Exhibit 2
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
COMMERCE ONE, INC.,
XXXXX ACQUISITION CORPORATION,
XXXXXXXXXXX.XXX, INC.
AND
THE SHAREHOLDERS NAMED HEREIN
DATED AS OF NOVEMBER 4, 1999
TABLE OF CONTENTS
Page
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TABLE OF CONTENTS.....................................................................................................i
ARTICLE I THE MERGER..................................................................................................1
1.1 The Merger..........................................................................................1
1.2 Effective Time......................................................................................1
1.3 Effect of the Merger................................................................................2
1.4 Articles of Incorporation; Bylaws...................................................................2
1.5 Directors and Officers..............................................................................2
1.6 Effect of Merger on the Capital Stock of the Constituent Corporations...............................2
1.7 Dissenting Shares...................................................................................5
1.8 Surrender of Certificates...........................................................................5
1.9 No Further Ownership Rights in Company Capital Stock................................................7
1.10 Lost, Stolen or Destroyed Certificates..............................................................7
1.11 Taking of Necessary Action; Further Action..........................................................7
1.12 Tax and Accounting Consequences.....................................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL SHAREHOLDERS...............................8
2.1 Organization of the Company.........................................................................8
2.2 Subsidiaries........................................................................................8
2.3 Company Capital Structure...........................................................................8
2.4 Authority..........................................................................................10
2.5 No Conflict........................................................................................10
2.6 Consents...........................................................................................10
2.7 Company Financial Statements.......................................................................11
2.8 No Undisclosed Liabilities.........................................................................11
2.9 No Changes.........................................................................................11
2.10 Tax Matters........................................................................................13
2.11 Restrictions on Business Activities................................................................15
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment.....................15
2.13 Intellectual Property..............................................................................15
2.14 Agreements, Contracts and Commitments..............................................................19
2.15 Interested Party Transactions......................................................................20
2.16 Governmental Authorization.........................................................................21
2.17 Litigation.........................................................................................21
2.18 Accounts Receivable; Inventory.....................................................................21
2.19 Minute Books.......................................................................................21
2.20 Environmental Matters..............................................................................21
2.21 Brokers'and Finders'Fees; Third Party Expenses.....................................................22
2.22 Employee Benefit Plans and Compensation............................................................22
2.23 Insurance..........................................................................................26
2.24 Compliance with Laws...............................................................................26
2.25 Warranties; Indemnities............................................................................26
2.26 Complete Copies of Materials.......................................................................26
2.27 Representations Complete...........................................................................26
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.........................................................27
3.1 Organization, Standing and Power...................................................................27
3.2 Authority..........................................................................................27
3.3 No Conflict........................................................................................27
3.4 Consents...........................................................................................28
3.5 Capital Structure..................................................................................28
3.6 SEC Filings; Financial Statements..................................................................28
3.7 Brokers'and Finders'Fees...........................................................................29
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................................................29
4.1 Conduct of Business of the Company.................................................................29
4.2 No Solicitation....................................................................................32
ARTICLE V ADDITIONAL AGREEMENTS......................................................................................32
5.1 Company Shareholder Approval.......................................................................32
5.2 Company Employee Stock Options.....................................................................32
5.3 Confidentiality; Public Disclosure.................................................................32
5.4 Consents...........................................................................................32
5.5 Reasonable Efforts.................................................................................33
5.6 Notification of Certain Matters....................................................................33
5.7 Additional Documents and Further Assurances........................................................33
5.8 FIRPTA Compliance..................................................................................33
5.9 Expenses...........................................................................................33
5.10 Reserved...........................................................................................34
5.11 Employee Benefits..................................................................................34
5.12 Employment Agreements..............................................................................34
5.13 Retention Bonus....................................................................................34
5.14 Rule 145 Affiliate Agreements......................................................................34
5.15 Registration Rights Agreement......................................................................34
5.16 Voting Agreements..................................................................................35
5.17 No Actions Inconsistent With Tax-Free Reorganization...............................................35
5.18 Nasdaq Listing.....................................................................................35
5.19 Form S-8...........................................................................................35
ARTICLE VI CONDITIONS TO THE MERGER..................................................................................35
6.1 Conditions to Obligations of Each Party to Effect the Merger.......................................35
6.2 Conditions to Obligations of Company...............................................................36
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6.3 Conditions to the Obligations of Parent and Sub....................................................37
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..............................................38
7.1 Survival of Representations and Warranties.........................................................38
7.2 Indemnification....................................................................................38
7.3 Escrow Arrangements................................................................................39
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................................45
8.1 Termination........................................................................................45
8.2 Effect of Termination..............................................................................46
8.3 Amendment..........................................................................................46
8.4 Extension; Waiver..................................................................................46
ARTICLE IX GENERAL PROVISIONS........................................................................................46
9.1 Notices............................................................................................46
9.2 Interpretation.....................................................................................48
9.3 Counterparts; Facsimile............................................................................48
9.4 Entire Agreement; Assignment.......................................................................48
9.5 Severability.......................................................................................49
9.6 Other Remedies; Specific Performance...............................................................49
9.7 Governing Law......................................................................................49
9.8 Rules of Construction..............................................................................49
9.9 Attorneys Fees.....................................................................................50
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INDEX OF EXHIBITS
EXHIBITS DESCRIPTION
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Exhibit A Agreement of Merger
Exhibit B Key Employees
Exhibit C Disclosure Schedules
Exhibit D Form of Employment Agreement
Exhibit E Rule 145 Affiliates Agreement
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Voting Agreement
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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2.1 List of Officers and Directors of the Company
2.3(a) List of Shareholders of the Company
2.3(b) List of Optionholder of the Company
2.7 List of financial statements of the Company
2.12(a) List of all real property currently leased by the Company
2.12(b) List of all material items of equipment owned or leased by the Company
2.13(b) List of all Registered Intellectual Property
2.13(d) List of shrink wrap license agreements of Company
2.13(g) List of agreements relating to Intellectual Property
2.13(h) List of agreements relating to infringement of Intellectual Property
2.14(a) List of agreements
2.16 List of Governmental authorizations
2.21(a) List of any brokerage or finders' fees incurred
2.21(b) Estimate of Third Party Expenses
2.23 List of all insurance policies
5.14 List of persons who are or may be "affiliates" of the Company within the
meaning of Rule 145
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of November 4, 1999 among Commerce One, Inc. a Delaware
corporation ("PARENT"), Xxxxx Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Parent ("SUB"), XXXXXXXXXXX.XXX, Inc., a
Delaware corporation (the "COMPANY") and Liron and Xxxxx Xxxxxxxxx, as husband
and wife, and Xxxxxx Xxxxxxx (collectively the "Principal Shareholders").
RECITALS
WHEREAS, the Boards of Directors of each of the Company, Parent and Sub
believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of the
Company with and into Sub (the "MERGER") and, in furtherance thereof, have
approved the Merger.
WHEREAS, pursuant to the Merger, among other things, all of the issued
and outstanding securities of the Company shall be converted into the right to
receive Parent Common Stock (as defined herein). Parent will assume all
outstanding stock options and warrants of the Company.
WHEREAS, the Company and the Principal Shareholders, on the one hand,
and Parent and Sub, on the other hand, desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger.
WHEREAS, the parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
the Company shall be merged with and into Sub, the separate corporate existence
of the Company shall cease and Sub shall continue as the surviving corporation
and as a wholly-owned subsidiary of Parent. The surviving corporation after the
Merger is hereinafter sometimes referred to as the "SURVIVING CORPORATION".
1.2 EFFECTIVE TIME. The closing of the Merger (the "Closing") will take
place on Monday, November 8, 1999 at 9:00 a.m. local time at the offices of
Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx
00000, unless another place or time is agreed to in writing by Parent and the
Company. The date upon which the Closing occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing an Agreement of Merger (or like instrument) in the
form attached hereto as Exhibit A with the Secretary of State of the State of
Delaware (the "Merger Agreement"), in accordance with the applicable provisions
of Delaware Law (the time of acceptance by the Secretary of State of the State
of Delaware of such filing being referred to herein as the "Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Certificate of Incorporation of Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors of the Surviving Corporation
immediately after the Effective Time shall be the directors of Sub immediately
prior to the Effective Time, each to hold the office of director of the
Surviving Corporation in accordance with the provisions of Delaware Law and the
Articles of Incorporation and Bylaws of the Surviving Corporation until his or
her successor is duly qualified and elected. The officers of the Surviving
Corporation immediately after the Effective Time shall be the officers of Sub
immediately prior to the Effective Time, each to hold office in accordance with
the provisions of the Bylaws of the Surviving Corporation.
1.6 EFFECT OF MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS.
(a) CERTAIN DEFINITIONS. For all purposes of this Agreement,
the following terms shall have the following meanings:
"CASH CONSIDERATION" shall mean an aggregate of $4,500,000,
less the amount by which the Estimated Third Party Expenses exceed $50,000.
"CASH EXCHANGE RATIO" shall mean an amount equal to the
quotient obtained by dividing (a) Cash Consideration by (b) the number of Total
Actual Shares.
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"COMPANY CAPITAL STOCK" shall mean shares of Company Common
Stock, Company Series A Preferred Stock and shares of any other capital stock of
the Company.
"COMPANY COMMON STOCK" shall mean outstanding shares of common
stock of the Company.
"COMPANY OPTION" shall mean an option, warrant or other right
to acquire Company Capital Stock.
"COMPANY SERIES A PREFERRED STOCK" shall mean shares of Series
A Preferred Stock of the Company.
"ESCROW TRADING PRICE" shall mean the average closing price of
Parent Common Stock on the Nasdaq National Market over the twenty (20) trading
days prior to the date on which a claim is made against the Escrow Fund.
"ESTIMATED THIRD PARTY EXPENSES" shall mean Third Party
Expenses (as defined in Section 5.9) of the Company on the Closing Date as
estimated by the Company in good faith and based on reasonable assumptions.
"GAAP" shall mean U.S. generally accepted accounting
principles consistent with the reporting practices and principles used by Parent
from time to time for preparing its public filings under the Securities and
Exchange Act of 1934, as amended (the "EXCHANGE ACT").
"KEY EMPLOYEES" shall mean those employees of the Company
listed on EXHIBIT B hereto.
"KNOWLEDGE" shall mean what is within the actual knowledge of
a person.
"PARENT COMMON STOCK" shall mean shares of the common stock,
par value $0.0001 per share, of Parent.
"PARENT COMMON STOCK CONSIDERATION" shall mean 785,714 shares
of Parent Common Stock (as appropriately adjusted for stock splits, stock
dividends, combination and the like of such Parent Common Stock subsequent to
the date hereof and prior to the Effective Time).
