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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation;
OXYGEN ACQUISITION CORPORATION,
a Delaware corporation;
and ATMOSPHERE NETWORKS, INC.,
a Delaware corporation;
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Dated as of June 21, 2000
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EXHIBIT 2.1
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of June 21, 2000, by and among: DITECH COMMUNICATIONS
CORPORATION, a Delaware corporation ("Parent"); OXYGEN ACQUISITION CORPORATION,
a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub");
and ATMOSPHERE NETWORKS, INC., a Delaware corporation (the "Company"). Certain
other capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub with and into the Company in accordance with this Agreement and
the Delaware General Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company.
D. Contemporaneously with the execution and delivery of this
Agreement, certain holders of capital stock of the Company holding a majority
of the outstanding shares of the common stock of the Company and a majority
of the outstanding shares of the preferred stock of the Company
(collectively, the "Major Stockholders") are executing and delivering to
Parent voting agreements ("Voting Agreements") of even date herewith
substantially in the form of Exhibit B.
AGREEMENT
The parties to this Agreement intending to be legally bound hereby
agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and
subject to the conditions set forth in this Agreement, at the Effective Time
(as defined in Section 1.3), Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall cease. The Company
will continue as the surviving corporation in the Merger (the "Surviving
Corporation").
1.
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the Delaware
General Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Cooley Godward LLP ("Xxxxxx Godward"), 0000 Xxxxxxx Xxxxxx, Xxxx
Xxxx, Xxxxxxxxxx 00000 at 10:00 a.m. on a date to be designated by Parent as
soon as practicable, but no later than two (2) business days following
satisfaction or waiver of the conditions set forth in Sections 6 and 7 herein
(the "Scheduled Closing Time"). (The date on which the Closing actually takes
place is referred to in this Agreement as the "Closing Date.")
Contemporaneously with or as promptly as practicable after the Closing, a
properly executed certificate of merger conforming to the requirements of the
Delaware General Corporation Law shall be filed with the Secretary of State
of the State of Delaware. The Merger shall become effective at the time such
certificate of merger is filed with the Secretary of State of the State of
Delaware (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND
OFFICERS. Unless otherwise determined by Parent and the Company prior to the
Effective Time:
(a) the certificate of incorporation of the Surviving
Corporation shall be amended and restated as of the Effective Time to
conform to the certificate of incorporation of Merger Sub as in effect
immediately prior to the Effective Time (except that the name of the
Surviving Corporation shall be such name as Parent may designate);
(b) the bylaws of the Surviving Corporation shall be amended
and restated as of the Effective Time to conform to the bylaws of
Merger Sub as in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals who are
the directors and officers of Merger Sub immediately prior to the
Effective Time, together with such additional individuals as Parent may
designate.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5, 1.8(d) and 1.9, at the Effective
Time, by virtue of the Merger and without any further action on the part of
Parent, Merger Sub, the Company or any stockholder of the Company:
(i) each share of common stock, $0.001 par value per
share, of the Company ("Company Common Stock") outstanding immediately
prior to the Effective Time shall be converted into the right to
receive a cash payment in the amount equal to the Common Share Price;
(ii) each share of Series A Preferred Stock, $0.001
par value per share, of the Company ("Company Series A Preferred
Stock") outstanding immediately prior to the Effective Time (including
shares of Company Series A Preferred Stock issued upon exercise of
Company Warrants (pursuant to the terms set forth therein) and
outstanding immediately prior to the Effective Time) shall be converted
into the right to receive the
2.
Applicable Fraction of a share of common stock, par value $0.001 per
share, of Parent ("Parent Common Stock");
(iii) each share of Series B Preferred Stock, $0.001
par value per share, of the Company ("Company Series B Preferred
Stock") outstanding immediately prior to the Effective Time (including
shares of Company Series B Preferred Stock issued upon exercise of
Company Warrants (pursuant to the terms set forth therein) and
outstanding immediately prior to the Effective Time) shall be converted
into the right to receive the Series B Preference Fraction of a share
of Parent Common Stock;
(iv) each share of Series C Preferred Stock, $0.001
par value per share, of the Company ("Company Series C Preferred
Stock") outstanding immediately prior to the Effective Time shall be
converted into the right to receive the Series C Preference Fraction of
a share of Parent Common Stock; and
(v) each share of the common stock (par value $0.001
per share) of Merger Sub outstanding immediately prior to the Effective
Time shall be converted into one share of common stock of the Surviving
Corporation.
(b) The capitalized terms used above without definition shall
have the following meanings:
(i) The "Applicable Fraction" shall be a fraction
(A) whose numerator is the Merger Consideration minus the number of
Preference Shares, and (B) whose denominator is the Fully Diluted
Company Shares minus the number of shares of Company Series C Preferred
Stock and Company Series B Preferred Stock outstanding immediately
prior to the Effective Time.
(ii) The "Common Share Price" shall be the product
obtained by multiplying (A) the Applicable Fraction, by (B) the Parent
Average Stock Price.
(iii) The "Fully Diluted Company Shares" shall be the
difference obtained by subtracting (A) the Termination Shares, from (B)
the Fully Diluted Pre-Termination Shares.
(iv) The "Fully Diluted Pre-Termination Shares" shall
be the sum of (A) the aggregate number of shares of Company Common
Stock outstanding immediately prior to the Effective Time (including
any such shares that are subject to a repurchase option or risk of
forfeiture under any restricted stock purchase agreement or other
agreement), (B) the aggregate number of shares of Company Common Stock
issuable upon conversion of all shares of Company Preferred Stock
outstanding immediately prior to the Effective Time, (C) the aggregate
number of shares of Company Common Stock purchasable under or otherwise
subject to all Company Options outstanding immediately prior to the
Effective Time (including all shares of Company Common Stock that may
ultimately be purchased under Company Options that are unvested or are
otherwise not then exercisable), and (D) the aggregate number of shares
of Company Common Stock issuable upon conversion of all other
convertible securities of the Company outstanding immediately prior to
the Effective Time.
3.
(v) "Merger Consideration" shall mean, subject to
Section 1.5(e), the number of shares of Parent Common Stock determined
by dividing $88,500,000 by the Parent Average Stock Price, provided
that (A) if the quotient determined by dividing $88,500,000 by the
Parent Average Stock Price is less than 1,000,000, the Merger
Consideration shall be equal to 1,000,000 shares of Parent Common
Stock, and (B) if the quotient determined by dividing $88,500,000 by
the Parent Average Stock Price is greater than 1,200,000, the Merger
Consideration shall be equal to 1,200,000 shares of Parent Common
Stock.
(vi) The "Parent Average Stock Price" shall be the
average of the closing sales price of a share of Parent Common Stock as
reported on as reported on the Nasdaq National Market (or any successor
thereto) for each of the five consecutive trading days ending two (2)
trading days prior to the Closing Date.
(vii) "Preference Shares" shall mean the Series C
Preference Shares and the Series B Preference Shares.
(viii) "Series B Preference Shares" shall mean the
number of shares of Parent Common Stock obtained by multiplying (A) the
number of shares of Company Series B Preferred Stock outstanding
immediately prior to the Effective Time, by (B) the Series B Preference
Fraction.
(ix) The "Series B Preference Fraction" shall mean
the fraction having a numerator equal to $3.2937, and a denominator
equal to the Parent Average Stock Price.
(x) The "Series C Preference Shares" shall mean the
number of shares of Parent Common Stock obtained by multiplying (A) the
number of shares of Company Series C Preferred Stock outstanding
immediately prior to the Effective Time, by (B) the Series C Preference
Fraction.
(xi) The "Series C Preference Fraction" shall mean
the fraction having a numerator equal to $6.5300, and a denominator
equal to the Parent Average Stock Price.
(xii) The "Termination Shares" shall mean (A) the
shares of Company Common Stock subject to a repurchase option or risk
of forfeiture under any restricted stock purchase, stock option
agreement or other agreement and held by Persons who, immediately
following the Effective Time, will not be employed by either the
Company or Parent (a written schedule setting forth such persons and
the vesting status of their respective shares as of the Effective Time
to be provided by the Company to Parent prior to the Effective Time),
and (B) the shares of Company Common Stock purchasable under or
otherwise subject to unvested Company Options outstanding immediately
prior to the Effective Time and held by Persons who, immediately
following the Effective Time, will not be employed by either the
Company or Parent (a written schedule setting forth such persons and
the vesting status of their respective options as of the Effective Time
to be provided by the Company to Parent prior to the Effective Time).
(c) To the extent not prohibited by the applicable agreement:
4.
(i) if any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to
a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with
the Company (to the extent the restriction does not terminate in
accordance with its terms as a result of the Merger), then the cash
amount payable pursuant to Section 1.5(a)(i) with respect to such
shares shall be paid by Parent on a monthly basis following the
Effective Time, the amount and timing of which shall be based upon the
periodic vesting of such shares (or removal of such repurchase option,
risk of forfeiture or other condition); and
(ii) if any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition
under any applicable restricted stock purchase agreement or other
agreement with the Company (to the extent the restriction does not
terminate in accordance with its terms as a result of the Merger), and
such shares of Company Common stock are converted by reason of the
Recapitalization Transaction into shares of Company Series A Preferred
Stock that are outstanding immediately prior to the Effective Time,
then the shares of Parent Common Stock issued in exchange for such
shares of Company Series A Preferred Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Parent
Common Stock shall accordingly be marked with appropriate legends and
held in the appropriate escrow accounts.
(d) A portion of the shares of Parent Common Stock issued and
the cash consideration paid pursuant to Section 1.5(a) above in the Merger
shall be delivered into escrow and held as specified in Section 1.8 hereof.
(e) In the event Parent at any time or from time to time
between the date of this Agreement and the Effective Time declares or pays
any dividend on Parent Common Stock payable in Parent Common Stock or in any
right to acquire Parent Common Stock, or effects a subdivision of the
outstanding shares of Parent Common Stock into a greater number of shares of
Parent Common Stock (by stock dividends, combinations, splits,
recapitalizations and the like), or in the event the outstanding shares of
Parent Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Parent Common Stock, then the
Applicable Fraction shall be appropriately adjusted.
1.6 STOCK OPTIONS. At the Effective Time, each stock option that
is then outstanding under the Company's 1997 Stock Plan, as amended (the
"Stock Plan"), whether vested or unvested (a "Company Option"), shall be
assumed by Parent in accordance with the terms (as in effect as of the date
of this Agreement) of the Stock Plan and the stock option agreement by which
such Company Option is evidenced. All rights with respect to Company Common
Stock under outstanding Company Options shall thereupon be converted into
rights with respect to Parent Common Stock. Accordingly, from and after the
Effective Time, (a) each Company Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (b) the number of shares of Parent
Common Stock subject to each such assumed Company Option shall be equal to
the number of shares of Company Common Stock that were subject to such
Company Option immediately prior to the Effective Time multiplied by the
Applicable Fraction, rounded to the nearest whole number of shares of Parent
Common Stock, (c) the per share exercise price
5.
for the Parent Common Stock issuable upon exercise of each such assumed
Company Option shall be determined by dividing the exercise price per share
of Company Common Stock subject to such Company Option, as in effect
immediately prior to the Effective Time, by the Applicable Fraction, and
rounding the resulting exercise price up to the nearest whole cent, and (d)
all restrictions on the exercise of each such assumed Company Option shall
continue in full force and effect, and the term, exercisability, vesting
schedule and other provisions of such Company Option shall otherwise remain
unchanged; PROVIDED, HOWEVER, that each such assumed Company Option shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Parent after the
Effective Time. The Company and Parent shall take all action that may be
necessary to effectuate the provisions of this Section 1.6. Following the
Closing, Parent will send to each holder of an assumed Company Option a
written notice setting forth (i) the number of shares of Parent Common Stock
subject to such assumed Company Option, and (ii) the exercise price per share
of Parent Common Stock issuable upon exercise of such assumed Company Option.
Parent shall file with the SEC, within twenty (20) days after the Closing
Date, a registration statement on Form S-8 registering the exercise of the
Company Options assumed by Parent pursuant to this Section 1.6.
Parent shall use its best efforts to maintain the effectiveness of
such Registration Statement for so long as such Company Options remain
outstanding. Parent shall take all necessary corporate action to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of Company Options assumed in accordance with this Section 1.6.
It is the intention of the parties that the Company Options assumed
by Parent qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent the Company Options
qualified as incentive stock options immediately prior to the Effective Time.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock
that were outstanding immediately prior to the Effective Time shall cease to
have any rights as stockholders of the Company, and the stock transfer books
of the Company shall be closed with respect to all shares of such capital
stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of the Company's capital stock shall be made on
such stock transfer books after the Effective Time. If, after the Effective
Time, a valid certificate previously representing any of such shares of the
Company's capital stock (a "Company Stock Certificate") is presented to the
Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES; ESCROW.
(a) Parent shall (i) reserve for exchange in accordance with
Section 1.5 the aggregate number of shares of Parent Common Stock issuable at
the Effective Time pursuant to the Merger, (ii) reserve for distribution cash
payable pursuant to Section 1.5(a) in exchange for outstanding shares of
Company Common Stock, and (iii) reserve for distribution cash for fractional
shares in the amount described in Section 1.8(f), and within five (5)
business days following the Effective Time, Parent will send or cause to be
sent to the holders of Company
6.
