Exhibit 4.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NETWORK ENGINES, INC., IPP ACQUISITION CO.,
AND
IP PERFORMANCE, INC.
November 7, 2000
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER................................................................. 1
1.1 The Merger................................................................. 1
1.2 The Closing................................................................ 1
1.3 Actions at the Closing..................................................... 1
1.4 Additional Action.......................................................... 2
1.5 Conversion of Shares....................................................... 2
1.6 Dissenting Shares.......................................................... 3
1.7 Fractional Shares.......................................................... 3
1.8 Warrants................................................................... 4
1.9 Escrow..................................................................... 4
1.10 Certificate of Incorporation and By-laws................................... 5
1.11 No Further Rights.......................................................... 5
1.12 Closing of Transfer Books.................................................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 5
2.1 Organization, Qualification and Corporate Power............................ 5
2.2 Capitalization............................................................. 6
2.3 Authorization of Transaction............................................... 6
2.4 Noncontravention........................................................... 7
2.5 Subsidiaries............................................................... 7
2.6 Financial Statements....................................................... 7
2.7 Absence of Certain Changes................................................. 8
2.8 Undisclosed Liabilities.................................................... 8
2.9 Tax Matters................................................................ 8
2.10 Assets..................................................................... 9
2.11 Owned Real Property........................................................ 10
2.12 Real Property Leases....................................................... 10
2.13 Intellectual Property...................................................... 10
2.14 Contracts.................................................................. 12
2.15 Accounts Receivable........................................................ 13
2.16 Powers of Attorney......................................................... 13
2.17 Insurance.................................................................. 13
2.18 Litigation................................................................. 13
2.19 Warranties................................................................. 14
2.20 Employees.................................................................. 14
2.21 Employee Benefits.......................................................... 14
2.22 Environmental Matters...................................................... 16
2.23 Legal Compliance........................................................... 17
2.24 Customers and Suppliers.................................................... 17
2.25 Permits.................................................................... 17
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2.26 Certain Business Relationships With Affiliates............................. 17
2.27 Brokers' Fees.............................................................. 17
2.28 Books and Records.......................................................... 17
2.29 Disclosure................................................................. 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY.. 18
3.1 Organization, Qualification and Corporate Power............................ 18
3.2 Capitalization............................................................. 18
3.3 Authorization of Transaction............................................... 18
3.4 Noncontravention........................................................... 19
3.5 Reports and Financial Statements........................................... 19
3.6 Interim Operations of the Transitory Subsidiary............................ 20
3.7 Brokers' Fees.............................................................. 20
ARTICLE IV COVENANTS.................................................................. 20
4.1 Closing Efforts............................................................ 20
4.2 Governmental and Third-Party Notices and Consents.......................... 20
4.3 Stockholder Approval....................................................... 20
4.4 Operation of Business...................................................... 21
4.5 Access to Information...................................................... 23
4.6 Notice of Breaches......................................................... 23
4.7 Exclusivity................................................................ 24
4.8 Expenses................................................................... 24
4.9 Indemnification............................................................ 24
4.10 Listing of Merger Shares................................................... 24
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER....................................... 25
5.1 Conditions to Each Party's Obligations..................................... 25
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary....... 25
5.3 Conditions to Obligations of the Company................................... 26
ARTICLE VI INDEMNIFICATION............................................................ 27
6.1 Indemnification by the Company Stockholders................................ 27
6.2 Indemnification by the Buyer............................................... 28
6.3 Indemnification Claims..................................................... 28
6.4 Survival of Representations and Warranties................................. 31
6.5 Limitations................................................................ 32
ARTICLE VII REGISTRATION RIGHTS........................................................ 32
7.1 Registration of Shares..................................................... 32
7.2 Limitations on Registration Rights......................................... 33
7.3 Incidental Registration.................................................... 34
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7.4 Registration Procedures.................................................... 35
7.5 Requirements of Company Stockholders....................................... 35
7.6 Indemnification............................................................ 36
7.7 Assignment of Rights....................................................... 36
7.8 Availability of Information................................................ 36
ARTICLE VIII TERMINATION................................................................ 37
8.1 Termination of Agreement................................................... 37
8.2 Effect of Termination...................................................... 38
ARTICLE IX DEFINITIONS................................................................ 38
ARTICLE X MISCELLANEOUS.............................................................. 40
10.1 Press Releases and Announcements........................................... 40
10.2 No Third Party Beneficiaries............................................... 40
10.3 Entire Agreement........................................................... 40
10.4 Succession and Assignment.................................................. 40
10.5 Counterparts and Facsimile Signature....................................... 40
10.6 Headings................................................................... 40
10.7 Notices.................................................................... 41
10.8 Governing Law.............................................................. 41
10.9 Amendments and Waivers..................................................... 41
10.10 Severability............................................................... 41
10.11 Submission to Jurisdiction................................................. 42
10.12 Construction............................................................... 42
Exhibit A - Escrow Agreement
Exhibit B - Investment Representation Letter
Exhibit C - Form of Stock Restriction Agreement
Exhibit D - Form of Stockholders Agreement
Exhibit E - Opinion of Counsel to the Company
Exhibit F - Opinion of Counsel to the Buyer and the Transitory Subsidiary
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of November 7, 2000 by and among Network Engines,
Inc., a Delaware corporation (the "Buyer"), IPP Acquisition Co., a Delaware
corporation and a wholly-owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and IP Performance, Inc., a Delaware corporation (the "Company").
The Buyer, the Transitory Subsidiary and the Company are referred to
collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary into the
Company. In such merger, the stockholders of the Company will receive common
stock of the Buyer in exchange for their capital stock of the Company.
The Parties intend the Merger (as defined below) to constitute a
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), for United States federal income tax purposes and that
this Agreement constitutes a plan of reorganization.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Surviving
Corporation files a certificate of merger or other appropriate documents
prepared and executed in accordance with Section 251(c) of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of the
State of Delaware. The Merger shall have the effects set forth in Section 259
of the Delaware General Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxx and Xxxx LLP
in Boston, Massachusetts, commencing at 9:00 a.m. local time on November 8,
2000, or, if all of the conditions to the obligations of the Parties to
consummate the transactions contemplated hereby have not been satisfied or
waived by such date, on such mutually agreeable later date as soon as
practicable (and in any event not later than three business days) after the
satisfaction or waiver of all conditions (excluding the delivery of any
documents to be delivered at the Closing by any of the Parties) set forth in
Article V hereof (the "Closing Date").
1.3 Actions at the Closing. At the Closing:
(a) the Company shall deliver to the Buyer and the Transitory
Subsidiary the various certificates, instruments and documents referred to
in Section 5.2;
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(b) the Buyer and the Transitory Subsidiary shall deliver to the
Company the various certificates, instruments and documents referred to in
Section 5.3;
(c) the Surviving Corporation shall file with the Secretary of State
of the State of Delaware the Certificate of Merger;
(d) each of the stockholders of record of the Company immediately
prior to the Effective Time (the "Company Stockholders") shall deliver to
the Buyer the certificate(s) representing his, her or its Company Shares
(as defined below);
(e) the Buyer shall deliver certificates for the Initial Shares (as
defined below) to each Company Stockholder in accordance with Section 1.5;
and
(f) the Buyer, each Company Stockholder and The Chase Manhattan Bank
(the "Escrow Agent") shall execute and deliver the Escrow Agreement
attached hereto as Exhibit A (the "Escrow Agreement") and the Buyer shall
deliver to the Escrow Agent a certificate for the Escrow Shares (as defined
below) being placed in escrow on the Closing Date pursuant to Section 1.9.
1.4 Additional Action. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, $.001 par value per share, of the
Company ("Common Shares" or "Company Shares") issued and outstanding
immediately prior to the Effective Time (other than Company Shares owned
beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares
(as defined below) and Company Shares held in the Company's treasury) shall
be converted into and represent the right to receive (subject to the
provisions of Section 1.9) such number of shares of common stock, $.01 par
value per share, of the Buyer ("Buyer Common Stock") as is equal to the
Conversion Ratio (as defined below).
(b) The "Conversion Ratio" shall be the result obtained by dividing
(i) (A) $14,000,000 if the average reported closing price of the Buyer
Common Stock on the Nasdaq National Market over the 15 consecutive trading
days ending on the third trading day prior to the Closing (the "Average
Closing Price") is between $33.46 and $40.90, (B) $15,000,000 if the
Average Closing Price is equal to or greater than $40.90 or (C) $13,000,000
if the Average Closing Price is equal to or less than $33.46 by (ii) the
number of outstanding Company Shares immediately prior to the Effective
Time, and dividing such amount by (iii) the Average Closing Price. The
Conversion Ratio shall be subject to equitable adjustment in the event of
any stock split, stock dividend, reverse stock split or similar event
affecting the Buyer Common Stock between the beginning of such fifteen-day
period and the Effective Time. The Company Stockholders shall be entitled
to receive, promptly after the Effective Time, 90% of the shares of Buyer
Common Stock into which their Company Shares were converted pursuant to
this Section 1.5 (the "Initial Shares"); the remaining 10% of the shares of
Buyer Common Stock into
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which their Company Shares were converted pursuant to this Section 1.5,
rounded to the nearest whole number (the "Escrow Shares"), shall be
deposited in escrow pursuant to Section 1.9 and shall be held and disposed
of in accordance with the terms of the Escrow Agreement. The Initial Shares
and the Escrow Shares shall together be referred to herein as the "Merger
Shares."
(c) Each Company Share held in the Company's treasury immediately
prior to the Effective Time and each Company Share owned beneficially by
the Buyer or the Transitory Subsidiary shall be cancelled and retired
without payment of any consideration therefor.