"SHAREHOLDER" shall mean each holder of any Company Capital
Stock immediately prior to the Effective Time.
"STOCK EXCHANGE RATIO" shall mean a number equal to the
quotient obtained by dividing (a) Parent Common Stock Consideration by (b) the
number of Total Outstanding Shares.
"TOTAL ACTUAL SHARES" shall mean the aggregate number of
shares of Company Capital Stock outstanding immediately prior to the Effective
Time.
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"TOTAL CONSIDERATION" shall mean the total Cash Consideration
and Parent Common Stock Consideration paid hereunder.
"TOTAL OUTSTANDING SHARES" shall mean the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time plus the aggregate number of shares of Company Common Stock issuable, with
or without the passage of time or satisfaction of other conditions, upon
exercise or conversion of all convertible securities, options, warrants and
other rights to acquire or receive shares of Company Capital Stock outstanding
immediately prior to the Effective Time.
"TRADING PRICE" shall mean $140.00.
(b) EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the Sub, the Company or the
Shareholders, each share of Company Capital Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares (as
defined in Section 1.7) will be canceled and extinguished and be converted
automatically into the right to receive, upon surrender of the certificate
representing such share of Company Capital Stock and upon the terms and subject
to the conditions set forth below and throughout this Agreement, including,
without limitation Sections 1.6(e), (f) and (g) hereof and the escrow provisions
set forth in Article VII and/or described in Section 1.8(b) hereof, (i) a
fraction of a share of Parent Common Stock equal to the Stock Exchange Ratio and
(ii) cash in an amount equal to the Cash Exchange Ratio.
(c) ASSUMPTION OF COMPANY STOCK OPTIONS, WARRANTS AND OTHER
RIGHTS TO PURCHASE COMPANY CAPITAL STOCK.
(i) At the Effective Time, under this Agreement, each Company
Option will be assumed by Parent, and will continue to have, and be subject to,
the same terms and conditions governing such Company Option immediately prior to
the Effective Time (including, without limitation, any vesting schedule or
repurchase rights), except that (i) each Company Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by the Stock Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Stock Exchange Ratio, rounded up to the nearest whole cent. After
the Effective Time, Parent will issue to each holder of an outstanding Company
Option a notice describing the foregoing assumption of such Company Options by
Parent.
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(ii) Prior to the Effective Time, the Company shall take all
action necessary to effect the transactions anticipated by this Section 1.6(c)
under all Company Option agreements and any other plan or arrangement of the
Company.
(d) WITHHOLDING TAXES. All Parent Common Stock issuable and
cash payable pursuant to Section 1.6 shall be subject to, and reduced by, the
amount of any state, federal and foreign withholding taxes incurred by or
applicable to a Shareholder (and not previously paid by or on behalf of such
Shareholder or the Company) in connection with the Merger, the acquisition of
Company Capital Stock upon the exercise of Company Options, the acceleration of
the vesting of any Company Option or any Company Capital Stock or the payment of
a bonus in the form of Company Capital Stock.
(e) FRACTIONAL SHARES. No fractional share of Parent Common
Stock shall be issued in the Merger. In lieu thereof, any fractional share,
after aggregating all shares held by a Shareholder, shall be rounded up to the
nearest whole share of Parent Common Stock.
1.7 DISSENTING SHARES. Notwithstanding any provision of this Agreement
to the contrary, any shares of Company Capital Stock held by a holder who has
exercised and perfected appraisal rights for such shares in accordance with
Delaware Law and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal rights ("DISSENTING SHARES"), shall not be converted into or
represent a right to receive the consideration for Company Capital Stock
pursuant to Section 1.6, but the holder thereof shall only be entitled to such
rights as are granted by Delaware Law.
(a) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
consideration for Company Capital Stock as provided in Section 1.6, without
interest thereon, upon surrender of the certificate representing such shares.
(b) The Company shall give Parent (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands. To the extent that Parent or the Company makes any payment or payments
in respect of any Dissenting Shares, Parent shall be entitled to recover under
the terms of Article VII hereof the aggregate amount by which such payment or
payments exceed the aggregate consideration that otherwise would have been
payable in respect of such shares.
1.8 SURRENDER OF CERTIFICATES.
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(a) EXCHANGE AGENT. The Corporate Secretary of Parent or an
institution selected by Parent and reasonably satisfactory to the Company shall
serve as exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) PARENT TO PROVIDE SHARES. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, certificates representing the shares of Parent
Common Stock representing the Parent Common Stock Consideration and cash
representing the Cash Consideration (each in the aggregate amount to be issued
in the Merger); PROVIDED, HOWEVER, that on behalf of the Shareholders, pursuant
to Section 7.3 hereof, Parent shall deposit into an escrow account the number of
shares of Parent Common Stock issued in respect of Company Capital Stock
pursuant to Section 1.6(b) to the Escrow Agent on behalf of the Shareholders
equal to the product obtained by multiplying (x) twenty percent (20%) by (y) the
Parent Common Stock Consideration (the "ESCROW AMOUNT"). The portion of the
Escrow Amount contributed on behalf of each Shareholder shall be in proportion
to the aggregate number of shares of Parent Common Stock which such Shareholder
would otherwise be entitled to receive in the Merger by virtue of ownership of
outstanding shares of Company Capital Stock.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Capital Stock whose shares were converted into the right to receive
shares of Parent Common Stock and cash pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock and cash. Upon surrender of
Certificates for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor certificates representing the number of whole shares of Parent Common
Stock and cash, and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.8(d) as to the
payment of dividends, to evidence the ownership of the number of full shares of
Parent Common Stock and cash into which such shares of Company Capital Stock
shall have been so converted and the right to receive any dividends or
distributions payable pursuant to Section 1.8(d).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES; INTEREST
ON CASH CONSIDERATION. No dividends or other distributions declared or made
after the date of this Agreement with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holders of any
unsurrendered Certificates with respect to the shares of Parent Common Stock
represented thereby until the holders of record of such Certificates shall
surrender such Certificates. Subject to applicable law, following surrender of
any such Certificates, the Exchange Agent shall
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deliver to the record holders thereof, without interest, certificates
representing whole shares of Parent Common Stock and Cash Consideration, as
applicable, issued in exchange therefor and the amount of any such dividends or
other distributions with a record date after the Effective Time payable with
respect to such whole shares of Parent Common Stock. No interest shall accrue or
be owed to a Shareholder with respect to any Cash Consideration or other amounts
which the Shareholder has the right to receive.
(e) TRANSFERS OF OWNERSHIP. If certificates for shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Company Capital Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All
consideration paid in respect of the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof, shall be deemed to be full
satisfaction of all rights pertaining to such shares of Company Capital Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash, if any, as
may be required pursuant to Section 1.8; PROVIDED, HOWEVER, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct against any claim that may be made against
Parent or the Exchange Agent with respect to the certificates alleged to have
been lost, stolen or destroyed.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, Parent and Sub, the officers and directors of the
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Company, Parent and Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
1.12 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "CODE"). It is
intended by the parties hereto that the Merger be treated as a purchase for
financial accounting purposes. Each party has consulted with its own tax
advisors and accountants with respect to the tax and accounting consequences,
respectively, of the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
The Company and, to each of his or her respective Knowledge, the
Principal Shareholders hereby, severally but not jointly, represents and
warrants to Parent and Sub, subject to such exceptions as are specifically
disclosed in the disclosure schedule (referencing the appropriate Section and
paragraph numbers) supplied by the Company and the Principal Shareholders to
Parent and attached hereto as EXHIBIT C (the "DISCLOSURE SCHEDULE"), that on the
date hereof and as of the Effective Time as though made at the Effective Time as
follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified could have a Company Material Adverse
Effect. For all purposes of this Agreement, the term "COMPANY MATERIAL ADVERSE
EFFECT" means any change, event or effect that is materially adverse to the
business, assets (including intangible assets), financial condition, or results
of operations of the Company, taken as a whole. The Company has delivered a true
and correct copy of its Certificate of Incorporation and Bylaws, each as amended
to date, to Parent. Section 2.1 of the Disclosure Schedule lists the directors
and officers of the Company. The operations now being conducted by the Company
have not been conducted under any other name.
2.2 SUBSIDIARIES. The Company does not have, and has never had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any corporation, partnership, association, joint venture
or other business entity.
2.3 COMPANY CAPITAL STRUCTURE.
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(a) The authorized Company Capital Stock consists of eighty
million (80,000,000) shares of authorized Company Common Stock, with a par value
of $0.0001 per share, of which ten million (10,000,000) shares are issued and
outstanding as of the date hereof, and twenty million (20,000,000) shares of
Preferred Stock, with a par value of $0.0001 per share, of which one million six
hundred thirty-nine thousand three hundred seventy-three (1,639,379) shares are
designated Series A Preferred Stock, of which one million six hundred
thirty-nine thousand three hundred seventy-nine (1,639,379) are issued and
outstanding as of the date hereof. Each share of Company Series A Preferred
Stock is convertible into 1.0000 shares of Company Common Stock. The Company
Capital Stock is held by the persons, with the domicile addresses and in the
amounts set forth in Section 2.3(a) of the Disclosure Schedule. All outstanding
shares of Company Capital Stock are duly authorized, validly issued, fully paid
and non-assessable and not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound and have been issued in
compliance with federal and state securities laws. There are no declared or
accrued unpaid dividends with respect to any shares of the Company's Capital
Stock. The Company has no other capital stock authorized, issued or outstanding.
(b) Except for the Stock Option Plan, the Company has never
adopted or maintained any stock option plan or other plan providing for equity
compensation of any person. The Company has reserved one million five hundred
thousand (1,500,000) shares of Company Common Stock for issuance to employees
and consultants pursuant to the Stock Option Plan, and three hundred forty-five
thousand five hundred twenty-five (345,525) shares are subject to outstanding
unexercised options as of the date hereof. Except as set forth on Section 2.3(b)
of the Disclosure Schedule, there is no outstanding Company Capital Stock which
is subject to vesting. Section 2.3(b) of the Disclosure Schedule sets forth for
each outstanding Company Option, the name and the domicile address of the
holder, the number of shares of Company Common Stock subject to such Company
Option, the exercise price of such Company Option, the vesting schedule of such
Company Option including the extent to which such Company Option has vested to
the date hereof and whether the vesting of such Company Option will be
accelerated by reason of the transactions contemplated by this Agreement, and
whether such Company Option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code. Section 2.3(b) of the Disclosure
Schedule also sets forth the name of the holder of any Company Capital Stock
subject to vesting, the number of shares of Company Capital Stock subject to
vesting and the vesting schedule for such Company Capital Stock, including the
extent vested to date. Except as set forth on Section 2.3(b) of the Disclosure
Schedule, there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting stock of the Company.