Stock Certificates (A) a letter of transmittal in customary form and
containing such provisions as Parent may reasonably specify, and (B)
instructions for use in effecting the surrender of Company Stock Certificates
in exchange for cash or certificates representing Parent Common Stock.
(b) Upon surrender of a Company Stock Certificate to Parent
by a Company stockholder that does not perfect its appraisal rights and is
otherwise entitled to receive cash or shares of Parent Common Stock pursuant
to Section 1.5 (a "Merger Stockholder") for exchange, together with a duly
executed letter of transmittal and such other documents as may be reasonably
required by Parent, Parent shall cause to be delivered (i) to such Merger
Stockholder a cash payment (reduced by the amount of Escrow Cash (as defined
in clause (ii) below)) or a certificate representing the number of shares of
Parent Common Stock (reduced by the amount of Escrow Shares (as defined in
clause (ii) below)), in either case, that such Merger Stockholder otherwise
has the right to receive pursuant to the provisions of Section 1.5, and (with
respect to Merger Stockholders receiving Parent Common Stock) cash in lieu of
any fractional share of Parent Common Stock, and (ii) to the escrow agent
under the Escrow Agreement in the form of Exhibit C hereto (the "Escrow
Agreement"), on behalf and in the name of such Merger Stockholder, a cash
payment in the amount derived by multiplying the Escrow Fraction (as defined
in clause (c) below) by the aggregate total cash payment that such Merger
Stockholder otherwise has the right to receive pursuant to the provisions of
Section 1.5 ("Escrow Cash"), or a certificate representing the number of
shares of Parent Common Stock (the "Escrow Shares") derived by multiplying
the Escrow Fraction by the number of shares of Parent Common Stock that such
Merger Stockholder otherwise has the right to receive pursuant to the
provisions of Section 1.5, and rounding down to the nearest whole share of
Parent Common Stock.
(c) For purposes of this Section 1.8, "Escrow Fraction" shall
mean a fraction whose numerator is the number of shares representing 10% of
the Fully Diluted Company Shares, and whose denominator is the number of
shares of the Fully Diluted Company Shares that are actually issued and
outstanding immediately prior to the Effective Time. With respect to those
Merger Stockholders whose shares of Company Common Stock are subject to
repurchase by the Company (pursuant to a restricted stock purchase agreement
or otherwise), and who exchange such shares for shares of Company Series A
Preferred Stock in the Recapitalization Transaction, the number of Escrow
Shares deposited on behalf of each such Merger Stockholder shall be prorated
between such Merger Stockholder's shares subject to repurchase ("Unvested
Shares") and such Merger Stockholder's shares not subject to repurchase
("Vested Shares") based on the respective number of Unvested Shares and
Vested Shares held by such Merger Stockholders immediately prior to the
Effective Time.
(d) Until surrendered as contemplated by this Section 1.8,
each Company Stock Certificate shall be deemed, from and after the Effective
Time, to represent only the right to receive upon such surrender cash or a
certificate representing shares of Parent Common Stock (and cash in lieu of
any fractional share of Parent Common Stock) as contemplated by this Section
1 (less any Escrow Cash or Escrow Shares deposited with the escrow agent
pursuant to this Section 1.8). If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a
condition precedent to the issuance of any certificate representing Parent
Common Stock, require the owner of such lost, stolen or destroyed Company
Stock Certificate to provide an appropriate affidavit and indemnity agreement
against any claim
7.
that may be made against Parent or the Surviving Corporation with respect to
such Company Stock Certificate.
(e) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Company Stock Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of any fractional share shall be paid to any such
holder, until such holder surrenders such Company Stock Certificate in
accordance with this Section 1.8 (at which time such holder shall be entitled
to receive all such dividends and distributions and such cash payment).
(f) No fractional shares of Parent Common Stock shall be
issued in connection with the Merger, and no certificates for any such
fractional shares shall be issued. In lieu of such fractional shares, any
holder of capital stock of the Company who would otherwise be entitled to
receive a fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock issuable to such holder) shall, upon
surrender of such holder's Company Stock Certificate(s), be paid in cash the
dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the Parent Average Stock Price.
(g) The shares of Parent Common Stock to be issued in the
Merger shall be characterized as "restricted securities" for purposes of Rule
144 under the Securities Act, and each certificate representing any such
shares shall, until such time that the shares are not so restricted under the
Securities Act, bear a legend identical or similar in effect to the following
legend (together with any other legend or legends required by applicable
state securities laws or otherwise, if any):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS AVAILABLE."
(h) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable
to any holder or former holder of capital stock of the Company pursuant to
this Agreement such amounts as Parent or the Surviving Corporation may be
required to deduct or withhold therefrom under the Code or under any
provision of state, local or foreign tax law. To the extent such amounts are
so deducted or withheld, such amounts shall be treated for all purposes under
this Agreement as having been paid to the Person to whom such amounts would
otherwise have been paid.
(i) Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of capital stock of the Company for any
shares of Parent Common Stock (or dividends or distributions with respect
thereto), or for any cash amounts, delivered to any public official pursuant
to any applicable abandoned property, escheat or similar law.
8.
(j) The Escrow Cash and Escrow Shares shall be maintained in
an escrow fund (the "Escrow Fund") for purposes of satisfying claims brought
pursuant to Section 9 and for the period of time set forth in the Escrow
Agreement.
1.9 APPRAISAL RIGHTS.
(a) Notwithstanding anything to the contrary contained in
this Agreement, any shares of capital stock of the Company for which, as of
the Company Stockholders' Meeting (as defined in Section 5.3 hereof), the
holder thereof has demanded an appraisal of their value in accordance with
Section 262 of the Delaware General Corporation Law or (to the extent
applicable) Chapter 13 of the California Corporations Code ("Dissenting
Shares") shall not be converted into or represent the right to receive cash
or Parent Common Stock in accordance with Section 1.5 (or cash in lieu of
fractional shares in accordance with Section 1.8(d)), and the holder or
holders of such shares shall be entitled only to such rights as may be
granted to such holder or holders in Section 262 of the Delaware General
Corporation Law or (to the extent applicable) Chapter 13 of the California
Corporations Code; PROVIDED, HOWEVER, that if the status of any such shares
as Dissenting Shares shall not be perfected, or if any such shares shall lose
their status as Dissenting Shares, then, as of the later of the Effective
Time or the time of the failure to perfect such status or the loss of such
status, such shares shall automatically be converted into and shall represent
only the right to receive (upon the surrender of the certificate or
certificates representing such shares) cash or Parent Common Stock in
accordance with Section 1.5 (and cash in lieu of fractional shares in
accordance with Section 1.8(d)) without any interest.
(b) The Company shall give Parent (i) prompt notice of any
written demand received by the Company at or prior to the Effective Time to
require the Company to purchase Dissenting Shares pursuant to Section 262 of
the Delaware General Corporation Law or (to the extent applicable) Chapter 13
of the California Corporations Code and of any other demand, notice or
instrument delivered to the Company prior to the Effective Time pursuant to
the Delaware General Corporation Law or (to the extent applicable) the
California Corporations Code, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior
to the Effective Time with respect to any such demand unless Parent shall
have consented in writing to such payment or settlement offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger
is intended to constitute a reorganization within the meaning of Section 368
of the Code. The parties to this Agreement hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation or
Parent with full right, title and possession of and to all rights and
property of Merger Sub and the Company, the officers and directors of the
Surviving Corporation and Parent shall be fully authorized (in the name of
Merger Sub, in the name of the Company and otherwise) to take such lawful and
necessary action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
9.
The Company represents and warrants, to and for the benefit of
the Indemnitees as follows (subject in the case of each section of this
Section 2 below to (i) exceptions set forth in the part of the Disclosure
Schedule that corresponds to such Section, and (ii) other exceptions set
forth in the Disclosure Schedule whose applicability to such section is
reasonably apparent from the context in which such exceptions appear):
2.1 DUE ORGANIZATION; ETC.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Subsidiary is a corporation duly organized, validly existing and in good
standing (or its equivalent) under the laws of Western Australia. Each of the
Acquired Companies has all necessary power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted and
is currently proposed to be conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used; and (iii) to perform
its obligations in all material respects under all Company Contracts.
(b) Except as set forth in Part 2.1(b) of the Disclosure
Schedule, none of the Acquired Companies is or has ever been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction.
(c) None of the Acquired Companies is conducting or has ever
conducted any business under or otherwise used, for any purpose or in any
jurisdiction, any fictitious name, assumed name, trade name or other name
other than the name under which such Acquired Company is currently
incorporated.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets
forth (i) the names of the members of the board of directors of each of the
Acquired Companies, (ii) the names of the members of each committee of the
board of directors of each of the Acquired Companies, and (iii) the names and
titles of the officers of each of the Acquired Companies.
(e) Except for the ownership of the Subsidiary by the
Company, no Acquired Company owns any controlling interest in any Entity, and
no Acquired Company has ever owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect equity interest in, any
Entity. No Acquired Company has agreed or is obligated to make any future
investment in or capital contribution to any Entity. The Company has not
guaranteed and is not responsible or liable for any obligation of any Entity
in which it owns or has owned any equity interest.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company
has delivered to Parent accurate and complete copies as of the date of this
Agreement of: (a) the certificate of incorporation and bylaws (or similar
organizational documents) of each Acquired Company, including all amendments
thereto; (b) the stock records of each Acquired Company; and (c) the minutes
and other records of the meetings and other proceedings (including any
actions taken by written consent or otherwise without a meeting) of the
stockholders of each Acquired Company, the board of directors of each
Acquired Company and all committees of the board of directors of each
Acquired Company. Except as set forth in Part 2.2 of the Disclosure Schedule,
there have been no formal meetings or other proceedings of the stockholders
of the Company, the board of directors of
10.
the Company or any committee of the board of directors of the Company that
are not fully reflected in such minutes or other records. There has not been
any violation of any of the provisions of the certificate of incorporation or
bylaws of any Acquired Company, and no Acquired Company has taken any action
that is inconsistent in any material respect with any resolution adopted by
such Acquired Company's stockholders, such Acquired Company's board of
directors or any committee of such Acquired Company's board of directors.
Except as set forth in Part 2.2 of the Disclosure Schedule, the books of
account, stock records, minute books and other records of each Acquired
Company is accurate, up-to-date and complete in all material respects, and
have been maintained in accordance with prudent business practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of:
(i) 25,000,000 shares of Company Common Stock (with $0.001 par value), of
which 7,340,863 shares have been issued and are outstanding as of the date of
this Agreement; (ii) 5,372,500 shares of Company Preferred Stock (with $0.001
par value) which have been designated "Series A Preferred Stock," of which
5,335,000 shares have been issued and are outstanding as of the date of this
Agreement; (iii) 3,100,000 shares of Company Preferred Stock (with $0.001 par
value) which have been designated "Series B Preferred Stock," of which
2,884,448 shares have been issued and are outstanding as of the date of this
Agreement; and (iv) 4,100,000 shares of Company Preferred Stock (with $0.001
par value) which have been designated "Series C Preferred Stock," of which
3,992,497 shares have been issued and are outstanding as of the date of this
Agreement. Except as contemplated by the Recapitalization Transaction (as
defined in Section 4.4 hereof), each outstanding share of Company Preferred
Stock is convertible into one share of Company Common Stock. All of the
outstanding shares of Company Common Stock and Company Preferred Stock have
been duly authorized and validly issued, and are fully paid and
non-assessable. Part 2.3(a) of the Disclosure Schedule provides an accurate
and complete description of the terms of each repurchase option which is held
by the Company and to which any of such shares is subject.
(b) The Company has reserved 4,929,449 shares of Company
Common Stock for issuance under the Stock Plan, of which options to purchase
3,364,955 shares are outstanding as of the date of this Agreement. Part
2.3(b) of the Disclosure Schedule accurately sets forth, with respect to each
Company Option that is outstanding as of the date of this Agreement: (i) the
name of the holder of such Company Option; (ii) the total number of shares of
Company Common Stock that are subject to such Company Option ; (iii) the date
on which such Company Option was granted and the term of such Company Option;
(iv) the vesting commencement date for such Company Option; (v) the exercise
price per share of Company Common Stock purchasable under such Company
Option; and (vi) whether such Company Option has been designated an
"incentive stock option" as defined in Section 422 of the Code. Except as set
forth in Part 2.3(b) of the Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities
of the Company or the Subsidiary; (ii) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any
shares of the capital stock or other securities of the Company or the
Subsidiary; (iii) Contract under which any Acquired Corporation is or may
become obligated to sell or otherwise issue any shares of its capital stock
or any other securities; or (iv) to the knowledge of the Company, condition
or circumstance that may give rise to or provide a basis for the assertion of
a claim by any Person to
11.
the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of any Acquired Corporation.
(c) All outstanding shares of Company Common Stock and
Company Preferred Stock and all outstanding Company Options have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts. Except as set forth on Part 2.3(c) of the Disclosure
Schedule, there are no preemptive rights applicable to any shares of capital
stock of any Acquired Company, nor other rights to subscribe for or purchase
securities of any Acquired Company.