(d) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and thereafter evidence one share of
common stock, $.01 par value per share, of the Surviving Corporation.
1.6 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means Company
Shares held as of the Effective Time by a Company Stockholder who has not
voted such Company Shares in favor of the adoption of this Agreement and
the Merger and with respect to which appraisal shall have been duly
demanded and perfected in accordance with Section 262 of the Delaware
General Corporation Law and not effectively withdrawn or forfeited prior to
the Effective Time. Dissenting Shares shall not be converted into or
represent the right to receive Merger Shares, unless such Company
Stockholder shall have forfeited his, her or its right to appraisal under
the Delaware General Corporation Law or properly withdrawn, his, her or its
demand for appraisal. If such Company Stockholder has so forfeited or
withdrawn his, her or its right to appraisal of Dissenting Shares, then (i)
as of the occurrence of such event, such holder's Dissenting Shares shall
cease to be Dissenting Shares and shall be converted into and represent the
right to receive the Merger Shares issuable in respect of such Company
Shares pursuant to Section 1.5, and (ii) promptly following the occurrence
of such event, the Buyer shall deliver to such Company Stockholder a
certificate representing 90% of the Merger Shares to which such holder is
entitled pursuant to Section 1.5 (which shares shall be considered Initial
Shares for all purposes of this Agreement) and shall deliver to the Escrow
Agent a certificate representing the remaining 10% of the Merger Shares to
which such holder is entitled pursuant to Section 1.5 (which shares shall
be considered Escrow Shares for all purposes of this Agreement).
(b) The Company shall give the Buyer (i) prompt notice of any written
demands for appraisal of any Company Shares, withdrawals of such demands,
and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the Delaware General
Corporation Law. The Company shall not, except with the prior written
consent of the Buyer, make any payment with respect to any demands for
appraisal of Company Shares or offer to settle or settle any such demands.
1.7 Fractional Shares. No certificates representing fractional Initial
Shares shall be issued to former Company Stockholders upon the surrender for
exchange of certificates that, immediately prior to the Effective Time,
represented Company Shares converted into Merger Shares pursuant to Section 1.5
(including any Company Shares referred to in the last sentence of
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Section 1.6(a)) ("Certificates"), and such former Company Stockholders shall not
be entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Buyer with respect to any
fractional Initial Shares that would have otherwise been issued to such former
Company Stockholders. In lieu of any fractional Initial Shares that would have
otherwise been issued, each former Company Stockholder that would have been
entitled to receive a fractional Initial Share shall, upon proper surrender of
such person's Certificates, receive such whole number of Initial Shares as is
equal to the precise number of Initial Shares to which such person would be
entitled, rounded up or down to the nearest whole number (with a fractional
interest equal to .5 rounded to the nearest odd number); provided that each such
holder shall receive at least one Initial Share.
1.8 Warrants.
(a) The Company shall cause the termination, as of the Effective Time,
of (i) Common Stock Warrant No. CW-001 dated July 31, 2000 issued to VIEO,
Inc. (formerly known as Power Micro Research, Inc.) (the "Warrant") if the
Warrant is not elected to be exercised prior to the Closing Date, and
thereafter the Warrant shall be of no further force or effect and (ii) the
rights granted to Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP to receive a warrant to
purchase common stock of the Company under the engagement letter agreement
dated as of July 14, 2000, between the Company and said firm, and
thereafter such warrant rights shall be of no further force or effect.
(b) The Company shall obtain, prior to the Closing and pursuant to
Section 1.8(a), (i) the consent from the holder of the Warrant to the
termination of the Warrant, and (ii) the consent from Xxxxxxx, Phleger &
Xxxxxxxx LLP to the termination of its rights to receive a warrant under
the engagement letter agreement dated as of July 14, 2000.
1.9 Escrow.
(a) On the Closing Date, the Buyer shall deliver to the Escrow Agent a
certificate or certificates (issued in the name of the Escrow Agent or its
nominee) representing the Escrow Shares, as described in Section 1.5, for
the purpose of securing the indemnification obligations of the Indemnifying
Stockholders (as defined in Section 6.1) set forth in this Agreement. The
Escrow Shares shall be held by the Escrow Agent under the Escrow Agreement
pursuant to the terms thereof. The Escrow Shares shall be held as a trust
fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party, and shall be held
and disbursed solely for the purposes and in accordance with the terms of
the Escrow Agreement.
(b) The adoption of this Agreement and the approval of the Merger by
the Company Stockholders shall constitute approval of the Escrow Agreement
and of all of the arrangements relating thereto, including without
limitation the placement of the Escrow Shares in escrow and the appointment
of Xxx Xxxxxx, as the representative of the Company Stockholders (the
"Indemnification Representative") (i) to take all action necessary in
connection with the defense and/or settlement of any claims for which the
Stockholders may be required to indemnify the Buyer or the Company pursuant
to Article VI hereof, (ii) to give and receive all notices required to be
given under this Agreement and the Escrow Agreement, and (iii) to take
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any and all additional action as is contemplated to be taken by or on
behalf of the Company Stockholders by the terms of this Agreement or the
Escrow Agreement.
1.10 Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the
Certificate of Incorporation of the Transitory Subsidiary immediately prior
to the Effective Time, except that (1) the name of the corporation set
forth therein shall be changed to the name of the Company and (2) the
identity of the incorporator shall be deleted.
(b) The By-laws of the Surviving Corporation immediately following the
Effective Time shall be the same as the By-laws of the Transitory
Subsidiary immediately prior to the Effective Time, except that the name of
the corporation set forth therein shall be changed to the name of the
Company.
1.11 No Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
1.12 Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Buyer or the Surviving Corporation, they shall be cancelled and exchanged
for Initial Shares in accordance with Section 1.5, subject to Section 1.9 and to
applicable law in the case of Dissenting Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Buyer on the date hereof and
accepted in writing by the Buyer (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify only the corresponding
paragraph in this Article II. For purposes of this Article II, the phrase "to
the knowledge of the Company" or any phrase of similar import shall be deemed to
refer to the actual knowledge of the executive officers of the Company, as well
as any other knowledge which such executive officers would have possessed had
they made reasonable inquiry of appropriate employees and agents of the Company
with respect to the matter in question.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect (as defined below). The
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Company has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Company has furnished to the Buyer complete and accurate copies
of its Certificate of Incorporation and By-laws. The Company is not in default
under or in violation of any provision of its Certificate of Incorporation or
By-laws. For purposes of this Agreement, "Company Material Adverse Effect" means
a material adverse effect on the assets, business, condition (financial or
otherwise), or results of operations of the Company.
2.2 Capitalization. The authorized capital stock of the Company consists of
(a) 2,000,000 Common Shares, of which, as of the date of this Agreement, 932,605
shares were issued and outstanding and no shares were held in the treasury of
the Company and (b) 1,000,000 Preferred Shares, of which, as of the date of this
Agreement, no shares are issued and outstanding. Section 2.2 of the Disclosure
Schedule sets forth a complete and accurate list of (i) all stockholders of the
Company, indicating the number and class or series of Company Shares held by
each stockholder and (for Company Shares other than Common Shares) the number of
Common Shares (if any) into which such Company Shares are convertible, (ii) all
outstanding warrants, indicating (A) the holder thereof, (B) the number and
class or series of Company Shares subject to each warrant and (for Company
Shares other than Common Shares) the number of Common Shares (if any) into which
such Company Shares are convertible, (C) the exercise price, date of grant,
vesting schedule and expiration date for each warrant, and (D) any terms
regarding the acceleration of vesting, and (iii) all stock option plans and
other stock or equity-related plans of the Company. All of the issued and
outstanding Company Shares are, and all Company Shares that may be issued upon
exercise of warrants will be (upon issuance in accordance with their terms),
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. Other than the warrants listed in Section 2.2 of the
Disclosure Schedule, there are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance or redemption of any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no
agreements to which the Company is a party or by which it is bound with respect
to the voting (including without limitation voting trusts or proxies),
registration under the Securities Act of 1933, as amended (the "Securities
Act"), or sale or transfer (including without limitation agreements relating to
pre-emptive rights, rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company. To the knowledge of the Company, there
are no agreements among other parties, to which the Company is not a party and
by which it is not bound, with respect to the voting (including without
limitation voting trusts or proxies) or sale or transfer (including without
limitation agreements relating to rights of first refusal, co-sale rights or
"drag-along" rights) of any securities of the Company. All of the issued and
outstanding Company Shares were issued in compliance with applicable federal and
state securities laws.
2.3 Authorization of Transaction. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and,
subject to the adoption of this Agreement and the approval of the Merger by a
majority of the votes represented by the outstanding Company Shares entitled to
vote on this Agreement and the Merger (the "Requisite Stockholder Approval"),
the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of the Company.
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Without limiting the generality of the foregoing, the Board of Directors of the
Company, at a meeting duly called and held, by the unanimous vote of all
directors (i) determined that the Merger is fair and in the best interests of
the Company and its stockholders, (ii) adopted this Agreement in accordance with
the provisions of the Delaware General Corporation Law, and (iii) directed that
this Agreement and the Merger be submitted to the stockholders of the Company
for their adoption and approval and resolved to recommend that the stockholders
of Company vote in favor of the adoption of this Agreement and the approval of
the Merger. This Agreement has been duly and validly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
2.4 Noncontravention. Subject to the filing of the Certificate of Merger
as required by the Delaware General Corporation Law, neither the execution and
delivery by the Company of this Agreement, nor the consummation by the Company
of the transactions contemplated hereby, will (a) conflict with or violate any
provision of the Certificate of Incorporation or By-laws of the Company, (b)
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (a "Governmental Entity"), (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party the right to terminate, modify or cancel, or require any notice, consent
or waiver under, any contract or instrument to which the Company is a party or
by which the Company is bound or to which any of its assets is subject, (d)
result in the imposition of any Security Interest (as defined below) upon any
assets of the Company or (e) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its properties
or assets. For purposes of this Agreement: "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge or other lien (whether
arising by contract or by operation of law), other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Company and not material to the Company; and
"Ordinary Course of Business" means the ordinary course of the Company's
business, consistent with past custom and practice (including with respect to
frequency and amount).