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2.4 AUTHORITY. The Company and each of the Principal Shareholders have
all requisite power and authority to enter into this Agreement and any Related
Agreements (as hereinafter defined) to which such person is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and any Related Agreements to which such person is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Company, and no further action is required on the part of the Company or the
Principal Shareholders to authorize the Agreement, any Related Agreements to
which such person is a party and the transactions contemplated hereby and
thereby, subject only to the approval of this Agreement by the Shareholders.
This Agreement and the Merger have been unanimously approved by the Board of
Directors of the Company. This Agreement and any Related Agreements to which the
Company or the Principal Shareholders is a party have been duly executed and
delivered by the Company or the Principal Shareholders, as the case may be, and,
assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligation of the Company
and the Principal Shareholders, as the case may be, enforceable in accordance
with their respective terms, subject to the laws of general application relating
to bankruptcy, insolvency and the relief of debtors and to rules of law
governing specific performance, injunctive relief or other equitable remedies.
The "RELATED AGREEMENTS" shall mean all such ancillary agreements required in
this Agreement to be executed and delivered in connection with the transactions
contemplated hereby, including, without limitation, the Employment Agreements
and the Rule 145 Affiliate Agreements.
2.5 NO CONFLICT. The execution and delivery of this Agreement and any
Related Agreements to which the Company or the Principal Shareholders are a
party by either the Company or the Principal Shareholders do not, and, the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "CONFLICT") (i) any provision of the
Certificate of Incorporation and Bylaws of the Company, (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise or license to which the Company or the Principal Shareholders or any
of their respective properties or assets (including intangible assets) are
subject, or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or the Principal Shareholders or their
respective properties or assets.
2.6 CONSENTS. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("GOVERNMENTAL ENTITY") is
required by or with respect to the Company or the Principal Shareholder in
connection with the execution and delivery of this Agreement and any Related
Agreements to which the Company or the Principal Shareholders is a party or the
consummation of the transactions contemplated hereby and thereby, except for (i)
such consents, waivers, approvals, orders,
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authorizations, registrations, declarations and filings as may be required under
applicable securities laws and (ii) the filing of the Merger Agreement with the
Secretary of State of the State of Delaware.
2.7 COMPANY FINANCIAL STATEMENTS. Section 2.7 of the Disclosure
Schedule sets forth the Company's unaudited Balance Sheet as of October 31, 1999
which shall be hereinafter referred to as the "CURRENT BALANCE SHEET."
2.8 NO UNDISCLOSED LIABILITIES. The Company has no liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other,
which individually or in the aggregate (i) has not been reflected in the Current
Balance Sheet, or (ii) has not arisen in the ordinary course of business
consistent with past practices since October 31, 1999, none of which is material
to the business, results of operations or condition (financial or otherwise) of
the Company.
2.9 NO CHANGES. Since October 31, 1999, there has not been, occurred
or arisen any:
(a) amendments or changes to the Certificate of Incorporation
or Bylaws of the Company;
(b) capital expenditure or commitment by the Company,
exceeding $50,000 individually or $100,000 in the aggregate;
(c) destruction of, damage to or loss of any asset with a
value of $100,000 or greater, business or customer of the Company (whether or
not covered by insurance);
(d) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(e) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company or any
direct or indirect redemption, purchase or other acquisition by the Company of
its capital stock;
(h) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company of a bonus or other additional salary or
compensation to any such person;
(i) agreement, contract, covenant, instrument, lease, license
or commitment to which the Company is a party or by which it or any of its
assets (including intangible assets) are bound or any termination, extension,
amendment or modification the terms of any agreement,
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contract, covenant, instrument, lease, license or commitment to which the
Company is a party or by which it or any of its assets are bound;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company or any creation of any security interest in
such assets or properties;
(k) loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practice;
(l) waiver or release of any right or claim of the Company
including any write-off or other compromise of any account receivable of the
Company;
(m) the commencement or notice or threat of any lawsuit or, to
the Company's or the Principal Shareholders' Knowledge, proceeding or
investigation against the Company or its affairs;
(n) knowledge of any claim or potential claim of ownership by
any person other than the Company of the Company Intellectual Property (as
defined in Section 2.13) or of infringement by the Company of any other person's
Intellectual Property (as defined in Section 2.13);
(o) issuance or sale, or contract to issue or sell, by the
Company of any shares of its capital stock or securities exchangeable,
convertible or exercisable therefor, or any securities, warrants, options or
rights to purchase any of the foregoing;
(p) (i) sale or license of any Company Intellectual Property
or entering into of any agreement with respect to the Company Intellectual
Property with any person or entity or with respect to the Intellectual Property
of any person or entity or (ii) purchase or license of any Intellectual Property
or entering into of any agreement with respect to the Intellectual Property of
any person or entity or (iii) change in pricing or royalties set or charged by
the Company to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to the Company;
(q) event or condition of any character that has had a Company
Material Adverse Effect;
(r) transaction by the Company except in the ordinary course
of business as conducted on that date and consistent with past practices; or
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(s) negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.10 TAX MATTERS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement,
"TAX" or, collectively, "TAXES", means (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts; (ii) any liability for the payment of any amounts of
the type described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period; and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) TAX RETURNS AND AUDITS.
(i) The Company has not filed any tax returns
("Returns") except payroll tax returns, which were filed on the Company's behalf
by an independent third party.
(ii) As of the Effective Time, the Company (A) will
have paid all Taxes required to paid by the Company on or before the Effective
Time and will have withheld with respect to its employees all federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld, and (B) will
have accrued on the Current Balance Sheet all Taxes attributable to the periods
covered by the Current Balance Sheet and will not have incurred any liability
for Taxes for the period prior to the Effective Time other than in the ordinary
course of business.
(iii) The Company is not currently delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding, assessed or
proposed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of
the Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) Company has no liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved against
on the Current Balance Sheet, whether asserted or unasserted, contingent or
otherwise.
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(vi) The Company has made available to Parent or its
legal counsel, copies of all foreign, federal and state income and all state
sales and use Returns for the Company filed for all periods since its inception.
(vii) There are (and immediately following the
Effective Time there will be) no liens, pledges, charges, claims, restrictions
on transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "LIENS") on the assets of the Company relating to or attributable
to Taxes other than Liens for Taxes not yet due and payable.
(viii) Neither the Company nor the Principal
Shareholders have Knowledge of any claim relating or attributable to Taxes
which, if adversely determined, would result in any Lien on the assets of the
Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property", within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible as an expense under applicable law.
(xi) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(4) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to any tax sharing,
indemnification or allocation agreement nor does the Company owe any amount
under any such agreement, other than this Agreement.
(xiii) The Company's tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's tax books and
records.
(xiv) The Company is not and has never been at any
time, a "United States Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code.
(xv) No adjustment relating to any Return filed by
the Company has been proposed formally or, to the knowledge of the Company,
informally by any tax authority to the Company or any representative thereof.
(c) EXECUTIVE COMPENSATION TAX. There is no contract,
agreement, plan or arrangement to which the Company is a party as of the date of
this Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of
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Company, individually or collectively, that could give rise to the payment of
any amount that would not be deductible pursuant to Sections 280G, 404 or 162(m)
of the Code.
2.11 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
may have the effect of prohibiting or impairing any business practice of the
Company, any acquisition of property (tangible or intangible) by the Company or
the conduct of business by the Company. Without limiting the foregoing, the
Company has not entered into any agreement under which it is restricted from
selling, licensing or otherwise distributing any of its technology or products
to or providing services to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.12 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION
OF EQUIPMENT.
(a) The Company does not own any real property, nor has the
Company ever owned any real property. Section 2.12(a) of the Disclosure Schedule
sets forth a list of all real property currently leased by the Company, the name
of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease, the aggregate annual rental and/or other fees
payable under any such lease. All such current leases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default).
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens, except as reflected in the Current
Balance Sheet and except for Liens for Taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not detract from the value, or
interfere with the present use, of the property subject thereto or affected
thereby.
(c) Section 2.12(c) of the Disclosure Schedule lists all
material items of equipment (the "EQUIPMENT") owned or leased by the Company and
such Equipment is, (i) adequate for the conduct of the business of the Company
as currently conducted and (ii) in good operating condition, regularly and
properly maintained, subject to normal wear and tear.
(d) The Company has sole and exclusive ownership, free and
clear of any Liens, of all customer files and other customer information
relating to customers of the Company's current and former customers (the
"CUSTOMER INFORMATION"). No person other than the Company possesses any claims
or rights with respect to use of the Customer Information.
2.13 INTELLECTUAL PROPERTY.
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(a) For the purposes of this Agreement, the following terms
have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the
following (i) works of authorship including, without limitation, computer
programs, source code and executable code, whether embodied in software,
firmware or otherwise, documentation, designs, files, records, data and mask
works, (ii) inventions (whether or not patentable), improvements, and
technology, (iii) proprietary and confidential information, trade secrets and
know how, (iv) databases, data compilations and collections and technical data,
(v) logos, trade names, trade dress, trademarks and service marks, (vi) domain
names, web addresses and sites, (vii) tools, methods and processes, and (viii)
all instantiations of the foregoing in any form and embodied in any media.
"INTELLECTUAL PROPERTY RIGHTS" shall mean worldwide
common law and statutory rights associated with (i) patents and patent
applications, (ii) copyrights, copyrights registrations and copyrights
applications and "moral" rights, (iii) the protection of trade and industrial
secrets and confidential information, (iv) other proprietary rights relating to
intangible intellectual property, (v) trademarks, trade names and service marks,
(vi) analogous rights to those set forth above, and (vii) divisions,
continuations, renewals, reissuances and extensions of the foregoing (as
applicable) now existing.
"COMPANY INTELLECTUAL PROPERTY" shall mean any
Intellectual Property and Intellectual Property Rights that are owned by the
Company.
"REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall mean
Intellectual Property Rights that have been registered, filed, certified or
otherwise perfected by recordation with any state, government or other public
legal authority.
(b) Section 2.13(b) of the Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, the Company
(the "COMPANY REGISTERED INTELLECTUAL PROPERTY") and lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property Rights.
(c) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed in Section 2.13(b) of the
Disclosure Schedule and all Intellectual Property licensed to the Company, is
free and clear of any Liens or other encumbrances. The Company is the exclusive
owner of all Company Intellectual Property.