(d) Except as set forth in Part 2.3(d) of the Disclosure
Schedule, no Acquired Company has repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities, other than a
repurchase of unvested shares and shares subject to repurchase rights on the
termination of employment or consulting services. All securities so
reacquired by the Acquired Company were reacquired in compliance with (i) all
applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following
financial statements and notes (collectively, the "Company Financial
Statements"):
(i) The audited consolidated balance sheet of the
Company as of December 31, 1998, and the related audited consolidated
statement of operations, statement of stockholders' equity and
statement of cash flows of the Company for the year then ended,
together with the notes thereto and the qualified report and opinion of
KPMG Peat Marwick LLP relating thereto;
(ii) The unaudited consolidated balance sheet of the
Company as of December 31, 1999, and the related audited consolidated
statement of operations, statement of stockholders' equity and
statement of cash flows of the Company for the year then ended,
together with the notes thereto; and
(iii) The unaudited consolidated balance sheet of the
Company as of May 31, 2000 (the "Unaudited Interim Balance Sheet"), and
the related unaudited consolidated income statement of the Company for
the five months then ended.
(b) The Company Financial Statements are accurate and
complete in all material respects and present fairly the consolidated
financial position of the Company as of the respective dates thereof and the
consolidated results of operations and (in the case of the financial
statements referred to in Sections 2.4(a)(i) and 2.4(a)(ii)) cash flows of
the Company for the periods covered thereby. The Company Financial Statements
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered
(except that the financial statements referred to in Section 2.4(a)(iii) do
not contain footnotes and are subject to normal and recurring year-end audit
adjustments, which will not, individually or in the aggregate, be material in
magnitude).
12.
(c) When delivered to Parent, the financial statements
referred to in Section 6.12 will be accurate and complete in all material
respects and will present fairly the consolidated financial position of the
Company as of the date thereof and the consolidated results of operations and
cash flows of the Company for the period covered thereby, and will have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the period covered.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since May 31, 2000:
(a) as of the date of this Agreement, there had not been any
material adverse change in the business, condition, assets,
liabilities, operations or financial performance of the Acquired
Companies, and, to the knowledge of the Company, no event has occurred
that will, or could reasonably be expected to, have a Material Adverse
Effect on the Acquired Companies, provided that the Company makes no
representation or warranty as to whether the matters described in Part
2.5(a) of the Disclosure Schedule constitute such a material adverse
change or other event described above;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the
material assets (whether or not covered by insurance) of any of the
Acquired Companies;
(c) no Acquired Company has (i) declared, accrued, set aside
or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise
reacquired any shares of any Acquired Company's capital stock or other
securities;
(d) no Acquired Company has sold, issued or authorized the
issuance of (i) any capital stock or other security, except pursuant to
the exercise of options or other rights issued under the Stock Plan or
outstanding Company Warrants, (ii) any option or right to acquire any
capital stock or any other security, other than options or other rights
issued under the Stock Plan in the ordinary course of business or (iii)
any instrument convertible into or exchangeable for any capital stock
or other security;
(e) no Acquired Company has amended or waived any of its
rights under, or permitted the acceleration of vesting under, (i) any
provision of the Stock Plan, (ii) any provision of any agreement
evidencing any outstanding Company Option, or (iii) any restricted
stock purchase agreement;
(f) no Acquired Company has amended its certificate of
incorporation or bylaws (or similar organizational documents), nor has
effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(g) no Acquired Company has formed any subsidiary or acquired
any equity interest or other interest in any other Entity;
13.
(h) no Acquired Company has made any capital expenditure
which, when added to all other capital expenditures made on behalf of
the Acquired Companies since May 31, 2000, exceeds $50,000;
(i) no Acquired Company has (i) entered into or permitted any
of the assets owned or used by it to become bound by any Contract that
is or would constitute a Material Contract (as defined in Section
2.10(a)), or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any such Material Contract;
(j) no Acquired Company has (i) acquired, leased or licensed
any right or other asset from any other Person, (ii) sold or otherwise
disposed of, or leased or licensed, any right or other asset to any
other Person, or (iii) waived or relinquished any right, except for
rights or other assets acquired, leased, licensed or disposed of in the
ordinary course of business and consistent with past practices;
(k) no Acquired Company has written off as uncollectible, or
established any extraordinary reserve with respect to, any account
receivable or other indebtedness;
(l) no Acquired Company has made any pledge of any of its
assets or otherwise permitted any of its assets to become subject to
any Encumbrance, except for pledges of assets made in the ordinary
course of business and consistent with past practices;
(m) no Acquired Company has (i) lent money to any Person
(other than pursuant to routine travel and business advances made to
employees in the ordinary course of business), or (ii) incurred or
guaranteed any indebtedness for borrowed money;
(n) except as contemplated by Section 5.8 of this Agreement,
no Acquired Company has (i) established or adopted any Employee Benefit
Plan, or (ii) paid any bonus or made any profit-sharing or similar
payment to, or (except in the ordinary course of business consistent
with past practices) increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees;
(o) no Acquired Company has changed any of its methods of
accounting or accounting practices in any respect;
(p) no Acquired Company has filed any Tax election with the
Internal Revenue Service or any other tax body;
(q) no Acquired Company has commenced or settled any Legal
Proceeding;
(r) no Acquired Company has entered into any material
transaction or taken any other material action outside the ordinary
course of business or inconsistent with its past practices; and
(s) no Acquired Company has agreed or committed to take any
of the actions referred to in clauses "(c)" through "(r)" above.
14.
2.6 TITLE TO ASSETS.
(a) The Acquired Companies own, and have good, valid and
marketable title to: (i) all assets reflected on the Unaudited Interim
Balance Sheet, (ii) all assets acquired by them since May 31, 2000; and (iii)
all other assets reflected in the books and records of the Acquired Companies
as being owned by the Acquired Companies except for such imperfections of
title which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present
use, of the assets subject thereto or affected thereby. Except as set forth
in Part 2.6(a) of the Disclosure Schedule, all of said assets are owned by
the Acquired Companies free and clear of any liens or other Encumbrances,
except for (x) any lien for current taxes not yet due and payable, and (y)
minor liens that have arisen in the ordinary course of business and that do
not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of the
Acquired Companies.
(b) Part 2.6(b) of the Disclosure Schedule identifies all
assets that are material to the business of the Acquired Companies and that
are being leased or licensed to the Acquired Companies.
2.7 RECEIVABLES. Except as set forth in Part 2.7 of the Disclosure
Schedule, all existing accounts receivable of the Company (including those
accounts receivable reflected on the Unaudited Interim Balance Sheet that
have not yet been collected and those accounts receivable that have arisen
since May 31, 2000 and have not yet been collected) (i) represent valid
obligations of customers of the Company arising from bona fide transactions
entered into in the ordinary course of business, and (ii) will be collected
in full when due (net of an allowance for doubtful accounts as set forth in
the Unaudited Interim Balance Sheet).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible
assets owned by or leased to the Acquired Companies are adequate for the uses
to which they are being put, are in good operating condition and repair
(ordinary wear and tear excepted) and are adequate for the conduct of the
business of the Acquired Companies in the manner in which such business is
currently being conducted.
(b) No Acquired Company owns any real property or interests
in real property other than leasehold interests in the real property lease
identified in Part 2.8 of the Disclosure Schedule. Part 2.8 of the Disclosure
Schedule sets forth a complete list of all real property and interest in real
property leased by the Acquired Companies ("Leased Real Property"). The
Acquired Companies have good and valid title to the leasehold interests in
all Leased Real Property, in each case free and clear of all Encumbrances,
except (i) such as are set forth in Part 2.8 of the Disclosure Schedule, (ii)
leases, subleases and similar agreements set forth in Part 2.8 of the
Disclosure Schedule, (iii) easements, covenants, rights-of-way and other
similar restrictions of record that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of the Acquired Companies, (iv) minor liens that have
arisen in the ordinary course of business and have been or will be paid
promptly and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the
operations of the Acquired Companies
15.
and (vi) any Encumbrance on the landlord's interest in any Leased Real
Property, including any deeds of trust, mortgages or other monetary liens.
2.9 INTELLECTUAL PROPERTY.
(a) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Acquired Companies to conduct
their business in the manner in which such business has been conducted.
Except as set forth in Part 2.9(a) of the Disclosure Schedule, the Acquired
Companies have good, valid and marketable title to all of its Company
Proprietary Assets, free and clear of all liens and other Encumbrances, and
have not developed jointly with any other Person any Company Proprietary
Asset with respect to which such other Person has any rights.
(b) The Acquired Companies have taken all measures and
precautions necessary to protect and maintain the confidentiality and secrecy
of all Company Proprietary Assets (except Company Proprietary Assets whose
value would be unimpaired by public disclosure) and otherwise to maintain and
protect the value of all Company Proprietary Assets. Except as set forth in
Part 2.9(b) of the Disclosure Schedule, the Acquired Companies have not
(other than pursuant to license agreements identified in Part 2.10 of the
Disclosure Schedule or pursuant to confidentiality agreements prohibiting the
further disclosure of such source code) disclosed or delivered to any Person,
or permitted the disclosure or delivery to any Person of, the source code, or
any portion or aspect of the source code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or
conflicts with any Proprietary Asset owned or used by any other Person. The
Acquired Companies are not infringing, misappropriating or making any
unlawful use of, and the Acquired Companies have not at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the knowledge of the Company, no
other Person is infringing, misappropriating or making any unlawful use of,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided with respect thereto by or on
behalf of the Acquired Companies to customers or other Persons; and (ii)
there has not been any claim by any customer or other Person alleging that
any Company Proprietary Asset (including each version thereof that has ever
been licensed or otherwise made available by the Acquired Companies to any
Person) does not conform in all material respects with any specification,
documentation, performance standard, representation or statement made or
provided by or on behalf of the Company, and, to the knowledge of the
Company, there is no basis for any such claim. The Acquired Companies have
established adequate reserves on the Unaudited Interim Balance Sheet to cover
all costs associated with any obligations that the Acquired Companies may
have with respect to the correction or repair of programming errors or other
defects in the Company Proprietary Assets.
16.
(e) Except as set forth in Part 2.9(e) of the Disclosure
Schedule, (i) the Acquired Companies have not licensed any of the Company
Proprietary Assets to any Person on an exclusive basis, and (ii) the Acquired
Companies have not entered into any covenant not to compete or Contract
limiting their ability to exploit fully any of its Proprietary Assets or to
transact business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure
Schedule, (i) all current and former employees of the Acquired Companies have
executed and delivered to the Acquired Companies an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Employment, Confidential Information,
Invention Assignment and Arbitration Agreement previously delivered to
Parent, and (ii) all current and former consultants and independent
contractors to the Acquired Companies have each executed and delivered to the
Company an agreement (copies of all of which have been delivered to Parent),
whereby such consultants and independent contractors have agreed to keep all
Company Proprietary Assets confidential.
(g) Except as set forth in Part 2.9(g) of the Disclosure
Schedule, the products (and products under development) of the Acquired
Companies and their respective internally developed computer systems and
software are Year 2000 Compliant. Except as set forth in Part 2.9(g) of the
Disclosure Schedule, to the knowledge of the Company, the third party
computer systems and software used by the Acquired Companies in their
respective internal operations are Year 2000 Compliant.
(h) No internally developed product, system, program or
software module designed, developed, sold, licensed or otherwise made
available by any Acquired Company to any Person, and to the knowledge of the
Company, no third party product, system, program or software module sold,
licensed or otherwise made available by any Acquired Company to any Person,
contains any "back door," "time bomb," "Trojan horse," "worm," "drop dead
device," "virus" or other software routines or hardware components designed
to permit unauthorized access or to disable or erase software, hardware or
data without the consent of the user.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment
of, or the performance of services by, any employee, consultant or
independent contractor;
(ii) each Company Contract relating to the
acquisition, transfer, use, development, sharing or license of any
technology or any Proprietary Asset;
(iii) each Company Contract imposing any restriction
on the right or ability of the Acquired Companies (A) to compete with
any other Person, (B) to acquire any product or other asset or any
services from any other Person, to sell any product or other asset to
or perform any services for any other Person or to transact business or
deal in any other manner with any other Person, or (C) develop or
distribute any technology;
(iv) each Company Contract creating or involving any
agency relationship, distribution arrangement or franchise
relationship;
17.
(v) each Company Contract relating to the
acquisition, issuance or transfer of any securities, other than
agreements relating to the grant of options or stock purchase rights
under the Stock Plan;
(vi) each Company Contract involving or incorporating
any guaranty, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;
(vii) each Company Contract creating or relating to
any partnership or joint venture or any sharing of revenues, profits,
losses, costs or liabilities;
(viii) each Company Contract with any Related Party
(as defined in Section 2.18);
(ix) any other Company Contract that has a term of
more than 60 days and that may not be terminated by the Company
(without penalty) within 60 days after the delivery of a termination
notice by the Company;
(x) any other Company Contract that contemplates or
involves (A) the payment or delivery of cash or other consideration in
an amount or having a value in excess of $50,000 in the aggregate, or
(B) the performance of services having a value in excess of $50,000 in
the aggregate; and
(xi) any other Company Contract that is material to
the business of any Acquired Company.