2.5 Subsidiaries. The Company does not control directly or indirectly or
have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association.
2.6 Financial Statements. The Company has provided to the Buyer the
unaudited balance sheet as of September 30, 2000 (the "Most Recent Balance Sheet
Date") and statements of income, changes in stockholders' equity and cash flows
for the period from inception to September 30, 2000. Such financial statements
(collectively, the "Financial Statements") have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered thereby, fairly present the
financial condition, results of operations and cash flows of the Company as of
the respective dates thereof and for the periods referred to therein and are
consistent with the books and records
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of the Company; provided, however, that the Financial Statements are subject to
normal recurring year-end adjustments (which will not be material) and do not
include footnotes.
2.7 Absence of Certain Changes. Since the inception of the Company, (a)
there has occurred no event or development which has had, or could reasonably be
expected to have in the future, a Company Material Adverse Effect, and (b) the
Company has not taken any of the actions set forth in paragraphs (a) through (n)
of Section 4.4.
2.8 Undisclosed Liabilities. The Company does not have any liability
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on the balance sheet referred to in Section 2.6 (the "Most Recent Balance
Sheet") and (b) liabilities which have arisen since the Most Recent Balance
Sheet Date in the Ordinary Course of Business and which are not material in
amount.
2.9 Tax Matters.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment,
unemployment insurance, social security, business license, business
organization, environmental, workers compensation, payroll, profits,
license, lease, service, service use, severance, stamp, occupation,
windfall profits, customs, duties, franchise and other taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any
such government, and any interest, fines, penalties, assessments or
additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing
authority in connection with Taxes.
(b) The Company has filed on a timely basis all Tax Returns that it
was required to file, and all such Tax Returns were complete and accurate
in all material respects. The Company is not and has never been a member of
a group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns. The Company has paid on a
timely basis all Taxes that were due and payable. The unpaid Taxes of the
Company for tax periods through the Most Recent Balance Sheet Date do not
exceed the accruals and reserves for Taxes (excluding accruals and reserves
for deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the Most Recent Balance Sheet. The Company has
no actual or potential liability for any Tax obligation of any taxpayer
(including without limitation any affiliated group of corporations or other
entities that included the Company during a prior period) other than the
Company. All Taxes that the Company is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity.
-8-
(c) The Company has delivered to the Buyer complete and accurate
copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company
since the date of the Company's incorporation. The federal income Tax
Returns of the Company have not been audited by the Internal Revenue
Service or are closed by the applicable statute of limitations for all
taxable years through the taxable year specified in Section 2.9(c) of the
Disclosure Schedule. No examination or audit of any Tax Return of the
Company by any Governmental Entity is currently in progress or, to the
knowledge of the Company, threatened or contemplated. The Company has not
been informed by any jurisdiction that the jurisdiction believes that the
Company was required to file any Tax Return that was not filed. The Company
has not waived any statute of limitations with respect to Taxes or agreed
to an extension of time with respect to a Tax assessment or deficiency.
(d) The Company: (i) is not a "consenting corporation" within the
meaning of Section 341(f) of the Code and none of the assets of the Company
is subject to an election under Section 341(f) of the Code; (ii) has not
been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(l)(A)(ii) of the Code; (iii) has not made any payments, is
not obligated to make any payments, or is not a party to any agreement that
could obligate it to make any payments that may be treated as an "excess
parachute payment" under Section 280G of the Code; (iv) does not have any
actual or potential liability for any Taxes of any person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or is not as a
transferee or successor, by contract, or otherwise; and (v) is or has not
been required to make a basis reduction pursuant to Treasury Regulation
Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (iii)
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.
(f) The Company has not undergone a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of
the Code.
(g) No state or federal "net operating loss" of the Company determined
as of the Closing Date is subject to limitation on its use pursuant to
Section 382 of the Code or comparable provisions of state law as a result
of any "ownership change" within the meaning of Section 382(g) of the Code
or comparable provisions of any state law occurring prior to the Closing
Date.
(h) The Company has never participated in an international boycott as
defined in Section 999 of the Code.
2.10 Assets. The Company owns or leases all tangible assets necessary for
the conduct of its business as presently conducted and as presently proposed to
be conducted. Each such tangible asset is free from material defects, has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and
-9-
is suitable for the purposes for which it presently is used. No asset of the
Company (tangible or intangible) is subject to any Security Interest.
2.11 Owned Real Property. The Company does not own, and has never owned,
any real property.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule lists
all real property leased or subleased to or by the Company and lists the term of
such lease, any extension and expansion options, and the rent payable
thereunder. The Company has delivered to the Buyer complete and accurate copies
of the leases and subleases (as amended to date) listed in Section 2.12 of the
Disclosure Schedule. With respect to each lease and sublease listed in Section
2.12 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing
in accordance with the terms thereof as in effect immediately prior to the
Closing;
(c) neither the Company nor, to the knowledge of the Company, any
other party, is not in breach or violation of, or default under, any such
lease or sublease, and no event has occurred, is pending or, to the
knowledge of the Company, is threatened, which, after the giving of notice,
with lapse of time, or otherwise, would constitute a breach or default by
the Company or, to the knowledge of the Company, any other party under such
lease or sublease;
(d) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or
subleasehold; and
(e) the Company is not aware of any Security Interest, easement,
covenant or other restriction applicable to the real property subject to
such lease, except for recorded easements, covenants and other restrictions
which do not materially impair the current uses or the occupancy by the
Company of the property subject thereto.
2.13 Intellectual Property.
(a) The Company owns or has the right to use all Intellectual Property
(as defined below) necessary (i) to use, manufacture, market and distribute
the products manufactured, marketed, sold or licensed (or as currently
contemplated to use, manufacture, market or distribute such products), and
to provide the services provided (or as currently contemplated to be
provided), by the Company to other parties (together, the "Customer
Deliverables") or (ii) to operate the Company's internal systems that are
material to the business or operations of the Company, including, without
limitation, computer hardware systems, software applications and embedded
systems (the "Internal Systems"; the Intellectual Property owned by or
licensed to the Company and incorporated in or underlying the Customer
Deliverables or the Internal Systems is referred to herein as the "Company
Intellectual Property"). Each item of Company Intellectual Property will be
owned or available for use by the Surviving Corporation immediately
following the Closing on substantially identical terms
-10-
and conditions as it was immediately prior to the Closing. The Company has
taken all reasonable measures to protect the proprietary nature of each
item of Company Intellectual Property. To the knowledge of the Company, (a)
no other person or entity has any rights to any of the Company Intellectual
Property owned by the Company (except pursuant to agreements or licenses
specified in Section 2.13(c) of the Disclosure Schedule), and (b) no other
person or entity is infringing, violating or misappropriating any of the
Company Intellectual Property. For purposes of this Agreement,
"Intellectual Property" means all (i) patents and patent applications, (ii)
copyrights and registrations thereof, (iii) mask works and registrations
and applications for registration thereof, (iv) computer software, data and
documentation, (v) trade secrets and confidential business information,
whether patentable or unpatentable and whether or not reduced to practice,
know-how, manufacturing and production processes and techniques, research
and development information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, (vi) trademarks, service
marks, trade names, domain names and applications and registrations
therefor and (vii) other proprietary rights relating to any of the
foregoing. Section 2.13(a) of the Disclosure Schedule lists each patent,
patent application, copyright registration or application therefor, mask
work registration or application therefor, and trademark, service xxxx and
domain name registration or application therefor of the Company.
(b) None of the Customer Deliverables, or the marketing, distribution,
provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or
entity. None of the Internal Systems, or the use thereof, infringes or
violates, or constitutes a misappropriation of, any Intellectual Property
rights of any person or entity. Section 2.13(b) of the Disclosure Schedule
lists any complaint, claim or notice, or written threat thereof, received
by the Company alleging any such infringement, violation or
misappropriation; and the Company has provided to the Buyer complete and
accurate copies of all written documentation in the possession of the
Company relating to any such complaint, claim, notice or threat. The
Company has provided to the Buyer complete and accurate copies of all
written documentation in the Company's possession relating to claims or
disputes known to the Company concerning any Company Intellectual Property.
(c) Section 2.13(c) of the Disclosure Schedule identifies each license
or other agreement (or type of license or other agreement) pursuant to
which the Company has licensed, distributed or otherwise granted any rights
to any third party with respect to, any Company Intellectual Property.
(d) Section 2.13(d) of the Disclosure Schedule identifies each item of
Company Intellectual Property that is owned by a party other than the
Company, and the license or agreement pursuant to which the Company uses it
(excluding off-the-shelf software programs licensed by the Company pursuant
to "shrink wrap" licenses).
(e) The Company has not disclosed the source code for any of the
software owned by the Company (the "Software") or other confidential
information constituting, embodied in or pertaining to the Software to any
person or entity, except pursuant to the agreements listed in Section
2.13(e) of the Disclosure Schedule, and the Company has taken reasonable
measure to prevent disclosure of such source code.
-11-
(f) All of the copyrightable materials (including Software)
incorporated in or bundled with the Customer Deliverables have been created
by employees of the Company within the scope of their employment by the
Company or by independent contractors of the Company who have executed
agreements expressly assigning all right, title and interest in such
copyrightable materials to the Company. No portion of such copyrightable
materials was jointly developed with any third party.