(d) To the extent that any Intellectual Property has been
developed or created independently or jointly by any person other than the
Company for which the Company has paid, the Company has a written agreement with
such person with respect thereto, and the Company thereby has obtained ownership
of, and is the exclusive owner of, all such Intellectual Property and associated
Intellectual Property Rights by operation of law or by valid assignment.
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(e) The Company has not transferred ownership of or granted
any license of or right to use or authorized the retention of any rights to use
any Intellectual Property or Intellectual Property Rights that is or was Company
Intellectual Property, to any other person.
(f) The Company Intellectual Property constitutes all the
Intellectual Property and Intellectual Property Rights used in and/or necessary
to the conduct of the business of the Company as it currently is conducted, or
planned to be conducted, including, without limitation, the design, development,
manufacture, use, import and sale of products, technology and services
(including products, technology or services currently under development).
(g) Other than "shrink-wrap" and similar commercially
available end-user licenses, the contracts, licenses and agreements listed in
Section 2.13(g) of the Disclosure Schedule include all contracts, licenses and
agreements to which the Company is a party with respect to any Intellectual
Property and Intellectual Property Rights. No person who has licensed
Intellectual Property or Intellectual Property Rights to the Company has
ownership rights or license rights to improvements made by the Company in such
Intellectual Property which has been licensed to the Company.
(h) Section 2.13(h) of the Disclosure Schedule lists all
contracts, licenses and agreements between the Company and any other person
wherein or whereby the Company has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, or guaranty with respect to the
infringement or misappropriation by the Company or such other person of the
Intellectual Property Rights of any person other than the Company.
(i) The operation of the business of the Company as it
currently is conducted, including but not limited to the design, development,
use, import, manufacture and sale of the products, technology or services
(including products, technology or services currently under development) of the
Company does not infringe or misappropriate the Intellectual Property Rights of
any person, and the Company has not received notice from any person claiming
that such product, technology or service (including products, technology or
services currently under development) of the Company infringes or
misappropriates the Intellectual Property Rights of such person or constitutes
unfair competition or trade practices under the laws of any jurisdiction (nor do
the Company or the Principal Shareholders have Knowledge of any basis therefor).
(j) Each item of Company Registered Intellectual Property is
valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Company Registered Intellectual Property have been
paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Company Registered Intellectual Property. There are no actions that must be
taken by the Company within sixty (60) days of the Closing Date, including the
payment of any registration, maintenance or renewal fees or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or
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preserving or renewing any Company Registered Intellectual Property. For each
product, technology or service of the Company that constitutes or includes a
copyrightable work, the Company has registered the copyright in the latest
version of such work with the U.S. Copyright Office. In each case in which the
Company has acquired ownership of any Intellectual Property from any person, the
Company has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Intellectual Property and the associated
Intellectual Property Rights (including the right to seek past and future
damages with respect thereto) to the Company and, to the maximum extent provided
for by, and in accordance with, applicable laws and regulations, the Company has
recorded each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office, or their respective equivalents in
any relevant foreign jurisdiction, as the case may be.
(k) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property under
which there is any dispute regarding the rights and obligations specified in
such agreement, or performance under such agreement including with respect to
any payments to be made or received by the Company thereunder.
(l) To the Knowledge of the Company and the Principal
Shareholders, no person is infringing or misappropriating any Company
Intellectual Property.
(m) The Company has taken all commercially reasonable steps to
protect the Company's rights in confidential information and trade secrets of
the Company or as required by any other person who has provided its confidential
information or trade secrets to the Company. Without limiting the foregoing, the
Company has, and enforces, a policy requiring each employee, consultant and
contractor to execute proprietary information, confidentiality and assignment
agreements substantially in the Company's standard forms, and all current and
former employees, consultants and contractors of the Company have executed such
an agreement.
(n) No Company Intellectual Property Intellectual Property
Rights or service of the Company is subject to any proceeding or outstanding
decree, order, judgment, agreement or stipulation that restricts in any manner
the use, transfer or licensing thereof by the Company or may affect the
validity, use or enforceability of such Company Intellectual Property.
(o) To the Company's Knowledge, no (i) product, technology,
service or publication of the Company, (ii) material published or distributed by
the Company or (iii) conduct or statement of Company constitutes obscene
material, a defamatory statement or material, false advertising or otherwise
violates any law or regulation.
(p) To the Company's and each of the Principal Shareholders
Knowledge, all of the Company's products (including products currently under
development) will record, store, process, calculate and present calendar dates
falling on and after (and if applicable, spans of time including) January 1,
2000, and will calculate any information dependent on or relating to such dates
in the same manner, and with the same functionality, data integrity and
performance, as the products
-18-
record, store, process, calculate and present calendar dates on or before
December 31, 1999, or calculate any information dependent on or relating to such
dates (collectively, "YEAR 2000 COMPLIANT"). All of the Company's products will
lose no functionality with respect to the introduction of records containing
dates falling on or after January 1, 2000. All of the Company's internal
computer and technology products and systems are Year 2000 Compliant. The
Company makes no representation or warranty as to any of the foregoing when the
Company's products are operated or used in conjunction with any hardware,
software or other product of a third party.
2.14 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as set forth in Sections 2.13(g), 2.13(h) or
2.14(a) of the Disclosure Schedule, the Company is not a party to nor is it
bound by:
(i) any employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization,
(ii) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement,
(iii) any fidelity or surety bond or completion bond,
(iv) any lease of personal property having a value
individually in excess of $50,000 or $100,000 in the aggregate,
(v) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,
(vi) any agreement, contract or commitment relating
to capital expenditures and involving future payments in excess of $50,000
individually or $100,000 in the aggregate,
(vii) any agreement, contract or commitment relating
to the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
(viii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit,
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(ix) any purchase order or contract for the purchase
of materials involving in excess of $50,000 individually or $100,000 in the
aggregate,
(x) any construction contracts,
(xi) any dealer, distribution, joint marketing or
development agreement,
(xii) any sales representative, original equipment
manufacturer, value added, remarketer, reseller or independent software vendor
or other agreement for use or distribution of the Company's products, technology
or services, or
(xiii) any other agreement, contract or commitment
that involves $50,000 individually or $100,000 in the aggregate or more or is
not cancelable without penalty within thirty (30) days.
(b) The Company is in compliance with and has not breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, any of the terms or conditions of any agreement, contract,
covenant, instrument, lease, license or commitment to which it is a party or by
which it is bound (collectively a "CONTRACT"), nor do the Company or the
Principal Shareholders have Knowledge of any event that would constitute such a
breach, violation or default with the lapse of time, giving of notice or both.
Each Contract is in full force and effect and is not subject to any default
thereunder by any party obligated to the Company pursuant thereto. The Company
has obtained, or will obtain prior to the Closing Date, all necessary consents,
waivers and approvals of parties to any Contract as are required thereunder in
connection with the Merger or for such Contracts to remain in effect without
modification after the Closing. Following the Effective Time, the Company will
be permitted to exercise all of its rights under the Contracts without the
payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which the Company would otherwise be required to pay had
the transactions contemplated by this Agreement not occurred.
(c) Any and all consents, waivers, assignments and approvals
under any of the Contracts as may be required in connection with the Merger (all
such consents, waivers and approvals are set forth in the Disclosure Schedule)
so as to preserve all rights of, and benefits to, the Company thereunder have
been obtained.
2.15 INTERESTED PARTY TRANSACTIONS. No officer, director or
Shareholder (nor any ancestor, sibling, descendant or spouse of any of such
persons, or any trust, partnership or corporation in which any of such persons
has or has had an interest), has or has had, directly or indirectly, (i) an
interest in any entity which furnished or sold, or furnishes or sells, services,
products or technology that the Company furnishes or sells, or proposes to
furnish or sell, or (ii) any interest in any entity that purchases from or sells
or furnishes to the Company any goods or services or (iii) a beneficial interest
in any Contract; PROVIDED, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "interest in any entity" for purposes of this Section 2.15.
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2.16 GOVERNMENTAL AUTHORIZATION. Section 2.16 of the Disclosure
Schedule accurately lists each consent, license, permit, grant or other
authorization issued to the Company by a Governmental Entity (i) pursuant to
which the Company currently operates or holds any interest in any of their
properties or (ii) which is required for the operation of its business or the
holding of any such interest (herein collectively called "COMPANY
AUTHORIZATIONS"). The Company Authorizations are in full force and effect and
constitute all Company Authorizations required to permit the Company to operate
or conduct its business or hold any interest in its properties or assets.
2.17 LITIGATION. There is no action, suit, claim or proceeding of any
nature pending, or, to the Company's or the Principal Shareholders' Knowledge,
threatened, against the Company, its properties (tangible or intangible) or any
of their officers or directors, nor, to the Knowledge of the Company or the
Principal Shareholders, is there any reasonable basis therefor. To the Company's
or Principal Shareholders' Knowledge, there is no investigation pending or
threatened against the Company, its properties or any of their officers or
directors (nor, to the best Knowledge of the Company or the Principal
Shareholders, is there any reasonable basis therefor) by or before any
Governmental Entity. No Governmental Entity has at any time challenged or
questioned the legal right of the Company to conduct its operations as presently
or previously conducted.
2.18 ACCOUNTS RECEIVABLE; INVENTORY. The Company has no inventory or
accounts receivable.
2.19 MINUTE BOOKS. The minutes of the Company made available to
counsel for Parent are the only minutes of the Company and contain a reasonably
accurate summary of all meetings of the Board of Directors (or committees
thereof) of the Company and its respective shareholders or actions by written
consent since the time of incorporation of the Company.
2.20 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, and urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies properly and
safely maintained. No Hazardous Materials are present as a result of the
deliberate actions of the Company or, to the Company's or the Principal
Shareholders' Knowledge, as a result of any actions of any other person or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company has at
any time owned, operated, occupied or leased.
-21-
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has either of them disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to as "HAZARDOUS MATERIALS
ACTIVITIES") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities, respectively, and other businesses of the Company as such activities
and businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is pending
or, to the Company's or the Principal Shareholders' Knowledge, threatened
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Company. Neither the Company nor the Principal
Shareholders has Knowledge of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
2.21 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth in Section 2.21(a) of the Disclosure Schedule, the Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with the Agreement or any transaction contemplated hereby. Section 2.21(a) of
the Disclosure Schedule sets forth the principal terms and conditions of any
agreement, written or oral, with respect to such fees. Section 2.21(b) of the
Disclosure Schedule sets forth the Company's current reasonable estimate of all
Third Party Expenses (the "Estimated Third Party Expenses") expected to be
incurred by the Company in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby.
