corporation” shall mean the Company, as the surviving corporation in the
Merger.
“SVB
Preference” shall mean the Series A Liquidation Preference Payments
attributed to the Preferred Shares subject to the SVB Warrant immediately
prior
to the Effective Time.
“Taxes”
shall mean any and all taxes, charges, fees, duties, contributions, levies
or
other similar assessments or liabilities in the nature of a tax, including,
without limitation, income, gross receipts, corporation, ad valorem, premium,
value-added, net worth, capital stock, capital gains, documentary, recapture,
alternative or add-on minimum, disability, estimated, registration, recording,
excise, real property, personal property, sales, use, license, lease, service,
service use, transfer, withholding, employment, unemployment, insurance,
social
security, national insurance, business license, business organization,
environmental, workers compensation, payroll, profits, severance, stamp,
occupation, windfall profits, customs duties, franchise and other taxes of
any
kind whatsoever imposed by the United States of America or any state, local
or
foreign government, or any agency or political subdivision thereof, and any
interest, fines, penalties, assessments or additions to tax imposed with
respect
to such items or any contest or dispute thereof.
“Tax
Returns” shall mean any and all reports, returns, declarations, or
statements relating to Taxes, including any schedule or attachment thereto
and
any related or supporting workpapers or information with respect to any of
the
foregoing, including any amendment thereof.
“Third
Party Action” shall mean any suit or proceeding by a person or entity other
than a Party for which indemnification may be sought by a Party under
Article VI.
“Trademarks”
shall mean all registered trademarks and service marks, logos, Internet domain
names, corporate names and doing business designations and all registrations
and
applications for registration of the foregoing, common law trademarks and
service marks and trade dress.
“Transaction
Expenses” means (i) all fees and expenses payable by the Company to The
Jordan, Xxxxxxxx Group, Inc. and all legal, audit, accounting, tax and financial
advisory fees and expenses incurred by the Company or Company Stockholders
in
connection with the transactions contemplated by this Agreement and the
preparation of the financial statements referred to in Section 4.5(c) and
(d), including, without limitation, the fees and expenses of DLA Piper US
LLP
and Xxxxx Xxxxxxxx LLP, and (ii) amounts to be paid to employees of the
Company under the Change in Control Bonus Plan.
“Transitory
Subsidiary” shall have the meaning set forth in the first paragraph of this
Agreement.
“User
Database” shall mean all data collected and maintained by the Company that
has been provided by users of the Websites.
“Value”
of Escrow Shares shall have the meaning set forth in
Section 6.3(c).
“Waived
Option” shall mean that certain Out-of-the Money Option issued to Xxxxxx
Xxxxxx, dated March 1, 1999.
“Warrant”
shall mean each warrant or other contractual right to purchase or acquire
Company Shares, provided that Options and Preferred Shares shall not be
considered Warrants.
“Websites”
shall mean all websites operated by the Company or any of its Subsidiaries,
including those listed on Schedule 2.13(o) attached hereto,
including: (A) all files and Content in each and any case
including, without limitation, text, images, graphics, navigational devices,
menu structures or arrangement, icons, operational instructions, scripts,
commands, syntax, screen design and other designs and
visual expressions contained on the Websites, whether
stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature, HTML code, HTML pages, software
applications, contact data base and advertiser information, search engines,
database engines, data, search engine designs and algorithms for inclusion
in
other internet-based search engines, software and database licenses, custom
software and custom applications with associated source and data, licenses,
lists, links and authorizations for links, banners as well as any and all
custom
programs, applications or solutions that the Company or any of its Subsidiaries
has developed itself or hired others to produce for it if any of those programs,
applications or solutions are useful and/or appropriate to the operation
of the
business of the Company; (B) title to and possession of all electronic and
hard copy versions of the media that constitute all copies and versions of
the
Content of the Websites, their respective component parts, and all Documentation
relating thereto; (C) all inventory of the text and Content of the
Websites, any public relations and marketing and promotional items related
to
the Websites, and any artwork or related materials related to the Websites;
and
(D) all customer, supplier and advertiser lists and data on traffic to the
Websites and advertisements running on the Websites.
Exhibit
99.1
ARTICLE
X
MISCELLANEOUS
10.1 Press
Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided,
however, that any Party may make any public disclosure it believes
in
good faith is required by applicable law, regulation or stock market rule
(in
which case the disclosing Party shall use Reasonable Best Efforts to advise
the
other Parties and provide them with a copy of the proposed disclosure prior
to
making the disclosure).
10.2 No
Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that
(i) the provisions in Article I concerning issuance of the Merger
Consideration, (ii) the provisions of Article VI concerning
indemnification and (iii) the provisions of Article VII concerning
registration rights are intended for the benefit of the Company
Stockholders.
10.3 Entire
Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that
the Confidentiality Agreement dated January 30, 2007 between the Buyer and
the
Company shall remain in effect in accordance with its terms.
10.4 Succession
and Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign any of its rights or delegate
any of its performance obligations hereunder without the prior written approval
of the other Parties; provided that the Transitory Subsidiary may assign
its rights, interests and obligations hereunder to an Affiliate of the
Buyer. Any purported assignment of rights or delegation of
performance obligations in violation of this Section 10.4 is
void.
10.5 Counterparts
and Facsimile Signature. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
10.6 Headings. The
Section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.