(g) To the knowledge of the Company, the Customer Deliverables and the
Internal Systems are free from significant defects or programming errors
and conform in all material respects to the written documentation and
specifications therefor.
2.14 Contracts.
(a) Section 2.14 of the Disclosure Schedule lists the following
agreements (written or oral) to which the Company is a party as of the date
of this Agreement:
(i) any agreement (or group of related agreements) for the lease
of personal property from or to third parties providing for lease payments
in excess of $10,000 per annum or having a remaining term longer than three
months;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of services
(A) which calls for performance over a period of more than one year, (B)
which involves more than the sum of $10,000, or (C) in which the Company
has granted manufacturing rights, "most favored nation" pricing provisions
or marketing or distribution rights relating to any products or territory
or has agreed to purchase a minimum quantity of goods or services or has
agreed to purchase goods or services exclusively from a certain party;
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness (including capitalized lease obligations)
involving more than $10,000 or under which it has imposed (or may impose) a
Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer, director or
stockholder of the Company or any affiliate (an "Affiliate"), as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), thereof;
(viii) any agreement under which the consequences of a default
or termination would reasonably be expected to have a Company Material
Adverse Effect;
-12-
(ix) any agreement which contains any provisions requiring the
Company to indemnify any other party thereto (excluding indemnities
contained in agreements for the purchase, sale or license of products
entered into in the Ordinary Course of Business); and
(x) any other agreement (or group of related agreements) either
involving more than $10,000 or not entered into in the Ordinary Course of
Business.
(b) The Company has delivered to the Buyer a complete and accurate
copy of each agreement listed in Section 2.13 or Section 2.14 of the
Disclosure Schedule. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable in all material respects
and in full force and effect; (ii) the agreement is expected to continue to
be legal, valid, binding and enforceable in all material respects and in
full force and effect immediately following the Closing in accordance with
the terms thereof as in effect immediately prior to the Closing; and (iii)
neither the Company nor, to the knowledge of the Company, any other party,
is not in breach or violation of, or default under, any such agreement, and
no event has occurred, is pending or, to the knowledge of the Company, is
threatened, which, after the giving of notice, with lapse of time, or
otherwise, would constitute a breach or default by the Company, to the
knowledge of the Company, any other party under such contract.
2.15 Accounts Receivable. All accounts receivable of the Company reflected
on the Most Recent Balance Sheet are valid receivables subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date on
which it first became due and payable), net of the applicable reserve for bad
debts on the Most Recent Balance Sheet. All accounts receivable reflected in the
financial or accounting records of the Company that have arisen since the Most
Recent Balance Sheet Date are valid receivables subject to no setoffs or
counterclaims and are collectible (within 90 days after the date on which it
first became due and payable), net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent Balance Sheet.
2.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
2.17 Insurance. Section 2.17 of the Disclosure Schedule lists each
insurance policy to which the Company is a party. Such insurance policies are of
the type and in amounts customarily carried by organizations conducting
businesses or owning assets similar to those of the Company. There is no
material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy. All premiums
due and payable under all such policies have been paid, the Company will not be
liable for retroactive premiums or similar payments, and the Company is
otherwise in compliance in all material respects with the terms of such
policies. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policy. Each such policy
will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.
2.18 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation before any Governmental Entity or before any arbitrator (a
"Legal Proceeding") which is
-13-
pending or has been threatened in writing against the Company which (a) seeks
either damages or equitable relief or (b) in any manner challenges or seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
2.19 Warranties. No product or service manufactured, sold, leased,
licensed or delivered by the Company is subject to any guaranty, warranty, right
of return, right of credit or other indemnity other than (i) the applicable
standard terms and conditions of sale or lease of the Company, which are set
forth in Section 2.19 of the Disclosure Schedule and (ii) manufacturers'
warranties for which the Company has no liability.
2.20 Employees.
(a) Section 2.20 of the Disclosure Schedule contains a list of all
employees of the Company, along with the position and the annual rate of
compensation of each such person. Each such employee has entered into a
confidentiality/assignment of inventions agreement with the Company, a copy
of which has previously been delivered to the Buyer. Section 2.20 of the
Disclosure Schedule contains a list of all employees of the Company who are
a party to a non-competition agreement with the Company; copies of such
agreements have previously been delivered to the Buyer. To the knowledge of
the Company, no key employee or group of employees has any plans to
terminate employment with the Company.
(b) The Company is not a party to or bound by any collective
bargaining agreement, and has not experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes.
The Company has no knowledge of any organizational effort made or
threatened, either currently or within the past two years, by or on behalf
of any labor union with respect to employees of the Company.
2.21 Employee Benefits.
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA), and any other written or oral
plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation.
(ii) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or
the regulations under Section 414(o) of the Code), any of which includes or
included the Company.
-14-
(b) Section 2.21(b) of the Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans maintained, or contributed to,
by the Company or any ERISA Affiliate. Complete and accurate copies of (i)
all Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, and (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded
plans) all plan financial statements for the last five plan years for each
Employee Benefit Plan, have been delivered to the Buyer. Each Employee
Benefit Plan has been administered in all material respects in accordance
with its terms and each of the Company and the ERISA Affiliates has in all
material respects met its obligations with respect to such Employee Benefit
Plan and has made all required contributions thereto. The Company, each
ERISA Affiliate and each Employee Benefit Plan are in compliance in all
material respects with the currently applicable provisions of ERISA and the
Code and the regulations thereunder.
(c) There are no Legal Proceedings (except claims for benefits payable
in the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders) against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under
any Employee Benefit Plan that could give rise to any material liability.
(d) Neither the Company nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan which is an "employee pension benefit plan."
(e) No Employee Benefit Plan provides benefits after termination of
employment to any employee of the Company (or to any beneficiary of any
such employee), except for continuation of health coverage required to be
continued under Section 4980B of the Code or other applicable law.
(f) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company or any ERISA
Affiliate that would subject the Company or any ERISA Affiliate to (i) any
material fine, penalty, tax or liability of any kind imposed under ERISA or
the Code or (ii) any contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect to any
Employee Benefit Plan.
(g) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as
a result thereof and no Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication
distributed generally to employees by its terms prohibits the Company from
amending or terminating any such Employee Benefit Plan.
(h) Section 2.21(h) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of the Company (A) the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving the Company of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee or (C) providing severance benefits or other benefits after the
termination of
-15-
employment of such director, executive officer or key employee; (ii)
agreement, plan or arrangement under which any person may receive payments
from the Company that may be subject to the tax imposed by Section 4999 of
the Code or included in the determination of such person's "parachute
payment" under Section 280G of the Code; and (iii) agreement or plan
binding the Company, including without limitation any stock option plan,
stock appreciation right plan, restricted stock plan, stock purchase plan,
severance benefit plan or Employee Benefit Plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
2.22 Environmental Matters.
(a) There is no pending or, to the knowledge of the Company,
threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law
involving the Company. For purposes of this Agreement, "Environmental Law"
means any federal, state or local law, statute, rule or regulation or the
common law relating to the environment or occupational health and safety,
including without limitation any statute, regulation, administrative
decision or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous materials
or substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
materials or substances, or solid or hazardous waste, including without
limitation emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants or chemicals; (v) the protection of wild life,
marine life and wetlands, including without limitation all endangered and
threatened species; (vi) storage tanks, vessels, containers, abandoned or
discarded barrels, and other closed receptacles; (vii) health and safety of
employees and other persons; and (viii) manufacturing, processing, using,
distributing, treating, storing, disposing, transporting or handling of
materials regulated under any law as pollutants, contaminants, toxic or
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall
have the meaning set forth in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA").
(b) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real
property or any facility formerly or currently owned, operated or
controlled by the Company. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes
and hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products or any other material subject to regulation under any
Environmental Law.
(c) Set forth in Section 2.22(c) of the Disclosure Schedule is a list
of all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises
currently or previously operated by the Company
-16-
(whether conducted by or on behalf of the Company or a third party, and
whether done at the initiative of the Company or directed by a Governmental
Entity or other third party) which the Company has possession of or access
to. A complete and accurate copy of each such document has been provided to
the Buyer.
2.23 Legal Compliance. The Company, and the conduct and operations of its
business, are in compliance with each applicable law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, except for any violations or defaults that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
2.24 Customers and Suppliers. Section 2.24 of the Disclosure Schedule sets
forth a list of (a) each customer of the Company and the amount of revenues
accounted for by such customer since the date of the Company's incorporation and
(b) each supplier to the Company. No such customer or supplier has indicated
within the past year that it will stop, or decrease the rate of, buying products
or supplying products, as applicable, to the Company.
2.25 Permits. Section 2.25 of the Disclosure Schedule sets forth a list of
all permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by the Company. Such listed Permits
are the only Permits that are required for the Company to conduct its business
as presently conducted, except for those the absence of which, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. Each such Permit is in full force and effect
and, to the knowledge of the Company, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration. Each such Permit will continue in full force
and effect immediately following the Closing.
2.26 Certain Business Relationships With Affiliates. No Affiliate of the
Company (a) owns any property or right, tangible or intangible, which is used in
the business of the Company, (b) has any claim or cause of action against the
Company, or (c) owes any money to, or is owed any money by, the Company.
Section 2.26 of the Disclosure Schedule describes any transactions or
relationships between the Company and any Affiliate thereof which have occurred
or existed since the date of the Company's incorporation.
2.27 Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.28 Books and Records. The minute books and other similar records of the
Company contain complete and accurate records of all actions taken at any
meetings of the Company's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company accurately reflect in all
material respects the assets, liabilities, business, financial condition and
results of operations of the Company and have been maintained in accordance with
good business and bookkeeping practices.