(Contracts in the respective categories described in clauses "(i)" through
"(xi)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and
complete copies of all written Material Contracts identified in Part 2.10(a)
of the Disclosure Schedule, including all amendments thereto. Part 2.10(a) of
the Disclosure Schedule provides an accurate description of the terms of each
Material Contract that is not in written form. Each Material Contract
identified in Part 2.10(a) of the Disclosure Schedule is valid and in full
force and effect, and, to the knowledge of the Company, is enforceable by the
Acquired Companies in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
(c) Except as set forth in Part 2.10(c) of the Disclosure
Schedule:
(i) No Acquired Company has violated or breached, or
committed any default under, any Material Contract, and, to the
knowledge of the Company, no other Person has violated or breached, or
committed any default under, any Material Contract;
(ii) to the knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or could reasonably be expected
to, (A) result in a violation or breach of any of the provisions of any
Material Contract, (B) give any Person the right to declare a default
or
18.
exercise any remedy under any Material Contract, (C) give any Person
the right to accelerate the maturity or performance of any Material
Contract, or (D) give any Person the right to cancel, terminate or
modify any Material Contract;
(iii) no Acquired Company has ever received any
notice or other communication regarding any actual or possible
violation or breach of, or default under, any Material Contract; and
(iv) no Acquired Company has waived any of its
material rights under any Material Contract.
2.11 LIABILITIES. No Acquired Company has any accrued, contingent
or other liabilities of any nature, either matured or unmatured (whether or
not required to be reflected in financial statements in accordance with
generally accepted accounting principles, and whether due or to become due),
except for: (a) liabilities identified as such in the "liabilities" column of
the Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries
that have been incurred by the Acquired Companies since May 31, 2000 in the
ordinary course of business and consistent with the past practices of the
Acquired Companies; (c) liabilities under the Company Contracts identified in
Part 2.10(a) of the Disclosure Schedule, to the extent the nature and
magnitude of such liabilities can be specifically ascertained by reference to
the text of such Company Contracts; and (d) the liabilities identified in
Part 2.11 of the Disclosure Schedule (including those incurred by the Company
in connection with the Merger).
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Acquired Companies
are, and have at all times been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Acquired
Companies. Except as set forth in Part 2.12 of the Disclosure Schedule, no
Acquired Company has ever received any notice or other communication from any
Governmental Body regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure
Schedule identifies each material Governmental Authorization held by the
Acquired Companies, and the Acquired Companies have delivered to Parent
accurate and complete copies of all Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule. The Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule are valid and in full
force and effect, and collectively constitute all Governmental Authorizations
necessary to enable the Acquired Companies to conduct their business in the
manner in which their business is currently being conducted. The Acquired
Companies are, and at all times have been, in substantial compliance with the
terms and requirements of the respective Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule. No Acquired Company has
ever received any notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (b) any actual
or possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 TAX MATTERS.
19.
(a) All Tax Returns required to be filed by or on behalf of
the Acquired Companies with any Governmental Body with respect to any taxable
period ending on or before the Closing Date (the "Company Returns") (i) have
been or will be filed on or before the applicable due date (including any
extensions of such due date), and (ii) have been, or will be when filed,
accurately and completely prepared in all material respects in compliance
with all applicable Legal Requirements. All amounts shown on the Company
Returns to be due on or before the Closing Date have been or will be paid on
or before the Closing Date. The Acquired Companies have not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to any Tax assessment or deficiency.
(b) The consolidated Financial Statements of the Acquired
Companies fully accrue all actual and contingent liabilities for Taxes with
respect to all periods through the dates thereof in accordance with generally
accepted accounting principles.
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. Except as set forth in Part
2.14(c) of the Disclosure Schedule, there have been no examinations or audits
of any Company Return.
(d) Except as set forth in Part 2.14(d) of the Disclosure
Schedule, no claim or Proceeding is pending or has been threatened against or
with respect to the Acquired Companies in respect of any Tax. There are no
unsatisfied liabilities for Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to
any notice of deficiency or similar document received by the Acquired
Companies with respect to any Tax (other than liabilities for Taxes asserted
under any such notice of deficiency or similar document which are being
contested in good faith by the Acquired Companies and with respect to which
adequate reserves for payment have been established). There are no liens for
Taxes upon any of the assets of the Acquired Companies except liens for
current Taxes not yet due and payable.
(e) Except as set forth in Part 2.14(e) of the Disclosure
Schedule, there is no agreement, plan, arrangement or other Contract covering
any employee or independent contractor or former employee or independent
contractor of either Acquired Company that, considered individually or
considered collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G of the Code.
Except as set forth in Part 2.14(e) of the Disclosure Schedule, no Acquired
Company is, nor has ever been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
(f) No Acquired Company has entered into or become bound by
any agreement or consent pursuant to Section 341(f) of the Code. The Company
has not been, and will not be, required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section 481 or
263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions or events occurring, or accounting methods
employed prior to the Closing. No Acquired Company has ever made any
distribution to any of its shareholders of stock or securities of a
controlled corporation within the meaning of Section 355 of the Code.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
20.
(a) Part 2.15(a) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life
or other insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program or agreement (collectively, the "Plans")
sponsored, maintained, contributed to or required to be contributed to by
either Acquired Company for the benefit of any employee of either Acquired
Company ("Employee").
(b) Except as set forth in Part 2.15(a) of the Disclosure
Schedule, no Acquired Company maintains, sponsors or contributes to, and, to
the knowledge of the Company, no Acquired Company has at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not excluded from coverage under
specific Titles or Merger Subtitles of ERISA) for the benefit of Employees or
former Employees (a "Pension Plan").
(c) The Acquired Companies maintain, sponsor or contribute
only to those employee welfare benefit plans (as defined in Section 3(1) of
ERISA, whether or not excluded from coverage under specific Titles or Merger
Subtitles of ERISA) for the benefit of Employees or former Employees which
are described in Part 2.15(a) of the Disclosure Schedule (the "Welfare
Plans"), none of which is a multiemployer plan (within the meaning of Section
3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to
Parent: (i) an accurate and complete copy of such Plan (including all
amendments thereto) and (ii) an accurate and complete copy of all annual
reports, summary plan descriptions, material employee communications, trust
or other funding agreements, financial statements and Contract relating to or
with respect to such Plan.
(e) The Acquired Companies are not required to be, and, to
the knowledge of the Company, have never been required to be, treated as a
single employer with any other Person under Section 4001(b)(1) of ERISA or
Section 414(b), (c), (m) or (o) of the Code. The Company has never been a
member of an "affiliated service group" within the meaning of Section 414(m)
of the Code. To the knowledge of the Company, the Acquired Companies have
never made a complete or partial withdrawal from a multiemployer plan, as
such term is defined in Section 3(37) of ERISA, resulting in "withdrawal
liability," as such term is defined in Section 4201 of ERISA (without regard
to subsequent reduction or waiver of such liability under either Section 4207
or 4208 of ERISA).
(f) Except as set forth in Part 2.15(f) of the Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether
or not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated
by applicable law, including coverage provided pursuant to Section 4980B of
the Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees' beneficiaries)).
21.
(g) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in
all material respects.
(h) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including but not limited to ERISA and the Code.
(i) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination, opinion,
notification or advisory letter from the Internal Revenue Service, and to the
Company's knowledge, there is no reason why any such letter should be revoked.
(j) Except as set forth in Part 2.15(j) of the Disclosure
Schedule, neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any
bonus, golden parachute or severance payment) to any current or former
Employee or director of any Acquired Company (whether or not under any Plan),
or materially increase the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
(k) The Acquired Companies are not a party to any collective
bargaining contract or other Contract with a labor union involving any of its
Employees. All of the employees of the Acquired Companies are "at will"
employees.
(l) The Acquired Companies are in compliance in all material
respects with all applicable Legal Requirements and Contracts relating to
employment, employment practices, wages, bonuses and terms and conditions of
employment, including employee compensation matters.
(m) Except as set forth in Part 2.15(m) of the Disclosure
Schedule, the Acquired Companies have good labor relations and the Company
has no reason to believe that the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a material
adverse effect on the labor relations of the Acquired Companies.
2.16 ENVIRONMENTAL MATTERS. The Acquired Companies are in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by the Acquired Company of all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
Neither of the Acquired Companies has received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that an Acquired Company
is not in compliance with any Environmental Law, and, to the knowledge of the
Company, there are no circumstances that may prevent or interfere with the
compliance of the Acquired Companies with any Environmental Law in the
future. To the knowledge of the Company, no current or prior owner of any
property leased or controlled by an Acquired Company has received any notice
or other communication (in writing or otherwise), whether from a Government
Body, citizens group, employee or otherwise, that alleges that such current
or prior owner lessee, operator, or an Acquired Company is not in compliance
with any Environmental Law. All Governmental Authorizations currently held by
22.
the Acquired Companies pursuant to Environmental Laws are identified in Part
2.16 of the Disclosure Schedule. (For purposes of this Section 2.16: (i)
"Environmental Law" means any federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface
or subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Materials of Environmental Concern" means
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or hereafter regulated
by any Environmental Law.)
2.17 INSURANCE. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of any
Acquired Company and identifies any material claims made thereunder, and
includes a summary of the amounts and types of coverage and deductibles under
each such insurance policy. Each of the insurance policies identified in Part
2.17 of the Disclosure Schedule is in full force and effect. No Acquired
Company has ever received any notice or other communication regarding any
actual or possible (a) cancellation or invalidation of any insurance policy,
(b) refusal of any coverage or rejection of any claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy.
2.18 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.18
of the Disclosure Schedule: (a) no Related Party has, and no Related Party
has at any time had, any direct or indirect interest in any material asset
used in or otherwise relating to the business of the Acquired Companies; (b)
no Related Party is, or has at any time been, indebted to the Acquired
Companies; (c) no Related Party has entered into, or has had any direct or
indirect financial interest in, any material Contract, transaction or
business dealing involving the Acquired Companies; (d) no Related Party is
competing, or has at any time competed, directly or indirectly, with the
Acquired Companies; and (e) no Related Party has any claim or right against
the Acquired Companies (other than rights under Company Options and rights to
receive compensation for services performed as an employee of the Acquired
Companies). (For purposes of the Section 2.18 each of the following shall be
deemed to be a "Related Party": (i) each of the stockholders, who own more
than 1% of the capital stock of the Company, of any of the Acquired
Companies; (ii) each individual who is, or who has at any time been, an
officer of any of the Acquired Companies; (iii) each member of the immediate
family of each of the individuals referred to in clauses "(i)" and "(ii)"
above; and (iv) any trust or other Entity (other than the Acquired Companies)
in which any one of the individuals referred to in clauses "(i)", "(ii)" and
"(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary
or equity interest.)
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19(a) of the Disclosure
Schedule, there is no pending Legal Proceeding, and (to the knowledge of the
Company) no Person has threatened to commence any Legal Proceeding: (i) that
involves any Acquired Company or any of the assets owned or used by any
Acquired Company or any Person whose liability an Acquired Company has or may
have retained or assumed, either contractually or by operation of law; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise
23.
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the knowledge of the Company, except as set forth in Part
2.19(a) of the Disclosure Schedule, no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.19(b) of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by or has ever been
pending against any Acquired Company.
(c) There is no order, writ, injunction, judgment or decree
to which any Acquired Company, or any of the assets owned or used by any
Acquired Company, is subject. None of the stockholders of any of the Acquired
Companies is subject to any order, writ, injunction, judgment or decree that
relates to the business of such Acquired Company or to any of the assets
owned or used by such Acquired Company. To the knowledge of the Company, no
officer or other employee of any Acquired Company is subject to any order,
writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to such Acquired Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement; and the execution, delivery and
performance by the Company of this Agreement have been duly authorized by all
necessary action on the part of the Company and its board of directors. This
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21
of the Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the certificate of incorporation or bylaws (or
similar organizational documents) of any Acquired Company, or (ii) any
resolution adopted by the stockholders of any Acquired Company, the
board of directors of any Acquired Company or any committee of the
board of directors of any Acquired Company;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any
of the transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any order,
writ, injunction, judgment or decree to which either Acquired Company,
or any of the assets owned or used by any Acquired Company, is subject;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
material Governmental Authorization that is held by any
24.
Acquired Company or that otherwise relates to the business of any
Acquired Company or to any of the assets owned or used by any Acquired
Company;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Material
Contract, or give any Person the right to (i) declare a default or
exercise any remedy under any such Material Contract, (ii) accelerate
the maturity or performance of any such Material Contract, or (iii)
cancel, terminate or modify any such Material Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by either
Acquired Company (except for minor liens that will not, in any case or
in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of any Acquired
Company).
Except as set forth in Part 2.21 of the Disclosure Schedule, no Acquired
Company is, nor will be, required to make any filing with or give any notice
to, or to obtain any Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the
Merger or any of the other transactions contemplated by this Agreement.
2.22 FULL DISCLOSURE.
(a) This Agreement (including, and as modified by the
Disclosure Schedule) does not, and the Closing Certificate will not, (i)
contain any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to state any
material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein (in the light of
the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
(b) The information supplied by the Company, but excluding
any information about Parent provided to the Company by Parent, for inclusion
in the Information Statement (as defined in Section 5.2) will not, as of the
date of the Information Statement or as of the date of the Company
Stockholders' Meeting (as defined in Section 5.3), (i) contain any statement
that is inaccurate or misleading with respect to any material fact, or (ii)
omit to state any material fact necessary in order to make such information
(in the light of the circumstances under which it is provided) not false or
misleading.