10.7 Notices. All
notices, requests, demands, claims, and other communications hereunder shall
be
in writing. Any notice, request, demand, claim or other communication
hereunder shall be deemed duly delivered four business days after it is sent
by
registered or certified mail, return receipt requested, postage prepaid,
or one
business day after it is sent for next business day delivery via a reputable
nationwide overnight courier service, in each case to the intended recipient
as
set forth below:
|
If
to the Company:
|
KnowledgeStorm,
Inc.
0000
Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxx 00000
Attn:
Chief Executive Officer
|
|
Copy
to:
|
DLA
Piper US LLP
0000
Xxxx Xxxxxxxxx Xxxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxx 00000-0000
Attn:
Xxxxxxx Xxxxx, Esq.
|
|
If
to the Buyer or the Transitory Subsidiary:
|
TechTarget,
Inc.
000
Xxxxxxxx Xxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
Attn: Xxxx
Xxxx, Esq.
|
|
Copy
to:
|
Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
00
Xxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Attn: Xxxx
X. Xxxxxx, Esq.
|
Any
Party
may give any notice, request, demand, claim or other communication hereunder
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been
duly
given unless and until it actually is received by the party for whom it is
intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set
forth.
10.8 Governing
Law. All matters arising out of or relating to this Agreement and
the transactions contemplated hereby (including without limitation its
interpretation, construction, performance and enforcement) shall be
governed by and construed in accordance with the internal laws of the State
of
Delaware without giving effect to any choice or conflict of law provision
or
rule (whether of the State of Delaware or any other jurisdiction) that
would cause the application of laws of any jurisdictions other than those
of the
State of Delaware.
10.9 Amendments
and Waivers. The Parties may mutually amend any provision of this
Agreement at any time prior to the Closing; provided, however,
that any amendment effected subsequent to the Requisite Stockholder Approval
shall be subject to any restrictions contained in the Delaware General
Corporation Law. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by all of the
Parties. No waiver of any right or remedy hereunder shall be valid
unless the same shall be in writing and signed by the Party giving such
waiver. No waiver by any Party with respect to any default,
misrepresentation or breach of warranty or covenant hereunder shall be deemed
to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by
virtue
of any prior or subsequent such occurrence.
10.10 Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination
of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid
or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or
unenforceable term or provision, and this Agreement shall be enforceable
as so
modified.
10.11 Submission
to Jurisdiction. Each Party (a) submits to the jurisdiction
of any state or federal court sitting in Boston, Massachusetts in any action
or
proceeding arising out of or relating to this Agreement (including any action
or
proceeding for the enforcement of any arbitral award made in connection with
any
arbitration of a Dispute hereunder), (b) agrees that all claims in respect
of such action or proceeding may be heard and determined in any such court,
(c) waives any claim of inconvenient forum or other challenge to venue in
such court, (d) agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court and (e) waives any right
it may have to a trial by jury with respect to any action or proceeding arising
out of or relating to this Agreement; provided in each case that, solely
with
respect to any arbitration of a Dispute, the Arbitrator shall resolve all
threshold issues relating to the validity and applicability of the arbitration
provisions of this Agreement, contract validity, applicability of statutes
of
limitations and issue preclusion, and such threshold issues shall not be
heard
or determined by such court. Each Party agrees to accept service of
any summons, complaint or other initial pleading made in the manner provided
for
the giving of notices in Section 10.7, provided that nothing in this
Section 10.11 shall affect the right of any Party to serve such summons,
complaint or other initial pleading in any other manner permitted by
law.
10.12 Certain
Options. Notwithstanding anything to the contrary in this
Agreement, if an Acknowledgement and Release (in the form of
Exhibit F) is not obtained on or before the Closing from any holder
of an In-the -Money Option (other than the Change-In-Control Options and
2007
Options), then (A) any such Option shall automatically be cancelled and
terminated as of the Effective time in exchange for a cash payment to the
holder
thereof equal to the Cash Merger Consideration in respect of a Common Share,
multiplied by the number of Common Shares subject to such Option immediately
prior to the Effective Time, and (B) the total exercise prices of such
Options shall not be included in the definition of “Aggregate Exercise Price”
for purposes of calculating the “Cash Merger Consideration.”
10.13 Construction.
(a) The
language used in this Agreement shall be deemed to be the language chosen
by the
Parties to express their mutual intent, and no rule of strict construction
shall
be applied against any Party.
(b) Any
reference to any federal, state, local or foreign statute or law shall be
deemed
also to refer to all rules and regulations promulgated thereunder, unless
the
context requires otherwise.
(c) Any
reference herein to “including” shall be interpreted as “including without
limitation.”
(d) Any
reference to any Article, Section or paragraph shall be deemed to refer to
an Article, Section or paragraph of this Agreement, unless the context
clearly indicates otherwise.
IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first
above written.
| TECHTARGET, INC. | |||
|
|
By:
|
/s/ Xxx Xxxx | |
| Xxx Xxxx | |||
| President | |||
| CATAPULT ACQUISITION CORP. | |||
|
|
By:
|
/s/ Xxx Xxxx | |
| Xxx Xxxx | |||
| President | |||
| KNOWLEDGESTORM, INC. | |||
|
|
By:
|
/s/ Xxxxxx Xxx | |
| Xxxxxx Xxx | |||
| CEO and President | |||