-17-
2.29 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Company has disclosed to the Buyer all material information relating to the
business of the Company or the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants to
the Company as follows:
3.1 Organization, Qualification and Corporate Power. Each of the Buyer and
the Transitory Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. The Buyer is
duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Buyer has furnished
or made available to the Company complete and accurate copies of its Certificate
of Incorporation and By-laws. For purposes of this Agreement, "Buyer Material
Adverse Effect" means a material adverse effect on the assets, business,
condition (financial or otherwise), results of operations or future prospects of
the Buyer and its subsidiaries, taken as a whole.
3.2 Capitalization. The authorized capital stock of the Buyer consists of
(a) 60,000,000 shares of Buyer Common Stock, of which 34,218,565 shares were
issued and outstanding as of September 30, 2000, and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All of the Merger Shares will be, when issued in accordance
with this Agreement, duly authorized, validly issued, fully paid, nonassessable
and free of all preemptive rights.
3.3 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery by the Buyer
and the Transitory Subsidiary of this Agreement and (in the case of the Buyer)
the Escrow Agreement and the consummation by the Buyer and the Transitory
Subsidiary of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer and Transitory Subsidiary, respectively. This Agreement has been duly and
validly executed and delivered by
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the Buyer and the Transitory Subsidiary and constitutes a valid and binding
obligation of the Buyer and the Transitory Subsidiary, enforceable against them
in accordance with its terms.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery by the
Buyer or the Transitory Subsidiary of this Agreement or (in the case of the
Buyer) the Escrow Agreement, nor the consummation by the Buyer or the Transitory
Subsidiary of the transactions contemplated hereby or thereby, will (a) conflict
with or violate any provision of the charter or By-laws of the Buyer or the
Transitory Subsidiary, (b) require on the part of the Buyer or the Transitory
Subsidiary any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (c) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party any right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which the Buyer or the Transitory Subsidiary is a
party or by which either is bound or to which any of their assets are subject,
except for (i) the consent required under the Underwriting Agreement, dated as
of July 13, 2000, among the Buyer, Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation, Xxxx Xxxxxxxx Incorporated, FleetBoston Xxxxxxxxx Xxxxxxxx Inc. and
DLJdirect Inc., as representatives of the several Underwriters defined therein
and listed in Schedule I therein, (ii) any conflict, breach, default,
acceleration, termination, modification or cancellation which would not
adversely affect the consummation of the transactions contemplated hereby or
(iii) any notice, consent or waiver the absence of which would not adversely
affect the consummation of the transactions contemplated hereby, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or the Transitory Subsidiary or any of their properties or assets.
3.5 Reports and Financial Statements. The Buyer has previously furnished
or made available to the Company complete and accurate copies, as amended or
supplemented, of its (a) Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2000, as filed with the Securities and Exchange Commission (the
"SEC"), and (b) all other reports filed by the Buyer under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the SEC since June
30, 2000 (such reports are collectively referred to herein as the "Buyer
Reports"). The Buyer Reports constitute all of the documents required to be
filed by the Buyer under Section 13 or subsections (a) or (c) of Section 14 of
the Exchange Act with the SEC from June 30, 2000 through the date of this
Agreement. The Buyer Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder when
filed. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto when filed, (ii) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Buyer as
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of the respective dates thereof and for the periods referred to therein, and
(iv) are consistent with the books and records of the Buyer.
3.6 Interim Operations of the Transitory Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
3.7 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including, without limitation,
using its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at its
expense, all waivers, permits, consents, approvals or other authorizations
from Governmental Entities, and to effect all registrations, filings and
notices with or to Governmental Entities, as may be required for such Party
to consummate the transactions contemplated by this Agreement and to
otherwise comply with all applicable laws and regulations in connection
with the consummation of the transactions contemplated by this Agreement.
(b) The Company shall use its Reasonable Best Efforts to obtain, at
its expense, all such waivers, consents or approvals from third parties,
and to give all such notices to third parties, as are required to be listed
in Section 2.4 of the Disclosure Schedule.
4.3 Stockholder Approval.
(a) The Company shall use its Reasonable Best Efforts to obtain, as
promptly as practicable, the Requisite Stockholder Approval, either at a
special meeting of stockholders or pursuant to a written stockholder
consent, all in accordance with the applicable requirements of the Delaware
General Corporation Law. In connection with such special meeting of
stockholders or written stockholder consent, the Company shall provide to
its stockholders a written proxy or information statement (the "Disclosure
Statement") which includes (A) a summary of the Merger and this Agreement
(which summary shall include a summary of the terms relating to the
indemnification obligations of the Company Stockholders, the escrow
arrangements and the authority of the Indemnification Representative, and a
statement that the adoption of this Agreement by the stockholders of the
Company shall constitute approval of such terms), (B) all of the
information required by Rule 502(b)(2) of Regulation D under the
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Securities Act and (C) a statement that appraisal rights are available for
the Company Shares pursuant to Section 262 of the Delaware General
Corporation Law and a copy of such Section 262. The Buyer agrees to
cooperate with the Company in the preparation of the Disclosure Statement.
The Company agrees not to distr ibute the Disclosure Statement until the
Buyer has had a reasonable opportunity to review and comment on the
Disclosure Statement and the Disclosure Statement has been approved by the
Buyer (which approval may not be unreasonably withheld or delayed). If the
Requisite Stockholder Approval is obtained by means of a written consent,
the Company shall send, pursuant to Sections 228 and 262(d) of the Delaware
General Corporation Law, a written notice to all stockholders of the
Company that did not execute such written consent informing them that this
Agreement and the Merger were adopted and approved by the stockholders of
the Company and that appraisal rights are available for their Company
Shares pursuant to Section 262 of the Delaware General Corporation Law
(which notice shall include a copy of such Section 262), and shall promptly
inform the Buyer of the date on which such notice was sent.
(b) The Company, acting through its Board of Directors, shall include
in the Disclosure Statement the unanimous recommendation of its Board of
Directors that the stockholders of the Company vote in favor of the
adoption of this Agreement and the approval of the Merger.
(c) The Company shall ensure that the Disclosure Statement does not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading (provided that the
Company shall not be responsible for the accuracy or completeness of any
information furnished by the Buyer in writing for inclusion in the
Disclosure Statement).
(d) The Buyer shall ensure that any information furnished by the Buyer
to the Company in writing for inclusion in the Disclosure Statement does
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading.
(e) Xxx Xxxxxx, Xxxx Xxxxx, Xxxx Xxxxxxx, Xxxxx Xxxx, Xxx Xxxxxx,
Xxxxxx Xxxxxx and Xxxx Xxxxxx (collectively, the "Key Employees") each
agree (i) to vote all Company Shares that are beneficially owned by him in
favor of the adoption of this Agreement and the approval of the Merger,
(ii) not to vote any Company Shares in favor of any other acquisition
(whether by way of merger, consolidation, share exchange, stock purchase or
asset purchase) of all or a majority of the outstanding capital stock or
assets of the Company and (iii) otherwise to use his Reasonable Best
Efforts to obtain the Requisite Stockholder Approval.
4.4 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall conduct its operations in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact its
current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect. Without limiting the generality
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of the foregoing, prior to the Effective Time, the Company shall not, without
the written consent of the Buyer:
(a) issue or sell, or redeem or repurchase, any stock or other
securities of the Company or any rights, warrants or options to acquire any
such stock or other securities (except pursuant to the exercise of the
Warrant) or amend any of the terms of (including without limitation the
vesting of) the Warrant;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock;
(c) create, incur or assume any indebtedness (including obligations in
respect of capital leases); assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity; or make any loans, advances or
capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.21(h) or (except for normal increases in the Ordinary Course of
Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment
terms of, its directors, officers or employees, generally or individually,
or pay any bonus or other benefit to its directors, officers or employees
(except for existing payment obligations listed in Section 2.19 of the
Disclosure Schedule);
(e) acquire, sell, lease, license or dispose of any assets or property
(including without limitation any shares or other equity interests in or
securities of any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets
in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational documents; (i)
change in any material respect its accounting methods, principles or
practices, except insofar as may be required by a generally applicable
change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action that
would constitute a violation of or default under, or waive any rights
under, any material contract or agreement;
(k) make or commit to make any capital expenditure in excess of $5,000
per item or $25,000 in the aggregate;
-22-
(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or (ii) any of the
conditions to the Merger set forth in Article V not being satisfied; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
4.5 Access to Information.
(a) The Company shall permit representatives of the Buyer to have full
access (at all reasonable times, and in a manner so as not to interfere
with the normal business operations of the Company) to all premises,
properties, financial and accounting records, contracts, other records and
documents, and personnel, of or pertaining to the Company.
(b) Within 15 days after the end of each month ending prior to the
Closing, the Company shall furnish to the Buyer an unaudited income
statement for such month and a balance sheet as of the end of such month,
prepared on a basis consistent with the Financial Statements. Such
financial statements shall present fairly the financial condition and
results of operations of the Company as of the dates thereof and for the
periods covered thereby, and shall be consistent with the books and records
of the Company.
(c) Each of the Buyer and the Transitory Subsidiary (i) shall treat
and hold as confidential any Confidential Information (as defined below),
(ii) shall not use any of the Confidential Information except in connection
with this Agreement, and (iii) if this Agreement is terminated for any
reason whatsoever, shall return to the Company all tangible embodiments
(and all copies) thereof which are in its possession. For purposes of this
Agreement, "Confidential Information" means any confidential or proprietary
information of the Company that is furnished in writing to the Buyer or the
Transitory Subsidiary by the Company in connection with this Agreement and
is labeled confidential or proprietary; provided, however, that it shall
not include any information (A) which, at the time of disclosure, is
available publicly, (B) which, after disclosure, becomes available publicly
through no fault of the Buyer or the Transitory Subsidiary, (C) which the
Buyer or the Transitory Subsidiary knew or to which the Buyer or the
Transitory Subsidiary had access prior to disclosure or (D) which the Buyer
or the Transitory Subsidiary rightfully obtains from a source other than
the Company.