2.22 EMPLOYEE BENEFIT PLANS AND COMPENSATION.
(a) The following terms shall have the meanings set forth
below:
(i) "AFFILIATE" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder;
(ii) "EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed
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to, by the Company or any Affiliate for the benefit of any Employee, or with
respect to which the Company or any Affiliate has or may have any liability or
obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current or former
employee, consultant or director of the Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or other agreement, contract or understanding between the Company or
any Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xi) "PENSION PLAN" shall mean each Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) SCHEDULE. Schedule 2.22(b) contains an accurate and
complete list of each Employee Plan and each Employee Agreement under each
Employee Plan or Employee Agreement. The Company does not have any plan or
commitment to establish any new Employee Plan or Employee Agreement, to modify
any Employee Plan or Employee Agreement (except to the extent required by law or
to conform any such Employee Plan or Employee Agreement to the requirements of
any applicable law, in each case as previously disclosed to Parent in writing,
or as required by this Agreement), or to enter into any Employee Plan or
Employee Agreement.
(c) DOCUMENTS. The Company has provided to Parent: (i) correct
and complete copies of all documents embodying each Employee Plan and each
Employee Agreement including (without limitation) all amendments thereto and all
related trust documents; (ii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Employee Plan;
(iii) if the Employee Plan is funded, the most recent annual and periodic
accounting of Employee Plan assets; (iv) the most recent summary plan
description together with the summary(ies) of material modifications thereto, if
any, required under ERISA with respect to each Employee Plan; (v) all
-23-
material written agreements and contracts relating to each Employee Plan,
including, but not limited to, administrative service agreements and group
insurance contracts; (vi) all communications material to any Employee or
Employees relating to any Employee Plan and any proposed Employee Plans, in each
case, relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any liability to the Company; (vii) all
correspondence to or from any governmental agency relating to any Employee Plan;
(viii) all COBRA forms and related notices; (ix) all policies pertaining to
fiduciary liability insurance covering the fiduciaries for each Employee Plan;
(x) all discrimination tests for each Employee Plan for the most recent plan
year; and (xi) all registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared in connection with each Employee
Plan.
(d) EMPLOYEE PLAN COMPLIANCE. (i) The Company has performed
all obligations required to be performed by it under, is not in default or
violation of, and has no Knowledge of any default or violation by any other
party to each Employee Plan, and each Employee Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Employee
Plan; (iii) there are no actions, suits or claims pending, or, to the Knowledge
of the Company or the Principal Shareholders, threatened or reasonably
anticipated (other than routine claims for benefits) against any Employee Plan
or against the assets of any Employee Plan; (iv) each Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent, the Company or any
Affiliate (other than ordinary administration expenses); (v) there are no
audits, inquiries or proceedings pending or, to the Knowledge of the Company or
the Principal Shareholders or any Affiliates, threatened by the IRS or DOL with
respect to any Employee Plan; and (vi) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Employee Plan under Section
502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) NO PENSION PLANS. Neither the Company nor any Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any Pension Plan.
(f) NO POST-EMPLOYMENT OBLIGATIONS. No Employee Plan provides,
or reflects or represents any liability to provide, retiree life insurance,
retiree health or other retiree employee welfare benefits to any person for any
reason, except as may be required by COBRA or other applicable statute, and the
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
or any other person that such Employee(s) or other person would be provided with
retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
-24-
(g) COBRA. Neither the Company nor any Affiliate has, prior to
the Effective Time, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of state law
applicable to its Employees.
(h) EFFECT OF TRANSACTION. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(i) PARACHUTE PAYMENTS. The Shareholders have approved by the
requisite vote any amounts of the Total Consideration that may be deemed to
constitute "parachute payments" pursuant to Section 280G of the Code, such that
all such payments, sales and purchases resulting from the transactions
contemplated hereby shall not be deemed to be "parachute payments" pursuant to
Section 280G of the Code or shall be exempt from such treatment under such
Section of the Code.
(j) EMPLOYMENT MATTERS. The Company: (i) is in compliance with
all applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing; and (iv) is not liable for any payment to
any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending or, to the Knowledge of the Company or the
Principal Shareholders, threatened or reasonably anticipated claims or actions
against the Company under any worker's compensation policy or long-term
disability policy.
(k) LABOR. No work stoppage or labor strike against the
Company is pending, or to the Knowledge of the Company or Principal
Shareholders, threatened or reasonably anticipated. The Company does not know of
any activities or proceedings of any labor union to organize any Employees.
There are no actions, suits, claims, labor disputes or grievances pending, or,
to the Knowledge of the Company or Principal Shareholders, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints. The Company has not engaged in any
unfair labor practices within the meaning of the National Labor Relations Act.
The Company is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by the
Company.
-25-
(l) NO INTERFERENCE OR CONFLICT. To the Knowledge of the
Company or the Principal Shareholders, no shareholder, officer, or employee of
the Company is obligated under any contract or agreement subject to any
judgment, decree or order of any court or administrative agency that would
interfere with such person's efforts to promote the interests of the Company or
that would interfere with the Company's business. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business as
presently conducted or presently proposed to be conducted nor any activity of
such officers, directors, employees or consultants in connection with the
carrying on of the Company's business as presently conducted or currently
proposed to be conducted, will, to the Knowledge of the Company and the
Principal Shareholders, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract or
agreement under which any of such officers, directors, employees or consultants
is now bound.
2.23 INSURANCE. Section 2.23 of the Disclosure Schedule lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company. There
is no claim by the Company pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid, and the Company is otherwise in compliance with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). Neither the Company nor the Principal Shareholders
has Knowledge of any threatened termination of, or premium increase with respect
to, any of such policies.
2.24 COMPLIANCE WITH LAWS. The Company has complied with, is not in
violation of, and has not received any written notices of violation with respect
to, any material foreign, federal, state or local statute, law or regulation.
2.25 WARRANTIES; INDEMNITIES. The Company has not sold or licensed any
products and accordingly has not given any warranties or indemnities relating to
its products or technology.
2.26 COMPLETE COPIES OF MATERIALS. The Company has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by Parent or its counsel.
2.27 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company or the Principal Shareholders (as modified by the
Disclosure Schedule), nor any statement made in any Schedule or certificate
furnished by the Company or the Principal Shareholders pursuant to this
Agreement or furnished in or in connection with documents mailed or delivered to
the Shareholders for use in soliciting their consent to this Agreement and the
Merger contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
-26-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company and the Principal
Shareholders that on the date hereof, and as of the Effective Time as though
made on the date hereof, as follows:
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Parent and Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a Parent
Material Adverse Effect on the ability of Parent and Sub to consummate the
transactions contemplated hereby. Parent has made available a true and correct
copy of the Certificate of Incorporation and Bylaws of Parent and the Articles
of Incorporation and Bylaws of Sub, to counsel for the Company. For all purposes
of this Agreement, the term "PARENT MATERIAL ADVERSE EFFECT" means any change,
event or effect that is materially adverse to the business, assets (including
intangible assets), financial condition, or results of operations of Parent and
its subsidiaries, taken as a whole.
3.2 AUTHORITY. Each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and any Related Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and any Related Agreements
to which it is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement and any Related Agreements to
which Parent and Sub are parties have been duly executed and delivered by Parent
and Sub and constitutes the valid and binding obligations of Parent and Sub,
enforceable in accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.3 NO CONFLICT. The execution and delivery of this Agreement and any
Related Agreements to which the Parent and/or the Sub is a party do not, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a Conflict under (i) any
provision of the Certificate of Incorporation, and Bylaws of Parent or the
Articles of Incorporation and Bylaws of Sub, (ii) any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise
or license to which Parent or any of its respective properties or assets are
subject and which has been filed as an exhibit to Parent's filings under the
Securities Act or the Exchange Act or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Sub.
-27-
3.4 CONSENTS. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, or any
third party is required by or with respect to Parent or Sub in connection with
the execution and delivery of this Agreement and any Related Agreements to which
it is a party or the consummation of the transactions contemplated hereby and
thereby, except for such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws and such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not have a Parent Material Adverse Effect.
3.5 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 250,000,000
shares of Common Stock, $0.0001 par value, of which 24,052,150 shares were
issued and outstanding as of September 30, 1999, and 10,000,000 shares of
undesignated Preferred Stock, $0.0001 par value. No shares of Preferred Stock
are issued or outstanding. The authorized capital stock of Sub consists of 100
shares of Common Stock, no par value, 100 shares of which, as of the date
hereof, are issued and outstanding and are held by Parent. All such shares of
Parent and Sub have been duly authorized, and all such issued and outstanding
shares have been validly issued, are fully paid and nonassessable and are free
of any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof. Parent has also reserved an aggregate of
4,631,013 shares of Common Stock for issuance pursuant to its employee and
director stock and option and stock purchase plans. Except as set forth in
Section 3.5 of the Parent Disclosure Schedule, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Parent is a party or by which it is bound obligating Parent to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of Parent or obligating Parent to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid, non-assessable,
free of any liens or encumbrances and not subject to any preemptive rights or
rights of first refusal created by statute or the Certificate of Incorporation
or Bylaws of Parent or Sub or any agreement to which Parent or Sub is a party or
is bound.
3.6 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed all forms, reports and documents required
to be filed with the SEC (collectively, the "Parent SEC Reports"). The Parent
SEC Reports (i) at the time they were filed, complied as to form in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact require to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
-28-
were made, not misleading. Parent and Sub make no representation or warranty
whatsoever concerning the Parent SEC Reports as of any time other than the time
they were filed. None of the Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) (the "Parent Financial Statements")
contained in the Parent SEC Reports has been prepared in accordance with GAAP
applied on a consistent basis throughout the period involved (except as may be
indicated in the notes thereto) and each fairly presents in all material
respects the consolidated financial position of Parent and its subsidiaries as
at the respective dates thereof and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be, individually or in the
aggregate, materially adverse to Parent and its subsidiaries taken as a whole.
3.7 BROKERS' AND FINDERS' FEES. Except for certain fees the Parent has
agreed to pay to Credit Suisse First Boston, the Parent has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing), to carry on the Company's business
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to pay
or perform other obligations when due, and, to the extent consistent with such
business, use their reasonable best efforts consistent with past practice and
policies to preserve intact the Company's present business organizations, keep
available the services of the Company's present officers and key employees and
preserve the Company's relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving unimpaired the Company's goodwill and ongoing businesses at
the Effective Time. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of business of the Company
and any material event involving the Company.