2.23 VOTE REQUIRED. The affirmative vote of the holders of (i) a
majority of the outstanding shares of Company Common Stock voting as a
separate class, (ii) a majority of the outstanding shares of Company Common
Stock and Company Preferred Stock, voting together and not as separate
classes, and (iii) a majority of the outstanding shares of Company Series A
Preferred Stock, Company Series B Preferred Stock and Company Series C
Preferred Stock, voting together as a single class, and not as a separate
series, and on an as converted basis (the "Required Vote") is the only vote
of the holders of any class or series of the Company's capital stock
necessary to (x) adopt and approve this Agreement, the Merger and the other
transactions contemplated by this Agreement, or(y) amend the Company's
Certificate of Incorporation in
25.
contemplation of the Recapitalization Transaction (as defined in Section 4.4
below) ("Required Recapitalization Vote").
2.24 NO EXISTING DISCUSSIONS. No Acquired Company nor any
Representative of any of the Acquired Companies is currently engaged,
directly or indirectly, in any discussions with any Person (other than Parent
and Merger Sub) relating to any Acquisition Transaction.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and
warrant to the Acquired Companies as follows:
3.1 CORPORATE EXISTENCE AND POWER. Each of Parent and Merger Sub
is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, and has all corporate power required
to conduct its business as now conducted, and is duly qualified to do
business and is in good standing in each jurisdiction in which the conduct of
its business or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on Parent's business, financial condition, or results
of operations.
3.2 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed with the SEC and heretofore made
available to the Company accurate and complete copies (excluding copies of
exhibits) of each report, registration statement (on a form other than Form
S-8) and definitive proxy statement filed by it and its subsidiary with the
SEC between June 9, 1999 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date
of such filing): (i) each of the Parent SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or
the Exchange Act (as the case may be); and (ii) none of the Parent SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(b) The consolidated financial statements contained in the
Parent SEC Documents: (i) complied as to form in all material respects with
the published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered, except as may be
indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iii) fairly present the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof and the consolidated results of operations of Parent and its
subsidiaries for the periods covered thereby
3.3 NO CONFLICTS; CONSENTS. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by Parent and
Merger Sub are not prohibited by, and will not violate or conflict with, any
provision of the certificate of incorporation or bylaws of Parent or Merger
Sub, or any Legal Requirement or any provision of any Contract to which
26.
Parent or Merger Sub is a party, except where any of the foregoing would not
have, individually or in the aggregate, a material adverse effect on the
business, financial condition or results of operations of Parent.
3.4 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub
have the absolute and unrestricted right, power and authority to enter into
and perform their obligations under this Agreement; and the execution,
delivery and performance by Parent and Merger Sub of this Agreement
(including the contemplated issuance of Parent Common Stock in the Merger in
accordance with this Agreement) have been duly authorized by all necessary
action on the part of Parent and Merger Sub and their respective boards of
directors. No vote of Parent's stockholders is needed to approve the Merger.
This Agreement constitutes the legal, valid and binding obligation of Parent
and Merger Sub, enforceable against them in accordance with its terms,
subject to (a) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (b) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.5 MERGER SUB. Merger Sub has been formed solely for the purpose
of executing and delivering this Agreement and consummating the transactions
contemplated hereby. Merger Sub has not engaged in any business or activity
other than activities related to its corporate organization and the execution
and delivery of this Agreement.
3.6 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common
Stock to be issued in the Merger and upon exercise of Company Options assumed
in accordance with the provisions of this Agreement will, when issued in
accordance with the provisions of this Agreement, be validly issued, fully
paid and nonassessable.
3.7 FORM S-3 ELIGIBILITY. Upon the filing of its Annual Report on
Form 10-K for the year ending April 30, 2000, with the Securities and
Exchange Commission, Parent shall be eligible to use Form S-3 for the
registration for resale by its stockholders of shares of its capital stock.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of
this Agreement through the Closing Date or earlier termination of this
Agreement pursuant to the provisions of Section 8.1 (the "Pre-Closing
Period"), the Company shall, and shall cause its Representatives to: (a)
provide Parent and Parent's Representatives with reasonable access to the
Acquired Companies' Representatives, personnel and assets and to all existing
books, records, Tax Returns, work papers and other documents and information
relating to the Acquired Companies; and (b) provide Parent and Parent's
Representatives with copies of such existing books, records, Tax Returns,
work papers and other documents and information relating to the Acquired
Companies, and with such additional financial, operating and other data and
information regarding the Acquired Companies, as Parent may reasonably
request.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing
Period:
(a) the Company shall conduct its (and shall cause each of the
other Acquired Companies to conduct its) business and operations in the
ordinary course and in
27.
substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement;
(b) the Company shall use commercially reasonable efforts to
preserve intact its (and shall cause each of the other Acquired
Companies to preserve intact its) current business organization, keep
available the services of its current officers and employees and
maintain its relations and good will with all suppliers, customers,
landlords, creditors, employees and other Persons having business
relationships with the Acquired Companies;
(c) the Company shall (and shall cause each of the other
Acquired Companies to) keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;
(d) the Company shall not (and shall cause each of the other
Acquired Companies not to) declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of
capital stock, and the Company shall not (and shall cause each of the
other Acquired Companies not to) repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities except from
former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with
any termination of service to any of the Acquired Companies;
(e) except for the issuance of shares of Company Common Stock
upon exercise or conversion of presently outstanding Company Preferred
Stock, Company Options or Company Warrants, the Company shall not (and
shall cause each of the other Acquired Companies not to) sell, issue or
authorize the issuance of (i) any capital stock or other security, (ii)
any option or right to acquire any capital stock or other security, or
(iii) any instrument convertible into or exchangeable for any capital
stock or other security;
(f) except as contemplated by this Agreement, the Company
shall not (and shall cause each of the other Acquired Companies not to)
amend or permit the adoption of any amendment to the certificate of
incorporation or bylaws of any of the Acquired Companies, or effect or
permit any of the Acquired Companies to become a party to any
Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(g) the Company shall not (and shall cause each of the other
Acquired Companies not to) form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(h) the Company shall not (and shall cause each of the other
Acquired Companies not to) make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures
made on behalf of the Acquired Companies during the Pre-Closing Period,
do not exceed $50,000 per month;
(i) the Company shall not (and shall cause each of the other
Acquired Companies not to) (i) enter into, or permit any of the assets
owned or used by it to become bound by, any Material Contract, or (ii)
amend or prematurely terminate, or waive any material right or remedy
under, any such Material Contract;
28.
(j) the Company shall not (and shall cause each of the other
Acquired Companies not to) (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the
ordinary course of business and may, consistent with its past
practices, allow employees to acquire Company Common Stock in exchange
for promissory notes upon exercise of Company Options), or (ii) incur
or guarantee any indebtedness for borrowed money;
(k) the Company shall not (and shall cause each of the other
Acquired Companies not to) (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment,
cash incentive payment or similar payment to, or increase the amount of
the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or
employees, or (iii) hire any new employees;
(l) the Company shall not (and shall cause each of the other
Acquired Companies not to) change any of its methods of accounting or
accounting practices in any material respect;
(m) the Company shall not (and shall cause each of the other
Acquired Companies not to) make any Tax election;
(n) the Company shall not (and shall cause each of the other
Acquired Companies not to) commence or settle any Legal Proceeding; and
(o) the Company shall not (and shall cause each of the other
Acquired Companies not to) agree or commit to take any of the actions
described in clauses "(e)" through "(n)" above.
Notwithstanding Section 4.2(a) through 4.2(o) above, the Company is
authorized without obtaining Parent's consent to take any and all actions
necessary to (i) pay any notes that are or become due and payable between
executing this Agreement and the Effective Date, (ii) pay any monies
necessary to buy-out warrants held by Comdisco, Inc. for the purchase of
Company Series B Preferred Stock, (iii) amend the Amended and Restated
Certificate of Incorporation of the Company to cause consideration paid to
stockholders to be in compliance with this Agreement and to effect the
Recapitalization Transaction as described in Section 4.4 hereof, (iv)
implement and execute any reduction-in-force as disclosed in the Disclosure
Schedules, including the payment of any severance, and (v) amend Section 1.3
of the Company's Bylaws to explicitly permit the use of private courier
service for the purposes of giving notice of a stockholders' meeting.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall
promptly notify Parent in writing of:
(i) the discovery by any of the Acquired Companies of
any event, condition, fact or circumstance that occurred or existed on
or prior to the date of this Agreement and that caused or constitutes
in any material respect an inaccuracy in or
29.
breach of any representation or warranty made by the Company in this
Agreement, as modified by the Disclosure Schedule;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that
would cause or constitute in any material respect an inaccuracy in or
breach of any representation or warranty made by the Company in this
Agreement if (A) such representation or warranty had been made as of
the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(iii) any material breach of any covenant or obligation
of the Company; and
(iv) any event, condition, fact or circumstance that
would make the satisfaction of any of the conditions set forth in
Section 6 or Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in
the Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming the Disclosure Schedule
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then the Company shall promptly
deliver to Parent an update to the Disclosure Schedule specifying such
change. No such update shall be deemed to supplement or amend the Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by the Company in this Agreement, or (ii)
determining whether any of the conditions set forth in Section 6 has been
satisfied.
4.4 RECAPITALIZATION OF THE COMPANY. Prior to the Closing and in
contemplation of the Recapitalization Transaction, an amendment to the
Company's Certificate of Incorporation providing for an increase of the
number of authorized shares of its Company Series A Preferred Stock and the
convertibility of Company Series B Preferred Stock to Company Series A
Preferred Stock, shall have been approved by the Required Recapitalization
Vote of the Company's stockholders, and filed with the Secretary of State of
the State of Delaware. Prior to the Closing, the Company shall use its best
efforts to cause holders of a sufficient number of outstanding shares of the
Company's Common Stock who qualify as "accredited investors" under Rule 501
of Regulation D under the Securities Act of 1933, as amended, to convert
their shares of Company Common Stock into Company Series A Preferred Stock
("Recapitalization Transaction") to satisfy the condition set forth in
Section 6.11. The Company shall complete the Recapitalization Transaction in
compliance with all applicable securities laws and other applicable Legal
Requirements.
4.5 DELIVERY OF AMENDED DOCUMENTS. Without limiting any other
covenant of the Company set forth herein, if, at any time prior to the
Closing, the Company amends or updates the certificate of incorporation,
bylaws, stock records, minutes or other records of the meetings of the
stockholders, board of directors or any committee of the board of directors
of any of the Acquired Companies, the Company shall within three (3) business
days after any such action
30.
deliver to Parent a copy of such amended or updated document together with a
description or summary of such amendment or update.
4.6 NO NEGOTIATION. During the Pre-Closing Period, the Company
shall not (and shall cause each of the other Acquired Companies not to),
directly or indirectly:
(a) solicit or encourage the initiation of any inquiry,
proposal or offer from any Person (other than Parent) relating to a
possible Acquisition Transaction;
(b) participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any
Person (other than Parent) relating to or in connection with a possible
Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from
any Person (other than Parent) relating to a possible Acquisition
Transaction.
The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company, the Subsidiary or any of their respective affiliates
during the Pre-Closing Period.
4.7 ACTIONS UNDER CERTAIN PLANS. As soon as practicable and in any
event prior to the Closing, (a) the administrator of the Stock Plan shall
take all actions necessary or appropriate to permit the holders of all
Company Options outstanding immediately prior to the Effective Time to
receive shares of Parent Common Stock upon exercise of such Company Options,
in accordance with Section 1.6 hereof and the terms of the Stock Plan, and
(b) the board of directors of the Company shall adopt resolutions approving
and authorizing the termination of the Company's 401(k) plan effective prior
to the Effective Time. Distributions from such terminated 401(k) plan shall
be subject to the receipt of a favorable determination letter from the IRS
regarding the 401(k) plan's qualified status under Section 401(a) of the Code
and subject to the adoption of any amendments necessary to maintain such
qualified status; PROVIDED, HOWEVER, employees of Company who terminate
service prior to the receipt of such determination letter shall be able to
receive a distribution from the 401(k) plan as provided under the 401(k) plan
or as otherwise required by applicable law.
4.8 SCHEDULE OF CERTAIN EMPLOYEES. The Company hereby agrees and
covenants that the written schedule described in Section 1.5(b)(xii), as and
when delivered to Parent, will be accurate and complete.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given
by such party in connection with the Merger and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain Consents as set forth on Part 5.1 of the Disclosure
Schedule. The Company shall (upon request) promptly deliver to Parent a copy
of each such filing made, each such notice given and each such Consent
obtained by the Company during the Pre-Closing Period.
31.
5.2 INFORMATION STATEMENT. Promptly after the execution of this
Agreement, the Company shall prepare in compliance with all Legal
Requirements and deliver to its stockholders an information statement or
other disclosure document relating to the Merger and the other transactions
contemplated by this Agreement (the "Information Statement"). The Company
shall use its best efforts to solicit and obtain the consent of the
stockholders of the Company sufficient to approve the Merger and this
Agreement. The Information Statement and other materials submitted to the
stockholders of the Company shall be subject to review and reasonable
approval by Parent and include information regarding the Company, the terms
of the Merger and this Agreement, information regarding Parent as provided to
the Company by Parent, and the recommendation of the Board of Directors of
the Company in favor of the Merger and this Agreement.