4.6 Notice of Breaches.
(a) From the date of this Agreement until the Effective Time, the
Company shall promptly deliver to the Buyer supplemental information
concerning events or circumstances occurring subsequent to the date hereof
which would render any representation, warranty or statement in this
Agreement or the Disclosure Schedule inaccurate or incomplete at any time
after the date of this Agreement until the Closing Date. No such
supplemental information shall be deemed to cure any misrepresentation or
breach of warranty or constitute an amendment of any representation,
warranty or statement in this Agreement or the Disclosure Schedule.
-23-
(b) From the date of this Agreement until the Effective Time, the
Buyer shall promptly deliver to the Company supplemental information
concerning events or circumstances occurring subsequent to the date hereof
which would render any representation or warranty in this Agreement
inaccurate or incomplete at any time after the date of this Agreement until
the Closing Date. No such supplemental information shall be deemed to cure
any misrepresentation or breach of warranty or constitute an amendment of
any representation or warranty in this Agreement.
4.7 Exclusivity.
(a) The Company shall not, and the Company shall require each of its
officers, directors, employees, representatives and agents not to, directly
or indirectly, (i) initiate, solicit, encourage or otherwise facilitate any
inquiry, proposal, offer or discussion with any party (other than the
Buyer) concerning any merger, reorganization, consolidation,
recapitalization, business combination, liquidation, dissolution, share
exchange, sale of stock, sale of material assets or similar business
transaction involving the Company or any division of the Company, (ii)
furnish any non-public information concerning the business, properties or
assets of the Company or any division of the Company to any party (other
than the Buyer) or (iii) engage in discussions or negotiations with any
party (other than the Buyer) concerning any such transaction.
(b) The Company shall immediately notify any party with which
discussions or negotiations of the nature described in paragraph (a) above
were pending that the Company is terminating such discussions or
negotiations. If the Company receives any inquiry, proposal or offer of the
nature described in paragraph (a) above, the Company shall, within one
business day after such receipt, notify the Buyer of such inquiry, proposal
or offer, including the identity of the other party and the terms of such
inquiry, proposal or offer.
4.8 Expenses. Except as set forth in Article VI and the Escrow Agreement,
each of the Parties shall bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that if the Merger is consummated, the
Company and the Subsidiaries shall not incur more than an aggregate of $25,000
in legal and accounting fees and expenses in connection with the Merger.
4.9 Indemnification. The Buyer shall not, for a period of three years
after the Effective Time, take any action to alter or impair any exculpatory or
indemnification provisions now existing in the Certificate of Incorporation or
By-laws of the Company for the benefit of any individual who served as a
director or officer of the Company at any time prior to the Effective Time,
except for any changes which may be required to conform with changes in
applicable law and any change which do not affect the application of such
provisions to acts or omissions of such individuals prior to the Effective Time.
4.10 Listing of Merger Shares. The Buyer shall use its best efforts to
list the Merger Shares on the Nasdaq National Market if required under the rules
of the Nasdaq National Market.
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ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following condition: this Agreement and the Merger shall have received the
Requisite Stockholder Approval.
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Merger is subject to the satisfaction (or waiver by the Buyer) of the
following additional conditions:
(a) the number of Dissenting Shares shall not exceed 3% of the number
of outstanding Common Shares as of the Effective Time;
(b) the Company will have obtained (and will have provided copies
thereof to the Buyer) all of the waivers, permits, consents, approvals or
other authorizations, and effected all of the registrations, filings and
notices, referred to in Section 4.2 which are required on the part of the
Company;
(c) the representations and warranties of the Company set forth in the
first sentence of Section 2.1 and in Section 2.3 and any representations
and warranties of the Company set forth in this Agreement that are
qualified as to materiality shall be true and correct in all respects, and
all other representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Effective Time as though
made as of the Effective Time, except to the extent such representations
and warranties are specifically made as of a particular date or as of the
date of this Agreement (in which case such representations and warranties
shall be true and correct as of such date);
(d) the Company shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Effective Time;
(e) no Legal Proceeding shall be pending or threatened wherein an
unfavorable judgment, order, decree, stipulation or injunction would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation or (iii) have a Company
Material Adverse Effect, and no such judgment, order, decree, stipulation
or injunction shall be in effect;
(f) the Company shall have delivered to the Buyer and the Transitory
Subsidiary a certificate (the "Company Certificate") to the effect that
each of the conditions specified in Section 5.1 and clauses (a) through (e)
(insofar as clause (e) relates to Legal Proceedings involving the Company)
of this Section 5.2 is satisfied in all respects;
(g) each of the Company Stockholders shall have executed and delivered
to the Buyer an Investment Representation Letter in the form attached
hereto as Exhibit B and the Buyer shall have no reason to believe that the
statements set forth therein are not true and shall
-25-
be reasonably satisfied that the issuance and sale of the Merger Shares is
exempt from the registration requirements of the Securities Act;
(h) each of the Key Employees shall have executed and delivered to the
Buyer an invention, non-disclosure, non-competition and non-solicitation
agreement in form and substance reasonably satisfactory to the Buyer;
(i) each of the Key Employees shall have executed and delivered a
stock restriction agreement in substantially the form attached hereto as
Exhibit C;
(j) each of the Company Stockholders who is not a Key Employee shall
have executed and delivered a stockholders agreement in substantially the
form attached hereto as Exhibit D;
(k) the Buyer shall have received from counsel to the Company an
opinion with respect to the matters set forth in Exhibit E attached hereto,
addressed to the Buyer and dated as of the Closing Date;
(l) the Buyer shall have received copies of the resignations,
effective as of the Effective Time, of each director and officer of the
Company (other than any such resignations which the Buyer designates, by
written notice to the Company, as unnecessary);
(m) the Buyer shall have received evidence in form and substance
satisfactory to it that the Warrant has been fully exercised or terminated,
as the case may be, and that the holders of the Warrant shall have no
further rights under such Warrant and that the Company shall have no
further obligations with respect to such Warrant; and
(n) the Buyer shall have received such other certificates and
instruments (including without limitation certificates of good standing of
the Company in their jurisdiction of organization and the various foreign
jurisdictions in which they are qualified, certified charter documents,
certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with
the Closing.
5.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
(a) the Merger Shares shall have been authorized for listing on the
Nasdaq National Market upon official notice of issuance;
(b) the Buyer shall have effected all of the registrations, filings
and notices referred to in Section 4.2 which are required on the part of
the Buyer, except for any which if not obtained or effected would not have
a Buyer Material Adverse Effect or a material adverse effect on the ability
of the Parties to consummate the transactions contemplated by this
Agreement;
(c) the representations and warranties of the Buyer and the Transitory
Subsidiary set forth in the first sentence of Section 3.1 and Section 3.3
and any representations and warranties of the Buyer and the Transitory
Subsidiary set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the
-26-
Buyer and the Transitory Subsidiary set forth in this Agreement that are
not so qualified (other than those set forth in Section 3.1 and Section
3.3) shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Effective Time as though made as
of the Effective Time, except to the extent such representations and
warranties are specifically made as of a particular date or as of the date
of this Agreement (in which case such representations and warranties shall
be true and correct as of such date);
(d) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and
covenants required to be performed or complied with under this Agreement as
of or prior to the Effective Time;
(e) the Buyer shall have delivered to the Company a certificate (the
"Buyer Certificate") to the effect that each of the conditions specified in
clauses (a) through (d) of this Section 5.3 is satisfied in all respects;
(f) the Company shall have received from counsel to the Buyer and the
Transitory Subsidiary an opinion with respect to the matters set forth in
Exhibit F attached hereto, addressed to the Company and dated as of the
Closing Date; and
(g) the Company shall have received such other certificates and
instruments (including without limitation certificates of good standing of
the Buyer and the Transitory Subsidiary in their jurisdiction of
organization, certified charter documents, certificates as to the
incumbency of officers and the adoption of authorizing resolutions) as it
shall reasonably request in connection with the Closing.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company Stockholders. The Company Stockholders
receiving the Merger Shares pursuant to Section 1.5 (the "Indemnifying
Stockholders") shall indemnify the Buyer in respect of, and hold it harmless
against, any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court costs, costs of investigators, fees
and expenses of attorneys, accountants, financial advisors and other experts,
and other expenses of litigation) ("Damages") incurred or suffered by the
Surviving Corporation or the Buyer or any Affiliate thereof resulting from,
relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to perform
any covenant or agreement of the Company contained in this Agreement or the
Company Certificate;
(b) any failure of any Company Stockholder to have good, valid and
marketable title to the issued and outstanding Company Shares issued in the
name of such Company Stockholder, free and clear of all Security Interests;
or
(c) any claim by a stockholder or former stockholder of the Company,
or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of
-27-
any shares of stock of the Company; (ii) any rights of a stockholder (other
than the right to receive the Merger Shares pursuant to this Agreement or
appraisal rights under the applicable provisions of the Delaware General
Corporation Law), including any option, preemptive rights or rights to
notice or to vote; (iii) any rights under the Certificate of Incorporation
or By-laws of the Company as constituted prior to the Merger; or (iv) any
claim that his, her or its shares were wrongfully repurchased by the
Company.
6.2 Indemnification by the Buyer. The Buyer shall indemnify the
Indemnifying Stockholders in respect of, and hold them harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholders resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Buyer or the Transitory
Subsidiary contained in this Agreement or the Buyer Certificate.