Except as expressly contemplated by this Agreement as set forth in
Section 4.1 of the Disclosure Schedule, the Company shall not, without the prior
written consent of Parent:
(a) Make any expenditures or enter into any commitment or
transaction exceeding $50,000 individually or $100,000 in the aggregate or any
commitment or transaction of the type described in Section 2.9 hereof;
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(b) (i) Sell any Company Intellectual Property or enter into
any agreement with respect to the Company Intellectual Property with any person
or entity or with respect to the Intellectual Property of any person or entity,
(ii) buy any Intellectual Property or enter into any agreement with respect to
the Intellectual Property of any person or entity, (iii) enter into any
agreement with respect to development of any Intellectual Property with a third
party;
(c) Sell or enter into any license agreement with respect to
the Company Intellectual Property with any person or entity or buy or enter into
any license agreement with respect to the Intellectual Property of any person or
entity;
(d) Transfer to any person or entity any rights to the Company
Intellectual Property;
(e) Enter into or amend any Contract pursuant to which any
other party is granted marketing, distribution, development or similar rights of
any type or scope with respect to any products or technology of the Company;
(f) Amend or otherwise modify (or agree to do so), except in
the ordinary course of business, or violate the terms of, any of the Contracts
set forth or described in the Disclosure Schedule;
(g) Commence or settle any litigation;
(h) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of the capital
stock of the Company (or options, warrants or other rights exercisable
therefor);
(i) Except for the issuance of shares of Company Capital Stock
upon the exercise or conversion of options, warrants or other rights, or
convertible securities outstanding on the date hereof, and except for the grant
of additional stock options at the fair market value to the persons and in the
amounts listed and with the vesting as set forth on Section 4.1(i) to the
Disclosure Schedule, issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities.
(j) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(k) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise
-30-
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the Company's business;
(l) Sell, lease, license or otherwise dispose of any of its
properties or assets, except properties or assets which are not Intellectual
Property in the ordinary course of business and consistent with past practices;
(m) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(n) Grant any loans to others or purchase debt securities of
others or amend the terms of any outstanding loan agreement;
(o) Grant any severance or termination pay (i) to any director
or officer or (ii) to any other employee except payments made pursuant to
standard written agreements outstanding on the date hereof and disclosed in the
Disclosure Schedule;
(p) Adopt any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees;
(q) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(r) Pay, discharge or satisfy, in an amount in excess of
$50,000 in any one case or $100,000 in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Current Balance
Sheet;
(s) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(t) Enter into any strategic alliance or joint marketing
arrangement or agreement;
(u) Other than as specifically requested in writing by Parent,
accelerate the vesting schedule of any of the outstanding Company Options or
Company Capital Stock;
(v) Hire or terminate employees or encourage employees to
resign; or
(w) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (u) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder, or any other action not in the ordinary course of the
Company's business and consent with past practice.
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4.2 NO SOLICITATION. The parties agree to continue to be bound by the
provisions of the letter agreement, dated October 29, 1999 between the Parent
and the Company until the earlier of (i) the Termination Date (as defined below)
or (ii) the effective time.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 COMPANY SHAREHOLDER APPROVAL. No later than Saturday, November 6,
1999, the Company shall submit this Agreement and the transactions contemplated
hereby and thereby to its Shareholders for approval and adoption as provided by
Delaware Law and its Certificate of Incorporation and Bylaws. The Company shall
use its best efforts to solicit and obtain the consent of its Shareholders
sufficient to approve the Merger and this Agreement and to enable the Closing to
occur as promptly as practicable. The materials submitted to the Company's
Shareholders shall be subject to preview and approval by Parent and include
information regarding the Company; the terms of the Merger; the Agreement and
the Related Agreements; and the recommendation of the Board of Directors of the
Company in favor of the Merger, this Agreement and Related Agreements.
5.2 COMPANY EMPLOYEE STOCK OPTIONS. Prior to Closing, the Company
shall reclassify all incentive stock options granted to its employees since
October 22, 1999 as non-qualified stock options ("NSOS"). In furtherance of the
foregoing, the Company shall obtain and deliver to the Parent a signed written
agreement from each employee who received such a stock option stating that
employee agrees (a) that the exercise price of the stock option was not equal to
the fair market value of the Company's common stock on the date of grant and
therefore should be properly characterized as an NSO, and (b) to return all
documents previously executed by such employee with respect to such stock
options and to execute new documents evidencing the stock options as NSOs.
5.3 CONFIDENTIALITY; PUBLIC DISCLOSURE.
(a) Each of the Parent, Sub, Company and each of the Principal
Shareholders hereby agrees that the information obtained in any investigation
pursuant to Section 5.2, or pursuant to the negotiation and execution of this
Agreement or the effectuation of the transaction contemplated hereby shall be
governed by the terms of the Confidentiality Agreement effective October 29,
1999 by and between the Company and Parent (as if all of such parties are
parties to such confidentiality agreement).
(b) Unless otherwise required by law, no disclosure (whether
or not in response to an inquiry) of the subject matter of this Agreement shall
be made by any party hereto unless approved by Parent and the Company prior to
release.
5.4 CONSENTS. The Company and the Principal Shareholders shall use
their reasonable efforts to obtain the consents, waivers, assignments and
approvals under any of the Contracts as may be required in connection with the
Merger (all of such consents, waivers and approvals are set forth in the
Disclosure Schedule) so as to preserve all rights of, and benefits to, the
Company thereunder.
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5.5 REASONABLE EFFORTS. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement.
5.6 NOTIFICATION OF CERTAIN MATTERS. The Company and the Principal
Shareholders shall give prompt notice to Parent of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of the Company or the Principal
Shareholders, respectively, contained in this Agreement to be untrue or
inaccurate and (ii) any failure of the Company or the Principal Shareholders, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.6 shall not limit or otherwise
affect any remedies available to the party receiving such notice. Further,
disclosure by the Company or the Principal Shareholders pursuant to this Section
5.6 shall not be deemed to amend or supplement the Disclosure Schedule or
prevent or cure any misrepresentations, breach of warranty or breach of
covenant.
5.7 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.8 FIRPTA COMPLIANCE. On the Closing Date, the Company shall deliver
to Parent a properly executed statement in a form reasonably acceptable to
Parent for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.9 EXPENSES.
(a) Except as set forth in Section 5.9(b), whether or not the
Merger is consummated, all fees and expenses incurred in connection with the
Merger including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties ("THIRD PARTY
EXPENSES") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses.
(b) In the event that the Merger is consummated, Parent agrees
to pay up to $50,000 of those Third Party Expenses incurred by the Company, and
the Company agrees that Parent shall have full recourse to the Escrow Fund (as
defined herein) for payment of all Third Party Expenses of the Company that
exceed the greater of Estimated Third Party Expenses or $50,000.
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5.10 RESERVED.
5.11 EMPLOYEE BENEFITS. Each employee of the Company who remains an
employee of the Company after the Effective Time shall be eligible, upon
completion of Parent's standard employee background and reference check, upon
proof of appropriate employment authorization from the U.S. Immigration and
Naturalization Service or the U.S. Department of State reflecting a right to
work in the United States, to receive salary and benefits (such as medical
benefits, bonuses and 401(k) plan participation consistent with Parent's
standard human resource policies.
5.12 EMPLOYMENT AGREEMENTS. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, from
each of the Principal Shareholders an executed Employment Agreement with the
Parent substantially in the form attached hereto as EXHIBIT D, upon proof of
appropriate employment authorization from the U.S. Immigration and
Naturalization Service or the U.S. Department of State reflecting a right to
work in the United States, and subject to and in compliance with Parent's
standard human resources policies and procedures.
5.13 RETENTION BONUS. Subject to the terms and conditions listed on
SCHEDULE 5.13 (to be mutually agreed upon by Parent and Xxxxx Xxxxxxxxx within
30 days of the Closing Date), Parent shall pay, or cause the Company to pay, an
aggregate of $5,500,000 in retention bonuses ("Retention Bonuses") to the key
employees listed on SCHEDULE 5.13 (to be mutually agreed upon by Parent and
Xxxxx Xxxxxxxxx within 30 days of the Closing Date) (an aggregate of $500,000 of
the Retention Bonuses shall be paid as soon as practicable after the date of the
Closing and $5,000,000 of the Retention Bonuses will be paid on or about
November 30, 2000).
5.14 RULE 145 AFFILIATE AGREEMENTS. SCHEDULE 5.14 sets forth those
persons who, in the Company's reasonable judgment, are or may be "affiliates" of
the Company within the meaning of Rule 145 (each such person a "RULE 145
AFFILIATE") promulgated under the Securities Act ("RULE 145"). The Company shall
provide Parent such information and documents as Parent shall reasonably request
for purposes of reviewing such list. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement from each
of the Rule 145 Affiliates of the Company, an executed agreement ("RULE 145
AFFILIATE AGREEMENT") in the form attached hereto as EXHIBIT E. Parent and Sub
shall be entitled to place appropriate legends on the certificates evidencing
any Parent Common Stock to be received by such Rule 145 Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for Parent Common Stock, consistent with the terms of such
Rule 145 Affiliate Agreements.
5.15 REGISTRATION RIGHTS AGREEMENT. Parent shall deliver to the
Company and the Shareholders, and the Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, an
executed Registration Rights Agreement, substantially in the form attached
hereto as EXHIBIT F.
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5.16 VOTING AGREEMENTS. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, from
each of the Principal Shareholders, an executed Voting Agreement with the Parent
substantially in the form attached hereto as EXHIBIT G.
5.17 NO ACTIONS INCONSISTENT WITH TAX-FREE REORGANIZATION. The
Company, Parent and Sub shall (and, following the Effective Time, Parent shall
cause the Company to) take no action with respect to the capital stock, assets
or liabilities of the Company that could reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code.
5.18 NASDAQ LISTING. Parent agrees to authorize for listing 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, upon
official notice of issuance.
5.19 FORM S-8. Parent shall file a registration statement on Form S-8
to register shares of Parent Common Stock issuable upon exercise of assumed
Company Options (other than Company Options in the form of warrants or other
investments issued pursuant to arrangements that are not eligible for
registration on Form S-8) within 30 days after the Closing Date.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of the Parent, Sub and Company to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) COMPANY SHAREHOLDER APPROVAL. This Agreement shall have
been approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the Shareholders. If such approval has
been obtained by a written consent of the Shareholders, such consent shall be
signed by the holders of at least 90% of the shares of outstanding Company
Capital Stock.
(b) PERMITS. All approvals from government authorities,
including any requisite Blue Sky approvals, which are appropriate or necessary
for the consummation of the Merger, shall have been obtained.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal or otherwise
prohibits consummation of the Merger.
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(d) RESERVED.