5.3 APPROVAL OF COMPANY STOCKHOLDERS. The Company shall, in
accordance with its certificate of incorporation and bylaws and the
applicable requirements of the Delaware General Corporation Law, solicit its
stockholders as promptly as practicable for the purpose of permitting them to
consider and to vote upon and approve the Merger, the Recapitalization
Transaction and this Agreement. Without limiting the generality or the effect
of anything contained in the Voting Agreements being executed and delivered
by the Major Stockholders to Parent contemporaneously with the execution and
delivery of this Agreement, the Company shall cause each Major Stockholder to
vote all shares of the capital stock of the Company that are owned,
beneficially or of record, by such Major Stockholder in favor of the Merger,
the Recapitalization Transaction and this Agreement.
5.4 CONVERSION AND EXERCISE. At or prior to the Closing, the
Company shall use its best efforts to complete the Recapitalization
Transaction in compliance with all applicable securities laws and other Legal
Requirements. At or prior to the Closing, the Company shall use commercially
reasonable efforts to cause the holders of Company Warrants to exercise the
Company Warrants in accordance with their respective terms or buy such
Company Warrants from the holders.
5.5 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) the
Company shall not (and the Company shall not permit any of the other Acquired
Companies or any of their respective Representatives to) issue any press
release or make any public statement regarding this Agreement or the Merger,
or regarding any of the other transactions contemplated by this Agreement,
without Parent's prior written consent, and (b) Parent will use best efforts
if time reasonably permits to consult with the Company prior to issuing any
press release or making any public statement regarding the Merger.
5.6 NONQUALIFIED STOCK OPTION PLAN. As soon as practicable after
the Effective Time, Parent shall adopt a stock option plan consisting of
nonqualified stock options (the "Nonqualified Option Plan"). The Nonqualified
Option Plan shall have a share reserve equal to 750,000 shares of Parent
Common Stock. The exercise price for any option granted under the
Nonqualified Option Plan shall be no more than the fair market value of
Parent Common Stock, as determined by the Board of Directors of Parent on the
date of issuance of such option, less a discount equal to the lesser of (i)
fifty percent (50%) of such fair market value of Parent Common Stock, or (ii)
$50.00 per share of Parent Common Stock; provided, however, taking into
account any capitalization adjustments, that the aggregate discount for all
options granted under the Nonqualified Option Plan shall not be in excess of
$37,500,000. All of the foregoing
32.
is subject to adjustment as appropriate to reflect any stock split, reverse
stock split, stock dividend, recapitalization or other similar transaction
effected by Parent after the date hereof. Such Nonqualified Option Plan shall
have a term of ten (10) years. Options granted under the Nonqualified Option
Plan shall terminate upon the earlier of the following events: (i) ten years
from the date the option is granted; or (ii) three months after the date the
employee's continuous service with the Parent is terminated. Additionally,
option grants under such Nonqualified Option Plan will vest as to 25% of the
shares subject to the option one year after the date of grant, and the
remaining shares subject to the option will vest monthly thereafter over the
succeeding 36 months. Upon the adoption of the Nonqualified Option Plan,
Parent shall grant options under the Nonqualified Option Plan to those
individuals (and for the number of shares set forth opposite their names)
identified in that certain written list that Parent and the Company have
developed and agreed to for purposes of this Section 5.6; PROVIDED that such
individuals are employees of Parent at the time of such grant. All options
shall be subject to the terms of the Nonqualified Option Plan adopted by the
Parent.
5.7 BONUS POOL; EMPLOYEE RETENTION PROGRAM.
(a) As soon as practicable after the Effective Time, Parent
shall establish a plan, which provides for a cash bonus pool ("Bonus Pool")
equal to $1,500,000, to be paid on a pro rata basis to the employees of the
Company identified in that certain written list that Parent and the Company
have developed and agreed to for purposes of this Section 5.7(a), to the
extent such employees become employed by Parent on the Closing Date and
remain employed as of the date of payment of such Bonus Pool (each, a "Bonus
Pool Employee"). Such bonus amount shall be paid in the amount set forth
opposite the name of each Bonus Pool Employee on such list on the later to
occur of (i) ninety (90) days from the date of execution of this Agreement or
(ii) five (5) days after the Closing (the "Bonus Pool Payment Date");
provided however, that in the event any individual identified on such list is
not employed by Parent on the date the bonus is paid, the amount otherwise
payable to such individual shall be reallocated among the Bonus Pool
Employees remaining employed on the Bonus Pool Payment Date pro rata based on
the respective bonus amounts set forth on such list opposite the names of
such Bonus Pool Employees, so that the total bonuses actually paid to Bonus
Pool Employees are equal to $1,500,000.
(b) As soon as practicable after the Effective Time, Parent
shall adopt an employee retention program, which provides that each employee
of the Company who remains continuously employed by an Acquired Company
through the first anniversary of the Closing Date shall receive a bonus
payment equal to the amount of 50% of such employee's annual base salary as
of the Closing Date (the "Retention Bonus"). Each such employee who is
terminated without Cause (as defined below) by Parent prior to the first
anniversary of the Closing Date shall receive the greater of (i) the amount
that the individual would have received in severance pursuant to Section 5.9
below if such individual were terminated at the Effective Time, or (ii) a
pro-rated bonus amount equal to (A) the Retention Bonus that he or she would
have been entitled to receive had he or she remained employed through the
first anniversary of the Closing Date, multiplied by (B) the fraction whose
numerator is the number of full months such employee was actually employed by
an Acquired Company, and whose denominator is twelve (12). Any employee that
resigns or is terminated with Cause by an Acquired Company shall not be
entitled to receive any Retention Bonus or any other severance payment. For
the purposes of this Agreement, "Cause" shall mean, with respect to an
employee, any of the following: (i) such
33.
employee's theft, dishonesty, or falsification of any material documents or
records; (ii) such employee's use or disclosure of confidential or
proprietary information in violation of such employee's contractual
obligations to the Parent or the Company; (iii) such employee's refusal to
perform any reasonable assigned duties after written notice from Parent of,
and a reasonable opportunity to cure within 30 days of receipt of such
notice, such refusal; (iv) any material breach by such employee of any
employment agreement between such employee and Parent, which breach is not
cured pursuant to the terms of such agreement; or (v) such employee's
conviction (including any plea of guilty or NOLO CONTENDERE) of any felony or
any crime involving moral turpitude or dishonesty which impairs such
employee's ability to perform his or her duties with Parent. (The Board of
Directors of Parent shall have the right to reasonably and in good faith
determine whether such employee has engaged in conduct constituting "Cause"
for purposes of this Agreement.)
5.8 SEVERANCE. Prior to the Closing, the Company and Parent shall
establish a severance plan pursuant to which certain employees of the Company
identified in that certain written list that Parent and the Company have
developed and agreed to for purposes of this Section 5.8 are offered the
following: (i) executive level employees identified on the list whose
employment with the Company is involuntarily terminated for any reason other
than Cause, within the transition time set forth next to his or her name on
such list shall receive eight months of Salary and Bonus; (ii) executive
level employees identified on the list whose employment with the Company is
involuntarily terminated effective on the Closing Date shall receive six
months of Salary and Bonus; (iii) non-executive level employees identified on
the list whose employment with the Company is involuntarily terminated for
any reason other than Cause, within the transition time set forth next to his
or her name on such list, shall receive four months of Salary and Bonus, and
(iv) non-executive level employees identified on the list whose employment
with the Company is involuntarily terminated by the Company effective as of
the Closing Date shall receive three months of Salary and Bonus. "Salary"
shall mean an employee's base salary as of the Closing Date. "Bonus" shall
mean the amount set forth next to the employee's name on the foregoing list.
The term "Cause" shall have the same meaning as set forth in Section 5.7
hereof.
5.9 COMMERCIALLY REASONABLE EFFORTS. During the Pre-Closing
Period, (a) the Company shall use all commercially reasonable efforts to
cause the conditions set forth in Section 6 to be satisfied on a timely
basis, and (b) Parent and Merger Sub shall use all commercially reasonable
efforts to cause the conditions set forth in Section 7 to be satisfied on a
timely basis.
5.10 EMPLOYMENT MATTERS.
(a) Parent shall offer at-will employment with Parent or its
affiliates, including the Company, to each of the individuals identified in
that certain written list that Parent and the Company have developed and
agreed to for purposes of this Section 5.10(a) at the Closing at base
compensation levels equal to or greater than each such employee's base
compensation level as an employee of the Company on the date hereof. Prior to
the Closing, Parent shall provide to such Company employees offer letters
setting forth the specific terms of their employment. Those employees of the
Company that continue to be employees of Parent or any of its affiliates,
including the Company, following the Closing would, subject to any necessary
transition period and the terms of such plans, be eligible to participate in
Parent's
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health, vacation, employee stock purchase, stock option, 401(k) and other
plans, to the same extent as comparably situated employees of Parent and
would receive credit under Parent's benefit plans for service as an employee
of the Company. For not less than one year following the Closing Date, Parent
shall maintain, or shall cause the Company to maintain, compensation and
employee benefit plans and arrangements and perquisites for those persons who
remain employees of the Company after the Closing Date that, in the
aggregate, are substantially comparable to (or more favorable than) those
provided pursuant to the compensation and employee benefit plans and
arrangements and perquisites in effect at the Company on the date hereof.
(b) During the 12-month period following the Closing, Parent
shall notify, and reasonably consult with, Xxx Xxxxxx (so long as he remains
an employee of Parent) with respect to any intended termination of any
employee who was an employee of the Company at the time of the Closing,
provided that the final decision and determination with respect to any such
intended termination shall rest with Parent.
5.11 NONCOMPETITION AGREEMENTS. The Company shall use its best
efforts to cause each of the individuals identified in Section 6.6(a)(ii) to
execute and deliver to Parent a Noncompetition Agreement in the form of
Exhibit D.
5.12 TERMINATION OF AGREEMENTS. Prior to the Closing:
(a) the Company and Investors shall enter into an agreement,
reasonably satisfactory in form and content to Parent (and conditioned and
effective upon the Closing), terminating all of Investor's rights under
Second Amended Stockholder's Rights Agreement dated as of August 30, 1999
between the Company and Investors; and
(b) the Company shall cause the Amended and Restated Co-Sale
Agreement, date August 30, 1999, between the Company and the parties thereto,
to be terminated.
5.13 FIRPTA MATTERS. At the Closing, the Company shall deliver
Parent a statement described in Section 1.1445-2(c)(3)(i) of the United
States Treasure Regulations certifying the interests in the Company are not
U.S. real property interests.
5.14 TAX MATTERS. Prior to the Closing Parent and the Company shall
each use its commercially reasonable efforts to cause the Merger to be
treated as a reorganization within the meaning of Section 368(a) of the Code
and to obtain an opinion of its respective counsel to such effect as
contemplated by Sections 6.6(e) and 7.4(c). Such efforts shall include a
requirement that Parent and the Company shall each execute and deliver to
Xxxxxx Godward and Xxxxxx Xxxxxxx, immediately prior to the Effective Time,
tax representation letters in customary form for transactions such as the
Merger.
5.15 NASDAQ NATIONAL MARKET LISTING. Parent shall file, if
applicable, an application to list on the Nasdaq National Market the shares
of Parent Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger, as soon as practicable and will pay
all necessary filing fees in connection therewith.
5.16 RELEASE. At the Closing, the Company shall cause each of the
Major Stockholders to execute and deliver to the Company a General Release in
the form of Exhibit E.
35.
5.17 S-3 REGISTRATION. Parent shall use its best efforts to file,
within the later of 10 days after the Closing Date or 10 days after Parent
becomes eligible to file registration statements on Form S-3, a Registration
Statement on Form S-3 with the SEC covering the resale of the shares of
Parent Common Stock issued pursuant to the Merger, and shall use its best
efforts to cause such registration statement to become effective as soon as
practicable thereafter; PROVIDED, HOWEVER, that any such registration shall
be subject to the terms and conditions set forth in the Declaration of
Registration Rights attached hereto as Exhibit F.
5.18 NOTIFICATION BY PARENT. During the Pre-Closing Period, Parent
shall promptly notify the Company in writing of:
(i) the discovery by Parent of any event, condition,
fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes in any material
respect an inaccuracy in or breach of any representation or warranty
made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that
would cause or constitute in any material respect an inaccuracy in or
breach of any representation or warranty made by Parent in this
Agreement if (A) such representation or warranty had been made as of
the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(iii) any material breach of any covenant or obligation
of Parent; and
(iv) any event, condition, fact or circumstance that
would make the satisfaction of any of the conditions set forth in
Section 6 or Section 7 impossible or unlikely.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger
and otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver by Parent), at or prior to the Closing,
of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company in Sections 2.3(a), 2.3(b) and 2.20 of this
Agreement shall have been accurate in all respects as of the date of this
Agreement and shall be accurate in all respects as of the Closing Date as if
made at the Closing except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be accurate in all respects on and as of such date (without
giving effect to any update to the Disclosure Schedule). Each of the other
representations and warranties made by the Company in this Agreement shall
have been accurate in all material respects as of the date of this Agreement,
and shall be accurate in all material respects as of the Scheduled Closing
Time as if made at the Scheduled Closing Time (without giving effect to any
update to the Disclosure Schedule) except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be accurate in all material respects on
and as of such date (without giving effect to any update to the Disclosure
Schedule)).
36.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that the Company is required to comply with or to perform at or prior to the
Closing shall have been complied with and performed in all material respects.
6.3 STOCKHOLDER APPROVAL. The principal terms of this Agreement
and the Merger shall have been duly approved by the Required Vote, and
holders of not more than five percent (5%) in the aggregate of the Company
Preferred Stock shall continue to have a right to exercise appraisal,
dissenters or similar rights under the Delaware General Corporation Law (or
if applicable, the California Corporations Code) with respect to their
Company Preferred Stock by virtue of the Merger.