6.3 Indemnification Claims.
(a) A party entitled, or seeking to assert rights, to indemnification
under this Article VI (an "Indemnified Party") shall give written
notification to the party from whom indemnification is sought (an
"Indemnifying Party") of the commencement of any suit or proceeding
relating to a third-party claim for which indemnification pursuant to this
Article VI may be sought. Such notification shall be given within 20
business days after receipt by the Indemnified Party of notice of such suit
or proceeding, and shall describe in reasonable detail (to the extent known
by the Indemnified Party) the facts constituting the basis for such suit or
proceeding and the amount of the claimed damages; provided, however, that
no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party of any liability or obligation
hereunder except to the extent of any damage or liability caused by or
arising out of such failure. Within 20 days after delivery of such
notification, the Indemnifying Party may, upon written notice thereof to
the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such
defense if (A) it acknowledges in writing to the Indemnified Party that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Party in connection with such suit or proceeding constitute
Damages for which the Indemnified Party shall be indemnified pursuant to
this Article VI and (B) the ad damnum is less than or equal to the amount
of Damages for which the Indemnifying Party is liable under this Article VI
and (ii) the Indemnifying Party may not assume control of the defense of a
suit or proceeding involving criminal liability or in which equitable
relief is sought against the Indemnified Party. If the Indemnifying Party
does not so assume control of such defense, the Indemnified Party shall
control such defense. The party not controlling such defense (the "Non-
controlling Party") may participate therein at its own expense; provided
that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses
available with respect to such suit or proceeding, the reasonable fees and
expenses of counsel to the Indemnified Party shall be considered "Damages"
for purposes of this Agreement. The party controlling such defense (the
"Controlling Party") shall keep the Non-controlling Party advised of the
status of such suit or proceeding and the defense thereof and shall
consider in good faith recommendations made by the Non-controlling Party
with respect thereto. The Non-controlling Party shall furnish the
Controlling Party with such information as it may have with respect to such
suit or proceeding
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(including copies of any summons, complaint or other pleading which may
have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of
such suit or proceeding. The Indemnifying Party shall not agree to any
settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnified Party,
which shall not be unreasonably withheld or delayed; provided that the
consent of the Indemnified Party shall not be required if the Indemnifying
Party agrees in writing to pay any amounts payable pursuant to such
settlement or judgment and such settlement or judgment includes a complete
release of the Indemnified Party from further liability and has no other
adverse effect on the Indemnified Party. The Indemnified Party shall not
agree to any settlement of, or the entry of any judgment arising from, any
such suit or proceeding without the prior written consent of the
Indemnifying Party, which shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the
"Claimed Amount") of any Damages incurred by the Indemnified Party, (ii) a
statement that the Indemnified Party is entitled to indemnification under
this Article VI for such Damages and a reasonable explanation of the basis
therefor, and (iii) a demand for payment (in the manner provided in
paragraph (c) below) in the amount of such Damages. If the Indemnified
Party is seeking to enforce such claim pursuant to the Escrow Agreement,
the Indemnifying Party shall deliver a copy of the Claim Notice to the
Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a written response (the
"Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in
which case the Response shall be accompanied by a payment by the
Indemnifying Party to the Indemnified Party of the Claimed Amount, by check
or by wire transfer; provided that if the Indemnified Party is seeking to
enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party
and the Indemnified Party shall deliver to the Escrow Agent, within three
days following the delivery of the Response, a written notice executed by
both parties instructing the Escrow Agent to distribute to the Buyer such
number of Escrow Shares as have an aggregate Value (as defined below) equal
to the Claimed Amount), (ii) agree that the Indemnified Party is entitled
to receive part, but not all, of the Claimed Amount (the "Agreed Amount")
(in which case the Response shall be accompanied by a payment by the
Indemnifying Party to the Indemnified Party of the Agreed Amount, by check
or by wire transfer; provided that if the Indemnified Party is seeking to
enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party
and the Indemnified Party shall deliver to the Escrow Agent, within three
days following the delivery of the Response, a written notice executed by
both parties instructing the Escrow Agent to distribute to the Buyer such
number of Escrow Shares as have an aggregate Value equal to the Agreed
Amount) or (iii) dispute that the Indemnified Party is entitled to receive
any of the Claimed Amount. If the Indemnifying Party in the Response
disputes its liability for all or part of the Claimed Amount, the
Indemnifying Party and the Indemnified Party shall follow the procedures
set forth in Section 6.3(d) for the resolution of such dispute (a
"Dispute"). For purposes of this Article VI, the "Value" of any Escrow
Shares on any given date delivered in satisfaction of an indemnity claim
shall be the
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average reported closing price of the Buyer Common Stock on the Nasdaq
National Market over the 15 consecutive trading days ending on the trading
day immediately preceding such date (subject to equitable adjustment in the
event of any stock split, stock dividend, reverse stock split or similar
event affecting the Buyer Common Stock since the Closing Date), multiplied
by the number of such Escrow Shares.
(d) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Indemnifying Party and the
Indemnified Party shall discuss in good faith the submission of the Dispute
to a mutually acceptable alternative dispute resolution procedure (which
may be non-binding or binding upon the parties, as they agree in advance)
(the "ADR Procedure"). In the event the Indemnifying Party and the
Indemnified Party agree upon an ADR Procedure, such parties shall, in
consultation with the chosen dispute resolution service (the "ADR
Service"), promptly agree upon a format and timetable for the ADR
Procedure, agree upon the rules applicable to the ADR Procedure, and
promptly undertake the ADR Procedure. The provisions of this Section 6.3(d)
shall not obligate the Indemnifying Party and the Indemnified Party to
pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the
Indemnifying Party and the Indemnified Party agree to pursue an ADR
Procedure, neither the Indemnifying Party nor the Indemnified Party may
commence litigation or seek other remedies with respect to the Dispute
prior to the completion of such ADR Procedure. Any ADR Procedure undertaken
by the Indemnifying Party and the Indemnified Party shall be considered a
compromise negotiation for purposes of federal and state rules of evidence,
and all statements, offers, opinions and disclosures (whether written or
oral) made in the course of the ADR Procedure by or on behalf of the
Indemnifying Party, the Indemnified Party or the ADR Service shall be
treated as confidential and, where appropriate, as privileged work product.
Such statements, offers, opinions and disclosures shall not be discoverable
or admissible for any purposes in any litigation or other proceeding
relating to the Dispute (provided that this sentence shall not be construed
to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used
by the Indemnifying Party and the Indemnified Party shall be shared equally
by the Indemnifying Party and the Indemnified Party. If the Indemnified
Party is seeking to enforce the claim that is the subject of the Dispute
pursuant to the Escrow Agreement, the Indemnifying Party and the
Indemnified Party shall deliver to the Escrow Agent, promptly following the
resolution of the Dispute (whether by mutual agreement, pursuant to an ADR
Procedure, as a result of a judicial decision or otherwise), a written
notice executed by both parties instructing the Escrow Agent as to what (if
any) portion of the Escrow Shares shall be distributed to the Buyer and/or
the Indemnifying Stockholders (which notice shall be consistent with the
terms of the resolution of the Dispute).
(e) Notwithstanding the other provisions of this Section 6.3, if a
third party asserts (other than by means of a lawsuit) that an Indemnified
Party is liable to such third party for a monetary or other obligation
which may constitute or result in Damages for which such Indemnified Party
may be entitled to indemnification pursuant to this Article VI, and such
Indemnified Party reasonably determines that it has a valid business reason
to fulfill such obligation, then (i) such Indemnified Party shall be
entitled to satisfy such obligation, without prior notice to or consent
from the Indemnifying Party, (ii) such Indemnified Party may
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subsequently make a claim for indemnification in accordance with the
provisions of this Article VI, and (iii) such Indemnified Party shall be
reimbursed, in accordance with the provisions of this Article VI, for any
such Damages for which it is entitled to indemnification pursuant to this
Article VI (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which
it is entitled to indemnification, under the terms of this Article VI).
(f) For purposes of this Section 6.3 and the last two sentences of
Section 6.4, (i) if the Indemnifying Stockholders comprise the Indemnifying
Party, any references to the Indemnifying Party (except provisions relating
to an obligation to make or a right to receive any payments provided for in
Section 6.3 or Section 6.4) shall be deemed to refer to the Indemnification
Representatives, and (ii) if the Indemnifying Stockholders comprise the
Indemnified Party, any references to the Indemnified Party (except
provisions relating to an obligation to make or a right to receive any
payments provided for in Section 6.3 or Section 6.4) shall be deemed to
refer to the Indemnification Representatives. The Indemnification
Representatives shall have full power and authority on behalf of each
Indemnifying Stockholder to take any and all actions on behalf of, execute
any and all instruments on behalf of, and execute or waive any and all
rights of, the Indemnifying Stockholders under this Article VI. The
Indemnification Representatives shall have no liability to any Indemnifying
Stockholder for any action taken or omitted on behalf of the Indemnifying
Stockholders pursuant to this Article VI.
6.4 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement, the Company Certificate or the Buyer
Certificate shall (a) survive the Closing and any investigation at any time made
by or on behalf of an Indemnified Party and (b) shall expire on the date one
year following the Closing Date, except that (i) the representations and
warranties set forth in Sections 2.1, 2.2, 2.3, 3.1, 3.2 and 3.3 (and the
portion of the Company Certificate or the Buyer Certificate relating thereto)
shall survive the Closing without limitation and (ii) the representations and
warranties set forth in Sections 2.9, 2.21 and 2.22 (and the portion of the
Company Certificate relating thereto) shall survive until 30 days following
expiration of all statutes of limitation applicable to the matters referred to
therein. If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or a notice that, as a result a legal
proceeding instituted by or written claim made by a third party, the Indemnified
Party reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party; and if the
Indemnified Party has delivered a copy of the Expected Claim Notice to the
Escrow Agent and Escrow Shares have been retained in escrow after the
Termination Date (as defined in the Escrow Agreement) with respect to such
Expected Claim Notice, the Indemnifying Party and the Indemnified Party shall
promptly deliver to the Escrow Agent a written notice executed by both parties
instructing the Escrow Agent to distribute such retained Escrow Shares to the
Indemnifying Stockholders in accordance with the terms of the Escrow Agreement.