(e) NASDAQ LISTING. The shares of Parent Common Stock issuable
to the Shareholders of Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on Nasdaq upon official notice of issuance.
6.2 CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of the
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Parent and Sub in this Agreement shall be true
and correct in all material respects on and as of the Effective Time as though
such representations and warranties were made on and as of such time and each of
Parent and Sub shall have performed and complied in all material respects with
all covenants and obligations of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) RESERVED.
(c) LEGAL OPINION. The Company shall have received a legal
opinion from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx with respect to the issuance of
the shares of Parent Common Stock in the Merger.
(d) REGISTRATION RIGHTS AGREEMENT. The Parent shall have
entered into the Registration Rights Agreement with the Shareholders which shall
be in full force and effect at the Effective Time and Parent shall not be in
breach of such Agreement, threatening to breach such Agreement or taking any
action materially inconsistent with Parent's obligations under the Agreement.
(e) OTHER DOCUMENTS. Company shall have been provided with
such other documents from the Parent and Sub as it shall reasonably request.
(f) CERTIFICATE OF THE PARENT. Company shall have been
provided with a certificate executed on behalf of Parent by a Vice President to
the effect that, as of the Effective Time:
(i) all representations and warranties made by Parent
and Sub in this Agreement are true and correct in all material respects on and
as of the Effective Time as though such representations and warranties were made
on and as of such time; and
(ii) all covenants and obligations of this Agreement
to be performed by Parent on or before such date have been so performed in all
material respects.
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6.3 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by Parent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Company and the Principal Shareholders in
this Agreement shall be true and correct in all material respects on and as of
the Effective Time as though such representations and warranties were made on
and as of the Effective Time and the Company and the Principal Shareholders
shall have performed and complied in all material respects with all covenants
and obligations of this Agreement required to be performed and complied with by
them as of the Effective Time.
(b) RESERVED.
(c) CLAIMS. There shall not have occurred any claims (whether
or not asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a Company
Material Adverse Effect. There shall be no BONA FIDE action, suit, claim or
proceeding of any nature pending, or overtly threatened, against the Parent, Sub
or the Company, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement.
(d) DISSENTERS. Shareholders holding no more than five percent
(5%) of the Company Capital Stock shall have exercised or given notice of their
intent to exercise appraisal rights in accordance with Delaware Law.
(e) THIRD PARTY CONSENTS. Any and all consents, waivers,
assignments and approvals in Section 2.6 hereto shall have been obtained.
(f) LEGAL OPINION. Parent shall have received a legal opinion
from Preston, Gates & Xxxxx, legal counsel to the Company, in such form as
Parent and its counsel shall reasonably request.
(g) EMPLOYMENT AGREEMENTS. Xxxxx Xxxxxxxxx and Xxxxxx Xxxxxxx
shall have entered into an Employment Agreement with Parent and each of such
Employment Agreements shall be in full force and effect at the Effective Time
and no party to any such agreement shall be in breach of the agreement,
threatening to breach such agreement or taking any action materially
inconsistent with the party's obligations under the agreement.
(h) AFFILIATE AGREEMENTS. Each Rule 145 Affiliate of the
Company shall have entered into a Rule 145 Affiliate Agreement and each of such
agreements shall be in full force and effect at the Effective Time and no party
to any such agreement shall be in breach of the agreement,
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are threatening to breach such agreement or taking any action materially
inconsistent with the party's obligations under the agreement.
(i) REGISTRATION RIGHTS AGREEMENT. The shareholders shall have
entered into the Registration Rights Agreement with Parent which shall be in
full force and effect at the Effective Time and no party to such agreement shall
be in breach of the agreement, threatening to breach such agreement or taking
any action materially inconsistent with the party's obligations under the
agreement.
(j) VOTING AGREEMENTS. Each of the Principal Shareholders
shall have entered into a Voting Agreement with Parent and each of such
agreements shall be in full force and effect on the Effective Time and no party
to any such agreement shall be in breach of the agreement, are threatening to
breach such agreement or taking any action materially inconsistent with the
party's obligations under the agreement.
(k) OTHER DOCUMENTS. Parent shall have been provided with such
other documents from the Company and Principal Shareholders as it shall
reasonably request.
(l) CERTIFICATE OF THE COMPANY AND PRINCIPAL SHAREHOLDERS.
Parent shall have been provided with a certificate executed by the Principal
Shareholders and executed on behalf of the Company by its Chief Executive
Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by the
Company and the Principal Shareholders in this Agreement are true and correct in
all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time;
(ii) all covenants and obligations of this Agreement
to be performed by the Company on or before such date have been so performed in
all material respects; and
(iii) the provisions set forth in Sections 6.3(c),
(d) and (e) have been satisfied.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Principal Shareholders' representations and warranties in this Agreement shall
survive the Merger and shall continue until the date that is twelve (12) months
after the Closing Date. All of the Parent's and Sub's representations and
warranties in this Agreement shall survive the Merger and shall continue until
the date that is twelve (12) months after the Closing Date.
7.2 INDEMNIFICATION. The Principal Shareholders, severally, and the
Company agree to indemnify and hold Parent and its officers, directors and
affiliates harmless against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
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expenses of investigation and defense (hereinafter individually a "LOSS" and
collectively "LOSSES") incurred by Parent, its officers, directors, or
affiliates (including the Surviving Corporation) directly or indirectly as a
result of (i) any inaccuracy or breach of a representation or warranty of the
Company or the Principal Shareholders contained in this Agreement or any Related
Agreements, (ii) any failure by the Company or the Principal Shareholders to
perform or comply with any covenant contained in this Agreement or any Related
Agreements, (iii) the Third Party Expenses incurred by the Company exceeding the
greater of the Estimated Third Party Expenses or $50,000, (iv) any and all
claims relating to Xxxxxx Xxxxxx'x alleged purchase of Company Capital Stock,
including without limitation the claims disclosed in the Disclosure Schedule
(the "XXXXXX XXXXXX MATTER") (the foregoing indemnity relating to the Xxxxxx
Xxxxxx matter shall be effective notwithstanding any disclosure concerning such
matter in the Disclosure Schedule). The Shareholders shall not have any right of
indemnification or contribution from the Company with respect to any Loss
claimed by an indemnified party after the Effective Time (PROVIDED, HOWEVER,
that except as provided in this sentence, this Agreement or the Related
Agreements, the Company's obligations to indemnify the officers and directors of
the Company for actions taken by such officers and directors prior to the
Effective Time shall survive the Closing). Notwithstanding the foregoing,
neither Seller nor any of the Principal Shareholders shall have any liability
under this Section 7.2, unless and until the aggregate Losses for which
indemnification is sought (aggregating all of the claims against the Seller and
all of the Principal Shareholders) exceed $100,000, in which case the full
amount of such Losses (including the $100,000) shall be subject to
indemnification. Except in the event of fraud, willful conduct or with respect
to the Xxxxxx Xxxxxx matter, the Escrow Fund (as defined below) shall be the
sole right and remedy of Parent and Sub for breaches of the Company's and
Principal Shareholders' representations and warranties.
7.3 ESCROW ARRANGEMENTS.
(a) ESCROW FUND. As security for the indemnity provided for in
Section 7.2 hereof and by virtue of this Agreement and the Merger Agreement, the
Company and the Shareholders will be deemed to have received and deposited with
the Escrow Agent (as defined below) the Escrow Amount (plus any additional
shares as may be issued upon any stock split, stock dividend or recapitalization
effected by Parent after the Effective Time with respect to the Escrow Amount)
without any act of the Company or any Shareholders. As soon as practicable after
the Effective Time, the Escrow Amount, without any act of any Shareholders, will
be deposited with [U.S. Bank Trust N.A.] (or other institution acceptable to
Parent and the Securityholder Agent (as defined in Section 7.3(g) below)) as
Escrow Agent (the "ESCROW AGENT"), such deposit to constitute an escrow fund
(the "ESCROW FUND") to be governed by the terms set forth herein. The Escrow
Agent may execute this Agreement following the date hereof and prior to the
Effective Time, and such latter execution shall not affect the binding nature of
this Agreement as of the date hereof among the signatories hereto. Nothing
herein shall limit the liability of the Company for any breach of any
representation, warranty, or covenant contained in this Agreement if the Merger
does not close.
(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW
PERIODS. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the
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Effective Time and shall terminate at 5:00 p.m., Pacific time, on the twelve
(12) month anniversary of the Closing Date (the "ESCROW PERIOD"); PROVIDED THAT
the Escrow Period shall not terminate with respect to such remaining portion of
the Escrow Fund (or some portion thereof) that in the reasonable judgement of
Parent, subject to the objection of the Securityholder Agent (as defined below)
and the subsequent arbitration of the matter in the manner provided in Section
7.3(f) hereof, is necessary to satisfy (i) any then pending unsatisfied claims
specified in any Officer's Certificate delivered to the Escrow Agent prior to
the termination of the Escrow Period and (ii) any unsatisfied claims specified
in any Officer's Certificate delivered to the Escrow Agent prior to termination
of the Escrow Period with respect to facts and circumstances existing prior to
the termination of such Escrow Period. As soon as all such claims have been
resolved and all Third Party Expenses have been paid pursuant to Section 5.9
hereof, the Escrow Agent shall deliver to the Shareholders the remaining portion
of the Escrow Fund not required to satisfy such claims and Third Party Expenses.
Deliveries of Escrow Amounts to the Shareholders pursuant to this Section 7.3(b)
shall be made in proportion to their respective original contributions to the
Escrow Fund.
(c) PROTECTION OF ESCROW FUND.
(i) The Escrow Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other
equity securities issued or distributed by Parent (including shares issued upon
a stock split) ("NEW SHARES") in respect of Parent Common Stock in the Escrow
Fund which have not been released from the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. New Shares issued in respect of shares of
Parent Common Stock which have been released from the Escrow Fund shall not be
added to the Escrow Fund but shall be distributed to the record holders thereof.
Cash dividends on Parent Common Stock, if any, shall not be added to the Escrow
Fund but shall be distributed to the record holders thereof.
(iii) Each Shareholder shall have voting rights and
the right to distributions of dividends with respect to the shares of Parent
Common Stock contributed to the Escrow Fund by such Shareholders (and on any
voting securities added to the Escrow Fund in respect of such shares of Parent
Common Stock).