6.4 CONSENTS. All Consents set forth on Part 5.1 of the Disclosure
Schedule shall have been obtained and shall be in full force and effect,
except to the extent that the failure to obtain any such Consents has not
had, and is not reasonably likely to have, a Material Adverse Effect on the
Company.
6.5 EXERCISE/EXPIRATION/BUY-OUT OF COMPANY WARRANTS. Parent shall
have received satisfactory evidence that either (a) prior to the Closing the
Company Warrants shall have been exercised in accordance with their
respective terms, (b) the Company shall have bought out the Company Warrants
for cash payments not to exceed $50,000 in the aggregate, or (c) the Company
Warrants shall have expired or otherwise terminated by their own terms upon
the Closing.
6.6 AGREEMENTS AND DOCUMENTS. Parent shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) Employment offer letters, accepted and countersigned by:
(i) at least fifteen (15) of the individuals identified in that certain
written list that Parent and the Company have developed and agreed to
for purposes of this Section 6.6(a), and (ii) three (3) of the
following individuals: Xxxxxx Xxxxxx; Xxxx Xxxxxxxx; Xxxxxx XxXxxxxxxx;
and Xxxxx Xxxxxxx;
(b) Noncompetition Agreements in the form of Exhibit D,
executed by each of the individuals identified in Section 6.6(a)(ii)
who accepts and countersigns the employment offer letter contemplated
by such Section;
(c) a General Release in the form of Exhibit E, executed by
each of the Major Stockholders;
(d) a legal opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
("Xxxxxx Xxxxxxx"), dated as of the Closing Date, and covering such
matters with respect to the Acquired Companies as Parent may reasonably
request (and is customary in a transaction such as the Merger);
(e) a legal opinion of Cooley Godward, dated as of the Closing
Date and addressed to Parent, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code; provided, however, that this condition will be deemed satisfied
if Xxxxxx Xxxxxxx shall render such opinion to Parent in form
reasonably acceptable to Parent. In rendering the opinion contemplated
by this Section, counsel may
37.
rely upon reasonable representations and certificates of Parent,
Merger Sub and the Company, including the tax representation letters
described in Section 5.14;
(f) a certificate executed by the Company containing the
representation and warranty of the Company that the conditions set
forth in Section 6 have been duly satisfied (the "Company's Closing
Certificate");
(g) a certificate of merger executed by the Company to be
filed with the Secretary of State of the State of Delaware in
accordance with Section 1.3; and
(h) written resignations of all directors of the Company,
effective as of the Effective Time.
6.7 ABSENCE OF MATERIAL ADVERSE EFFECT. There shall have been no
change in the business, properties, condition (financial or otherwise), or
results of operations of any Acquired Company since the date of this
Agreement which has had or would reasonably be expected to have a Material
Adverse Effect on any Acquired Company.
6.8 FIRPTA COMPLIANCE. The Company shall have delivered to Parent
the documents required to be filed with the Internal Revenue Service referred
to in Section 5.13.
6.9 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.10 NO LEGAL PROCEEDINGS. No Government Body or other Person
shall have commenced or threatened to commence any Legal Proceeding
challenging or seeking the recovery of a material amount of damages in
connection with the Merger or seeking to prohibit or limit the exercise by
Parent of any material right pertaining to its ownership of stock of the
Surviving Corporation.
6.11 CASH CONSIDERATION OF MERGER. The aggregate amount of cash
payable by Parent pursuant to Section 1.5(a)(i) shall not exceed $11,000,000.
6.12 AUDITED FINANCIAL STATEMENTS. The Company shall have delivered
to Parent the audited consolidated balance sheet of the Company as of
December 31, 1999, and the related audited consolidated statement of
operations, statement of stockholders' equity and statement of cash flows of
the Company for the year then ended, together with the notes thereto and the
qualified report and opinion of KPMG Peat Marwick LLP relating thereto.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver by the Company), at or prior to the
Closing, of the following conditions:
38.
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement, and shall
be accurate in all material respects as of the Scheduled Closing Time as if
made at the Scheduled Closing Time.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that Parent and Merger Sub are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all
material respects.
7.3 STOCKHOLDER APPROVAL. The Merger and this Agreement shall have
been duly approved by the stockholders of the Company by the requisite vote
under applicable law and the Company's certificate of incorporation.
7.4 AGREEMENTS AND DOCUMENTS. The Company shall have received the
following documents:
(a) an Escrow Agreement in the form of Exhibit C, executed by
Parent;
(b) a legal opinion of Xxxxxx Godward, dated as of the Closing
Date, and covering such matters with respect to Parent and Merger Sub
as the Company may reasonably request (and is customary in a
transaction such as the Merger) ;
(c) subject to the last two sentences of this Section 7.4, a
legal opinion of Xxxxxx Xxxxxxx, dated as of the Closing Date and
addressed to the Company, to the effect that the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code;
provided, however, that this condition will be deemed satisfied if
Xxxxxx Godward shall render such opinion to the Company in form
reasonably acceptable to the Company. In rendering the opinion
contemplated by this Section, counsel may rely upon reasonable
representations and certificates of Parent, Merger Sub and the Company,
including the tax representation letters described in Section 5.14;
(d) a certificate executed by Parent and Merger Sub containing
the representation and warranty of Parent and Merger Sub that the
conditions set forth in Sections 7.1, 7.2 and 7.5 have been duly
satisfied; and
(e) a Declaration of Registration Rights in the form of
Exhibit F, executed by Parent.
Notwithstanding any provisions of this Agreement (including without
limitation Section 7.4(c) and Section 8) to the contrary, and without
limiting any other rights of Parent hereunder, in the event that neither
Xxxxxx Xxxxxxx nor Cooley Godward is able to render the opinion described in
Section 7.4(c) solely because the requirement in Section 368(a)(2)(E)(ii) of
the Code is not satisfied, the Company shall not be entitled to terminate
this Agreement or otherwise refuse or fail to consummate the Merger solely
based on the failure to receive such opinion if Parent, in its sole
discretion, during the 10-day period described below, shall restructure the
Merger (the "Restructuring") so that at the Effective Time, (i) the Company
is merged into Merger Sub rather than Merger Sub being merged into the
Company, and (ii) all other terms and conditions of the Merger remain
identical in all material respects to the terms set forth in this Agreement
(and Parent shall in such event have the right to unilaterally cause the
Restructuring to occur, and
39.
extend the Scheduled Closing Time as reasonably necessary to effectuate the
Restructuring, subject to the other conditions hereof). Without limiting the
foregoing, in no event shall the Company be entitled to terminate this
Agreement or otherwise refuse or fail to consummate the Merger on the sole
basis of the inability of Xxxxxx Xxxxxxx and Cooley Godward to render such
opinion without first giving Parent at least 10 days' written notice of its
intention to do so.
7.5 LISTING. The shares of Parent Common Stock issuable, and those
required to be reserved for issuance, in connection with the Merger, shall,
if applicable, have been filed for listing (subject to notice of issuance) on
the Nasdaq Stock Market.
7.6 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to
the Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become
impossible (other than as a result of any failure on the part of Parent
or Merger Sub to comply with or perform any covenant or obligation of
Parent or Merger Sub set forth in this Agreement);
(b) by the Company if the Company reasonably determines that
the timely satisfaction of any condition set forth in Section 7 has
become impossible (other than as a result of any failure on the part of
the Company to comply with or perform any covenant or obligation set
forth in this Agreement or in any other agreement or instrument
delivered to Parent);
(c) by Parent if the Closing has not taken place on or before
September 30, 2000 (other than as a result of any failure on the part
of Parent to comply with or perform any covenant or obligation of
Parent set forth in this Agreement);
(d) by the Company if the Closing has not taken place on or
before September 30, 2000 (other than as a result of the failure on the
part of the Company to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or
instrument delivered to Parent); or
(e) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger; or
(f) by the mutual written consent of Parent and the Company.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Parent shall deliver to the Company a written
40.
notice stating that Parent is terminating this Agreement and setting forth a
brief description of the basis on which Parent is terminating this Agreement.
If the Company wishes to terminate this Agreement pursuant to Section 8.1(b),
Section 8.1(d) or Section 8.1(e), the Company shall deliver to Parent a
written notice stating that the Company is terminating this Agreement and
setting forth a brief description of the basis on which the Company is
terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 8.1, all further obligations of the parties under this
Agreement shall terminate; PROVIDED, HOWEVER, that: (a) none of the parties
shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement; and (b) the parties
shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Sections 10 and 5.5.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Company
(including the representations and warranties set forth in Section 2 and the
representations and warranties set forth in the Company's Closing
Certificate) shall survive the Closing and shall expire on the first
anniversary of the Closing Date; PROVIDED, HOWEVER, that if, at any time
prior to the first anniversary of the Closing Date, any Indemnitee (acting in
good faith) delivers to the Stockholders' Agent (as defined in Section 10.1
below) a written notice alleging the existence of an inaccuracy in or a
breach of any of the representations and warranties made by the Company (and
setting forth in reasonable detail the basis for such Indemnitee's belief
that such an inaccuracy or breach may exist) and asserting a claim for
recovery under Section 9.2 based on such alleged inaccuracy or breach, then
the claim asserted in such notice shall survive the first anniversary of the
Closing until such time as such claim is fully and finally resolved. The
representations and warranties made by Parent and Merger Sub in Section 3
hereof shall survive the Closing and shall expire on the first anniversary of
the Closing Date, and any liability of Parent or Merger Sub with respect to
such representations and warranties shall thereupon cease.
(b) The representations, warranties, covenants and
obligations of the Company, and the rights and remedies that may be exercised
by the Indemnitees, shall not be limited or otherwise affected by or as a
result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other
item of information set forth in the Disclosure Schedule or in any update to
the Disclosure Schedule shall be deemed to be a representation and warranty
made by the Company in this Agreement.
9.2 INDEMNIFICATION. From and after the Effective Time (but
subject to Section 9.1(a)), the stockholders of the Company who shall have
received, or shall be entitled to receive, cash or Parent Common Stock
pursuant to Section 1.5 of this Agreement (the "Indemnitors"), severally and
not jointly and in proportion to their original contribution to Escrow, shall
hold harmless and indemnify each of the Indemnitees from and against, and the
Escrow Cash and Escrow Shares shall be available to compensate and reimburse
each of the Indemnitees for, any Damages which are directly or indirectly
suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject (regardless of whether or not such
41.
Damages relate to any third-party claim) and which arise from or as a result
of, or are directly or indirectly connected with: (i) any inaccuracy in or
breach of any representation or warranty set forth in Section 2, as modified
by the Disclosure Schedule (without giving effect to any update to the
Disclosure Schedule delivered by the Company to Parent prior to the Closing)
or the Company's Closing Certificate; (ii) any breach of any covenant or
obligation of the Company (including the covenants set forth in Sections 4
and 5); (iii) any possible claim by any employee of the Company described in
Part 2.19(a)(D) of the Disclosure Schedule; (iv) the election of Parent to
cause a Restructuring (as defined in Section 7.4) to occur, or (v) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)" or "(ii)" above or any claim or other matter described in clause
"(iii)" or clause "(iv)" above (including any Legal Proceeding commenced by
any Indemnitee for the purpose of enforcing any of its rights under this
Section 9).
9.3 THRESHOLD. The Indemnitors shall not be required to make any
indemnification payment pursuant to Section 9.2 for any inaccuracy in or
breach of any of their representations and warranties set forth in Section 2,
as modified by the Disclosure Schedule, or the Company's Closing Certificate,
until such time as the total amount of all Damages (including the Damages
arising from such inaccuracy or breach and all other Damages arising from any
other inaccuracies in or breaches of any representations or warranties) that
have been directly or indirectly suffered or incurred by any one or more of
the Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceeds $300,000 in the aggregate. (If the total
amount of such Damages exceeds $300,000, then the Indemnitees shall be
entitled to be indemnified against and compensated and reimbursed only for
the portion of such Damages exceeding $300,000.) The foregoing provisions of
this Section 9.3 limiting the indemnity obligations of the Indemnitors shall
not be applicable to any claim by an Indemnitee for indemnification pursuant
to Section 9.2(iii).
9.4 EXCLUSIVE REMEDY. From and after the Closing, recourse of
Parent to the Escrow Cash and Escrow Shares pursuant to this Agreement and
the Escrow Agreement shall be the sole and exclusive remedy of Parent and the
other Indemnitees for damages under the indemnification provisions contained
in, and for any breach of, this Agreement and the Exhibits, Schedules,
Closing Certificates and any other related documents (it being understood
that nothing in this Section 9.4 or elsewhere in this Agreement shall affect
Parent's rights to specific performance or other equitable remedies with
respect to the covenants referred to in this Agreement to be performed after
the Closing). No former stockholder, optionholder, warrantholder, officer,
director, employee or agent of the Company shall have any personal liability
to Parent after the Closing in connection with the transactions contemplated
by this Agreement. Notwithstanding the foregoing provisions of this Section
9.4, the rights and restrictions set forth herein do not limit any other
potential remedies of Parent and other Indemnities against Persons who may be
liable for fraud under common law in connection with the transactions
contemplated by this Agreement.