(d) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Escrow Agent at any time on
or before the last day of the Escrow Period of a certificate signed by any
officer of Parent (an "OFFICER'S CERTIFICATE"): (A) stating that Parent has paid
or properly accrued or reasonably anticipates that it will have to pay or accrue
Losses, (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentations, breach of warranty or covenant to which
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such items is related, and (C) specifying the number of Escrow Shares necessary
to satisfy such claim, the Escrow Agent shall, subject to the provisions of
Section 7.3(e), deliver to Parent out of the Escrow Fund as promptly as
practicable, shares of Parent Common Stock held in the Escrow Fund in an amount
equal to such Losses. In lieu of delivery to Parent of Parent Common Stock out
of the Escrow Fund, the Shareholders shall have the right to pay for any such
Losses in cash.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow Fund
as indemnity pursuant to Section 7.3(b) and 7.3(d)(i) hereof, the shares of
Parent Common Stock shall be valued at the Escrow Trading Price.
(e) OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Securityholder Agent and for a period of thirty (30)
days after such delivery, the Escrow Agent shall make no delivery to Parent of
any Escrow Amounts pursuant to Section 7.3(d) hereof unless the Escrow Agent
shall have received written authorization from the Securityholder Agent to make
such delivery. After the expiration of such thirty (30) day period, the Escrow
Agent shall make delivery of shares of Parent Common Stock from the Escrow Fund
in accordance with Section 7.3(d) hereof, provided that no such payment or
delivery may be made if the Securityholder Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent prior to the expiration of such
thirty (30) day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Securityholder Agent shall so object
in writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common Stock from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Securityholder Agent may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration conducted by
one arbitrator mutually agreeable to Parent and the Securityholder Agent. In the
event that within forty-five (45) days after submission of any dispute to
arbitration, Parent and the Securityholder Agent cannot mutually agree on one
arbitrator, Parent and the Securityholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrator or arbitrators, as the case may be, shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgement of the arbitrator or
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majority of the three arbitrators, as the case may be, to discover relevant
information from the opposing parties about the subject matter of the dispute.
The arbitrator or a majority of the three arbitrators, as the case may be, shall
rule upon motions to compel or limit discovery and shall have the authority to
impose sanctions, including attorneys' fees and costs, to the extent as a court
of competent law or equity, should the arbitrator or a majority of the three
arbitrators, as the case may be, determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator or a majority of the
three arbitrators, as the case may be, as to the validity and amount of any
claim in such Officer's Certificate shall be binding and conclusive upon the
parties to this Agreement, and notwithstanding anything in Section 7.3(e)
hereof, the Escrow Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow Fund in accordance
therewith. Such decision shall be written and shall be supported by written
findings of fact and conclusions which shall set forth the award, judgment,
decree or order awarded by the arbitrator(s).
(iii) Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. Any such
arbitration shall be held in Contra Costa County, Delaware under the rules then
in effect of the American Arbitration Association. All expenses relating to the
arbitration shall be paid, including without limitation, the respective expenses
of each party, the fees of each arbitrator and the administrative fee of the
American Arbitration Association, by the losing party.
(g) SECURITYHOLDER AGENT OF THE SHAREHOLDERS; POWER OF
ATTORNEY.
(i) In the event that the Merger is approved,
effective upon such vote, and without further act of any Shareholders, Xxxxx
Xxxxxxxxx shall be appointed as agent and attorney-in-fact (the "SECURITYHOLDER
AGENT") for each Shareholder of the Company, for and on behalf of Shareholders,
to give and receive notices and communications, to authorize delivery to Parent
of shares of Parent Common Stock from the Escrow Fund in satisfaction of claims
by Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of Securityholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the Shareholders
from time to time upon not less than thirty (30) days prior written notice to
Parent; provided that the Securityholder Agent may not be removed unless holders
of a majority interest of the Escrow Fund agree to such removal and to the
identity of the substituted agent. No bond shall be required of the
Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the
Shareholders.
(ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent while acting in good
faith and in the exercise of reasonable judgment. The Shareholders on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall severally
indemnify the Securityholder Agent and hold the Securityholder Agent
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harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of the Securityholder Agent and arising out of or in
connection with the acceptance or administration of the Securityholder Agent's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Securityholder Agent.
(h) ACTIONS OF THE SECURITYHOLDER AGENT. A decision, act,
consent or instruction of the Securityholder Agent shall constitute a decision
of all the Shareholders for whom a portion of the Escrow Amount otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each of such Shareholders, and the Escrow Agent and Parent
may rely upon any such decision, act, consent or instruction of the
Securityholder Agent as being the decision, act, consent or instruction of each
and every such Shareholder. The Escrow Agent and Parent are hereby relieved from
any liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Securityholder Agent.
(i) THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and the
Securityholder Agent and the Shareholders of the Company shall be entitled, at
their expense, to participate in any defense of such claim. Parent shall have
the right in its sole discretion to settle any such claim; provided, however,
that except with the consent of the Securityholder Agent, no settlement of any
such claim with third-party claimants shall be determinative of the amount of
any claim against the Escrow Fund. In the event that the Securityholder Agent
has consented to any such settlement, the Securityholder Agent shall have no
power or authority to object under any provision of this Article VII to the
amount of any claim by Parent against the Escrow Fund with respect to such
settlement.
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized
to disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or
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decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Escrow Agent is not responsible for determining
and verifying the authority of any person acting or purporting to act on behalf
of any party to this Agreement.
(vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damages.
Furthermore, the Escrow Agent may at its option, file
an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to deposit
with the clerk of the court all documents and shares of Parent Common Stock held
in escrow, except all cost, expenses, charges and reasonable attorney fees
incurred by the Escrow Agent due to the interpleader action and which the
parties jointly and severally agree to pay. Upon initiating such action, the
Escrow Agent shall be fully released and discharged of and from all obligations
and liability imposed by the terms of this Agreement.
(vii) Parent agrees to indemnify and hold Escrow
Agent harmless against any and all losses, claims, damages, liabilities, and
expenses, including reasonable costs of investigation, counsel fees, including
allocated costs of in-house counsel and disbursements that may be imposed on
Escrow Agent or incurred by Escrow Agent in connection with the performance of
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his/her duties under this Agreement, including but not limited to any litigation
arising from this Agreement or involving its subject matter other than arising
out of its negligence or willful misconduct.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to Parent and the Securityholder
Agent; provided, however, that no such resignation shall become effective until
the appointment of a successor escrow agent which shall be accomplished as
follows: the parties shall use their best efforts to mutually agree on a
successor escrow agent within thirty (30) days after receiving such notice. If
the parties fail to agree upon a successor escrow agent within such time, the
Escrow Agent shall have the right to appoint a successor escrow agent authorized
to do business in the state of Delaware. The successor escrow agent shall
execute and deliver an instrument accepting such appointment and it shall,
without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor escrow agent as if originally named as
escrow agent. Upon appointment of a successor escrow agent, the Escrow Agent
shall be discharged from any further duties and liability under this Agreement.
(k) FEES. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent in accordance with the standard fee
schedule of the Escrow Agent. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement, or if the parties
request a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to the Escrow Fund or its subject matter, the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy or litigation. The
Parent promises to pay these sums upon demand.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in Section 8.2, this Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual consent of the Company and Parent, as evidenced
in a written agreement executed by both parties;
(b) by Parent or the Company if: (i) the Effective Time has
not occurred by December 31, 1999, PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement; (ii) there
shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or (iii) there shall be any
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statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity that would make consummation
of the Merger illegal;
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would: (i) prohibit
or materially restrict the Parent's or the Surviving Corporation's ownership or
operation of any portion of the business of the Company or (ii) compel Parent or
the Company to dispose of or hold separate all or a portion of the business or
assets of the Company or Parent as a result of the Merger;
(d) by Parent if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement or
any Related Agreements on the part of the Company and such breach has not been
cured within ten (10) calendar days after written notice to the Company;
PROVIDED, HOWEVER, that, no cure period shall be required for a breach which by
its nature cannot be cured; or
(e) by Parent if an event having a Company Material Adverse
Effect shall have occurred after the date of this Agreement.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Sub or the
Company, or their respective officers, directors or Stockholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; provided further that, the provisions of Sections 5.3 and 5.9(a),
Article IX and this Section 8.2 shall remain in full force and effect and
survive any termination of this Agreement.
8.3 AMENDMENT. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of Parent,
Sub, the Company and the Principal Shareholders.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent
and Sub, on the one hand, and the Company and the Principal Shareholders, on the
other hand, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or
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mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with acknowledgment of complete transmission) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice), PROVIDED, HOWEVER, that notices sent by mail will not be deemed
given until received:
(a) if to Parent or Sub, to:
Commerce One, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
N. Xxxxxxx Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Liron and Xxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Preston, Gates & Xxxxx
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(c) If to the Principal Shareholders, to:
Liron and Xxxxx Xxxxxxxxx
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and to:
Xxxxxx Xxxxxxx
0000 Xxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (415)
(d) If to the Escrow Agent, to:
U.S. Bank Trust N.A.
Xxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(e) If to the Securityholder Agent, to:
Xxxxx Xxxxxxxxx
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.3 COUNTERPARTS; FACSIMILE. This Agreement may be executed by
facsimile and in one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other party, it
being understood that all parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Related
Agreements, the Exhibits and Schedules hereto, the Confidentiality, dated
October 1999, between the Company and Parent and the documents and instruments
and other agreements among the parties hereto referenced herein: (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
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and supersede all prior agreements and understandings both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned (other than by operation of law), except that Parent
and Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
9.5 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within Contra Costa County, State of
Delaware, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be served
upon them in any manner authorized by the laws of the State of Delaware for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction, venue and such process. Each of
Parent, Company and Sub hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this agreement or the actions of
Parent, Company or Sub in the negotiation, administration, performance and
enforcement hereof.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefor, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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9.9 ATTORNEYS FEES. If any action or other proceeding relating to the
enforcement of any provision of this Agreement is brought by 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).
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IN WITNESS WHEREOF, Parent, Sub, the Company, the Principal
Shareholders, the Escrow Agent and the Securityholder Agent have caused this
Agreement to be signed, all as of the date first written above.
COMMERCE ONE, INC. XXXXX XXXXXXXXX
By:
------------------------------------- --------------------------------
Name:
Title:
XXXXX ACQUISITION CORPORATION XXXXX XXXXXXXXX
By:
------------------------------------- --------------------------------
Name:
Title:
XXXXXXXXXXX.XXX, INC. XXXXXX XXXXXXX
By:
------------------------------------- --------------------------------
Name:
Title:
ESCROW AGENT:
U.S. BANK TRUST N.A.
(for purposes of Article VII only)
By:
-------------------------------------
Name:
Title:
SECURITYHOLDER AGENT:
XXXXX XXXXXXXXX
(for purposes of Article VII only)
-------------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