9.5 NO CONTRIBUTION. No stockholders of the Company shall have any
right of contribution, right of indemnity or other right or remedy against
the Surviving Corporation in connection with any indemnification obligation
or any other liability to which he, she or it may become subject under or in
connection with this Agreement.
42.
9.6 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion
or commencement by any Person of any claim or Legal Proceeding (whether
against the Surviving Corporation, against Parent or against any other
Person) with respect to which any of the Indemnitors may, in Parent's
reasonable judgment, become obligated to hold harmless, indemnify, compensate
or reimburse any Indemnitee pursuant to this Section 9, Parent shall have the
right, at its election, to proceed with the defense of such claim or Legal
Proceeding on its own. The Merger Stockholders shall be entitled, at their
expense, to participate in any defense of such claim or Legal Proceeding. If
Parent so proceeds with the defense of any such claim or Legal Proceeding:
(a) each Indemnitor shall make available to Parent any
documents and materials in his, her or its possession or control that
may be reasonably necessary to the defense of such claim or Legal
Proceeding; and
(b) Parent shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the prior written
consent of the Stockholders' Agent (as defined in Section 10.1);
PROVIDED, HOWEVER, that such consent shall not be unreasonably
withheld.
Parent shall give the Stockholders' Agent prompt notice of the commencement
of any such Legal Proceeding against Parent or the Surviving Corporation;
PROVIDED, HOWEVER, that any failure on the part of Parent to so notify the
Stockholders' Agent shall not limit any of the obligations of the Indemnitors
under this Section 9 (except to the extent such failure materially prejudices
the defense of such Legal Proceeding or the rights of the Merger
Stockholders). If Parent does not elect to proceed with the defense of any
such claim or Legal Proceeding, the Stockholders' Agent may proceed with the
defense of such claim or Legal Proceeding with counsel reasonably
satisfactory to Parent and the expense of said defense shall be paid out of
the Escrow Fund; PROVIDED, HOWEVER, that the Stockholders' Agent may not
settle, adjust or compromise any such claim or Legal Proceeding without the
prior written consent of Parent (which consent may not be unreasonably
withheld).
9.7 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT. No
Indemnitee (other than Parent or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless Parent (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim
or the exercise of such other remedy.
9.8 EXECUTION BY STOCKHOLDERS' AGENT. The Stockholders' Agent may
execute this Agreement at any time after the date hereof and prior to the
Closing; PROVIDED, HOWEVER, that the effectiveness of this Agreement shall
not be predicated upon such execution.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 STOCKHOLDERS' AGENT. By virtue of their approval of the Merger
and this Agreement, the Merger Stockholders shall have approved, among other
matters, the indemnification and escrow terms set forth in Section 9 and the
expense reimbursement provisions in Section 10.3 and shall irrevocably
appoint Xxxxxxx Xxxxx as their agent for purposes of Section 9 and Section
10.3 (the "Stockholders' Agent") to give and receive notices and
communications, to authorize delivery to Parent of Parent Common Stock, cash
or other property from the Escrow Fund, to object to such deliveries, to
agree to, negotiate, enter into
43.
settlements and compromises of, and demand dispute resolution pursuant to
Section 3 of the Escrow Agreement and comply with orders of courts and awards
of arbitrators with respect to indemnification claims, and to take all
actions necessary or appropriate in the judgment of the Stockholders' Agent
for the accomplishment of the foregoing. Xxxxxxx Xxxxx hereby accepts his
appointment as the Stockholders' Agent. Parent shall be entitled to deal
exclusively with the Stockholders' Agent on all matters relating to Section
9, and shall be entitled to rely conclusively (without further evidence of
any kind whatsoever) on any document executed or purported to be executed on
behalf of any Merger Stockholder by the Stockholders' Agent, and on any other
action taken or purported to be taken on behalf of any Merger Stockholder by
the Stockholders' Agent, as fully binding upon such Merger Stockholder. If
the Stockholders' Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities as agent of the Merger Stockholders, then the
Merger Stockholders shall, within ten days after such death or disability,
appoint a successor agent and, promptly thereafter, shall notify Parent of
the identity of such successor. Any such successor shall become the
"Stockholders' Agent" for purposes of Section 9 and this Section 10.1. No
bond shall be required for the Stockholders' Agent. If for any reason there
is no Stockholders' Agent at any time, all references herein to the
Stockholders' Agent shall be deemed to refer to the Indemnitors. The
Stockholders' Agent shall not be responsible for any act done or omitted
thereunder as Stockholders' Agent while acting in good faith and in the
exercise of reasonable judgment. The Merger Stockholders shall jointly and
severally indemnify the Stockholders' Agent and hold the Stockholders' Agent
harmless against any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Stockholders'
Agent and arising out of or in connection with the acceptance or
administration of the Stockholders' Agent's duties hereunder, including the
reasonable fees and expenses of any legal counsel or other professional
retained by the Stockholders' Agent. By virtue of their approval of the
Merger and this Agreement, the Merger Stockholders hereby agree to pay (i)
the reasonable fees of the Stockholders' Agent relating to his services
performed in such capacity, and (ii) all reasonable costs and expenses,
including those of any legal counsel or other professional retained by the
Stockholders' Agent, in connection with the acceptance and administration of
the Stockholders' Agent's duties hereunder. Subject to the prior right of
Parent to make claims for Damages, the Stockholders' Agent shall have the
right to recover from the Escrow Fund prior to any distribution to the Merger
Stockholders, any reasonable fees, costs and expenses, including those of any
legal counsel or other professional retained by the Stockholders' Agent, in
connection with the performance, acceptance and administration of the
Stockholders' Agent's duties hereunder.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause
to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may
reasonably request (prior to, at or after the Closing) for the purpose of
carrying out or evidencing any of the transactions contemplated by this
Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and
pay all fees, costs and expenses (including legal fees and accounting fees)
that have been incurred or that are incurred by such party in connection with
the transactions contemplated by this Agreement, including all fees, costs
and expenses incurred by such party in connection with or by virtue of (a)
the investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to
Parent and its Representatives in connection with such investigation and
review), (b) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule) and all agreements, certificates,
opinions
44.
and other instruments and documents delivered or to be delivered in
connection with the transactions contemplated by this Agreement, (c) the
preparation and submission of any filing or notice required to be made or
given in connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions, and (d) the satisfaction of any
conditions to the Closing; and (e) the consummation of the Merger
(collectively, the "Transaction Costs"); PROVIDED, HOWEVER, that, to the
extent the total amount of all such fees, costs and expenses incurred by or
for the benefit of the Company (including all such fees, costs and expenses
incurred prior to the date of this Agreement) exceeds $2,000,000 in the
aggregate, such fees, costs and expenses shall be borne and paid by the
Merger Stockholders by deducting, from the Escrow Fund, Escrow Cash and
Escrow Shares having an aggregate value equal to the amount of the
Transaction Costs of the Company that exceeds $2,000,000 in the aggregate.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
IF TO PARENT OR MERGER SUB:
Ditech Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx
Facsimile: (000) 000-0000
WITH A COPY TO:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
IF TO THE COMPANY:
Atmosphere Networks, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
45.
WITH A COPY TO:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X'Xxxxx
Facsimile: (000) 000-0000
IF TO THE STOCKHOLDERS' AGENT:
Xxxxxxx Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
10.6 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.7 HEADINGS. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
10.9 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
Delaware (without giving effect to principles of conflicts of laws).
10.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
each of the parties hereto and each of their respective successors and
assigns, if any. This Agreement shall inure to the benefit of: the Company;
Parent; Merger Sub; the other Indemnitees; and the respective successors and
assigns, if any, of the foregoing. Merger Sub may freely assign any or all of
its rights under this Agreement (including its indemnification rights under
Section 9), in whole or in part, to any other Person without obtaining the
consent or approval of any other party hereto or of any other Person.
10.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or
threatened breach by any party to this Agreement of any covenant, obligation
or other provision set forth in this Agreement for the benefit of any other
party to this Agreement, such other party shall be entitled (in addition to
any other remedy that may be available to it) to (a) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach.
10.12 WAIVER.
46.
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the
part of any Person in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
10.13 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto.
10.14 SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable,
shall not be impaired or otherwise affected and shall continue to be valid
and enforceable to the fullest extent permitted by law.
10.15 PARTIES IN INTEREST. Except for the provisions of Sections
1.5, 1.6, 9 and 10.1, none of the provisions of this Agreement is intended to
provide any rights or remedies to any Person other than the parties hereto
and their respective successors and assigns (if any).
10.16 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof; PROVIDED, HOWEVER, that the Mutual
Non-Disclosure Agreement previously executed on behalf of Parent and the
Company shall not be superseded by this Agreement and shall remain in effect
in accordance with its terms until the earlier of (a) the Effective Time, or
(b) the date on which such Mutual Non-Disclosure Agreement is terminated in
accordance with its terms.
10.17 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction
to the effect that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this Agreement.
47.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
48.
The parties hereto have caused this Agreement to be executed and
delivered as of the date first written above.
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
/s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President and Chief Executive Officer
OXYGEN ACQUISITION CORPORATION,
a Delaware corporation
/s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President and Chief Executive Officer
ATMOSPHERE NETWORKS, INC.,
a Delaware corporation
/s/ Xxx Xxxxxx
-------------------------------------------------
Name: Xxx Xxxxxx
Title: President and Chief Executive Officer
/s/ Xxxxxxx X. Xxxxx
-------------------------------------------------
XXXXXXX X. XXXXX, as Stockholders' Agent
49.
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED COMPANIES. "Acquired Companies" shall mean collectively the
Company and its subsidiaries.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the business or assets of any of the Acquired
Corporations;
(b) the issuance, disposition or acquisition of (i) any
capital stock or other equity security of any of the Acquired
Corporations, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock or other equity
security of any of the Acquired Corporations, or (iii) any security,
instrument or obligation that is or may become convertible into or
exchangeable for any capital stock or other equity security of any of
the Acquired Corporations; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving any of the Acquired
Corporations.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger
and Reorganization to which this Exhibit A is attached (including the
Disclosure Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which any of the Acquired Corporations is a party; (b) by which any of the
Acquired Corporations or any of its assets is or may become bound or under
which any of the Acquired Corporations has, or may become subject to, any
obligation; or (c) under which any of the Acquired Corporations has or may
acquire any right or interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean
any Proprietary Asset owned by or licensed to any of the Acquired
Corporations or otherwise used by any of the Acquired Corporations.
COMPANY WARRANT. "Company Warrant" means any warrant to purchase
shares of capital stock of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental
Authorization).
CONTRACT. "Contract" shall mean any written, oral or other
agreement, contract, subcontract, lease, understanding, instrument, note,
warranty, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline
in value, lost opportunity, liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee
(including reasonable attorneys' fees), charge, cost (including reasonable
costs of investigation) or expense of any nature, net of any indemnity from
third parties or, in the case of third party claims, by any amounts actually
recovered relating to facts giving rise to such third-party claims.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to Parent on behalf of the
Company.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor
or higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body
or any such prime contractor or subcontractor otherwise has or may acquire
any right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement; or (b) right under any Contract with
any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental
authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
Entity and any court or other tribunal).
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a)
Parent; (b) Parent's current and future officers, directors and affiliates
(including Merger Sub); (c) the respective Representatives of the Persons
referred to in clauses "(a)" and "(b)" above; and (d) the respective
successors and assigns of the Persons referred to in clauses "(a)", "(b)" and
"(c)" above;
PROVIDED, HOWEVER, that the stockholders of the Company shall not be deemed
to be "Indemnitees."
INVESTORS. "Investors" shall mean the parties, other than the
Company, to the Second Amended Stockholders' Rights Agreement, dated August
30, 1999.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or
any arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal,
state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed
to have a "Material Adverse Effect" on the Company if (i) such violation or
other matter (considered together with all other matters that would
constitute exceptions to the representations and warranties set forth in the
Agreement or in the Company's Closing Certificate excluding for such purpose
reference to "Material Adverse Effect" qualifications in such representations
and warranties) would have a material adverse effect on the business,
condition, assets, liabilities, operations or financial performance of the
Acquired Companies, taken as a whole, (ii) such violation or other matter was
not caused by the entering into, announcement or pendency of the transactions
contemplated by this Agreement, and (iii) such violation or other matter was
not disclosed on Part 2.5(a) of the Disclosure Schedule.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or
other intellectual property right or intangible asset; or (b) right to use or
exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended.
SUBSIDIARY. "Subsidiary" shall mean Atmosphere Networks Pty., Ltd.,
a company organized under the laws of Western Australia.
TAX. "Tax" shall mean any tax (including any income tax, franchise
tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise
tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property
tax, business tax, withholding tax or payroll tax), levy, assessment, tariff,
duty (including any customs duty), deficiency or fee, and any related charge
or amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
EXHIBITS B THROUGH F AND DISCLOSURE SCHEDULES TO THE AGREEMENT HAVE BEEN
OMITTED. COPIES OF SUCH EXHIBITS AND SCHEDULES WILL BE FURNISHED
SUPPLEMENTALLY TO THE COMMISSION UPON REQUEST.
EXHIBITS INDEX
Exhibit A - Certain Definitions
Exhibit B - Form of Voting Agreement
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Noncompetition Agreement
Exhibit E - Form of General Release
Exhibit F - Form of Declaration of Registration Rights
Disclosure Schedules of the Company