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6.5 Limitations.
(a) Notwithstanding anything to the contrary herein, (i) the aggregate
liability of the Indemnifying Stockholders for Damages under this Article
VI shall not exceed the Value of the Escrow Shares held by the Escrow
Agent, (ii) the aggregate liability of the Buyer for Damages under this
Article VI shall not exceed $1,300,000, and (iii) the Indemnifying
Stockholders and the Buyer shall be liable under this Article VI for only
that portion of the aggregate Damages for which they or it would otherwise
be liable which exceeds $50,000; provided that the limitation set forth in
clause (iii) above shall not apply to (A) a claim pursuant to Section
6.1(a) relating to a breach of the representations and warranties set forth
in Sections 2.1, 2.2, or 2.3 (or the portion of the Company Certificate
relating thereto) or to a breach of the covenants set forth in Sections 4.8
or (B) a claim pursuant to Section 6.2 relating to a breach of the
representations and warranties set forth in Sections 3.1, 3.2, or 3.3 (or
the portion of the Buyer Certificate relating thereto). For purposes solely
of this Article VI, all representations and warranties of the Company in
Article II (other than Section 2.29) and all representations and warranties
of the Buyer and the Transitory Subsidiary in Article III shall be
construed as if the term "material" and any reference to "Company Material
Adverse Effect" and "Buyer Material Adverse Effect" (and variations
thereof) were omitted from such representations and warranties.
(b) Except with respect to claims based on fraud, after the Closing,
the rights of the Indemnified Parties under this Article VI and the Escrow
Agreement shall be the exclusive remedy of the Indemnified Parties with
respect to claims resulting from or relating to any misrepresentation,
breach of warranty or failure to perform any covenant or agreement
contained in this Agreement.
(c) No Indemnifying Stockholder shall have any right of contribution
against the Company or the Surviving Corporation with respect to any breach
by the Company of any of its representations, warranties, covenants or
agreements.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Registration of Shares.
(a) The Buyer shall file with the SEC, as soon as practicable
following the Closing (but in no event prior to the Buyer's satisfaction of
the eligibility requirements for use of Form S-3), a registration statement
on Form S-3 covering the resale to the public by the Company Stockholders
of 28.57% of the Merger Shares (the "Initial Stockholder Registration
Statement"). As soon as practicable following each of the three anniversary
dates of the Closing Date, the Buyer shall file with the SEC a registration
statement on Form S-3 covering the resale to the public by the Company
Stockholders of an addition 23.81% of the Merger Shares (each, a
"Subsequent Stockholder Registration Statement" and together with the
Initial Stockholder Registration Statement, the "Registration Statements").
The Buyer shall use its best efforts to cause each Registration Statement
to be declared effective by the SEC as soon as practicable. The Buyer shall
cause each Registration Statement to remain effective until the date six
months after the date such Registration Statement was declared effective or
such earlier time as all of the
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Merger Shares covered by such Registration Statement have been sold
pursuant thereto. Notwithstanding the foregoing, the Buyer shall not be
obligated to file a Registration Statement (or maintain the effectiveness
thereof) with respect to any Merger Shares eligible to be sold under Rule
144(k) of the Securities Act.
(b) If the Buyer desires that any officers or directors of the Buyer
holding securities of the Buyer be included in any registration requested
pursuant to Section 7.1(a) or if other holders of securities of the Buyer
who are entitled, by contract with the Buyer, to have securities included
in such a registration (the "Other Holders") request such inclusion, the
Buyer may include the securities of such officers, directors and Other
Holders in such registration on the terms set forth herein. If such
registration involves an underwritten offering, the Buyer shall (together
with all Company Stockholders, officers, directors and Other Holders
proposing to distribute their securities through such underwriting) enter
into an underwriting agreement in customary form (including, without
limitation, customary indemnification and contribution provisions on the
part of the Buyer) with the managing underwriter. Notwithstanding any other
provision of this Section 7.1, if the managing underwriter determines that
the inclusion of all shares requested to be registered would adversely
affect the offering, the Buyer may limit the number of shares to be
included in the registration and underwriting. The Buyer shall so advise
all holders of shares requesting registration, and the number of shares
that are entitled to be included in the registration and underwriting shall
be allocated in the following manner. The securities of the Buyer held by
holders other than Company Stockholders and Other Holders shall be excluded
from such registration and underwriting to the extent deemed advisable by
the managing underwriter, and, if a further limitation on the number of
shares is required, the number of shares that may be included in such
registration and underwriting shall be allocated among all Company
Stockholders and Other Holders requesting registration in proportion, as
nearly as practicable, to the respective number of shares of Buyer Common
Stock which they held at the time the Buyer gives notice of the proposed
registration to the Other Holders. If any Company Stockholder, officer,
director or Other Holder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person
may elect to withdraw therefrom by written notice to the Buyer, and the
securities so withdrawn shall also be withdrawn from registration. If the
managing underwriter has not limited the number of shares or other
securities to be underwritten, the Buyer may include securities for its own
account in such registration if the managing underwriter so agrees and if
the number of shares and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
7.2 Limitations on Registration Rights.
(a) The Buyer may, by written notice to the Company Stockholders, (i)
delay the filing or effectiveness of any Registration Statement or (ii)
suspend any Registration Statement after effectiveness and require that the
Company Stockholders immediately cease sales of shares pursuant to any
Registration Statement, in the event that (A) the Buyer files a
registration statement (other than a registration statement on Form S-8 or
its successor form) with the SEC for a public offering of its securities;
(B) the Buyer is engaged in any activity or transaction or preparations or
negotiations for any activity or transaction that the Buyer desires to keep
confidential for business reasons, if the Buyer determines in good faith
that the public disclosure requirements imposed on the Buyer under the
Securities Act in connection with the
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Registration Statement would require disclosure of such activity,
transaction, preparations or negotiations or (C) the Buyer fails to satisfy
the requirements for use of Form S-3, as set forth in the General
Instructions to Form S-3.
(b) If the Buyer delays or suspends any Registration Statement or
requires the Company Stockholders to cease sales of shares pursuant to
paragraph (a) above, the Buyer shall, as promptly as practicable following
the termination of the circumstance which entitled the Buyer to do so, take
such actions as may be necessary to file or reinstate the effectiveness of
such Registration Statement and/or give written notice to all Company
Stockholders authorizing them to resume sales pursuant to such Registration
Statement. If as a result thereof the prospectus included in such
Registration Statement has been amended to comply with the requirements of
the Securities Act, the Buyer shall enclose such revised prospectus with
the notice to Company Stockholders given pursuant to this paragraph (b),
and the Company Stockholders shall make no offers or sales of shares
pursuant to such Registration Statement other than by means of such revised
prospectus.
7.3 Incidental Registration.
(a) If, on or before the third anniversary of the Effective Date, the
Buyer proposes to file a registration statement with respect to any class
of its equity securities, (other than a Registration Statement filed
pursuant to Section 7.1 or a registration statement covering shares to be
sold solely for the account of Other Holders), it will, prior to such
filing, give written notice to all Company Stockholders of its intention to
do so; provided, that no such notice need be given if no shares are to be
included therein as a result of a determination of the managing underwriter
pursuant to Section 7.3(b). Upon the written request of a Company
Stockholder or Company Stockholders given within 20 days after the Buyer
provides such notice (which request shall state the intended method of
disposition of such shares), the Buyer shall use its best efforts to cause
all Merger Shares which the Buyer has been requested by such Company
Stockholder or Company Stockholders to register to be registered under the
Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution
specified in the request of such Company Stockholder or Company
Stockholders; provided that the Buyer shall have the right to postpone or
withdraw any registration effected pursuant to this Section 7.3 without
obligation to any Company Stockholder.
(b) If the registration for which the Buyer gives notice pursuant to
Section 7.3(a) is a registered public offering involving an underwriting,
the Buyer shall so advise the Company Stockholders as a part of the written
notice given pursuant to Section 7.3(a). In such event, the right of any
Company Stockholder to include its Merger Shares in such registration
pursuant to Section 7.3 shall be conditioned upon such Company
Stockholder's participation in such underwriting on the terms set forth
herein. All Company Stockholders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for the
underwriting by the Buyer. Notwithstanding any other provision of this
Section 7.3, if the managing underwriter determines that the inclusion of
all shares requested to be registered would adversely affect the offering,
the Buyer may limit the number of shares to be included in the registration
and underwriting to not less than 50% of the total number of securities to
be included in the offering. The Buyer shall so advise all holders of
shares requesting registration, and the number of shares that are entitled
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to be included in the registration and underwriting shall be allocated in
the following manner. The securities of the Buyer held by holders other
than Company Stockholders and Other Holders shall be excluded from such
registration and underwriting to the extent deemed advisable by the
managing underwriter, and, if a further limitation on the number of shares
is required, the number of shares that may be included in such registration
and underwriting shall be allocated among all Company Stockholders and
Other Holders requesting registration in proportion, as nearly as
practicable, to the respective number of shares of Buyer Common Stock which
they held at the time the Buyer gives the notice specified in Section
7.3(a). If any Company Stockholder or Other Holder would thus be entitled
to include more securities than such holder requested to be registered, the
excess shall be allocated among other requesting Company Stockholders and
Other Holders pro rata in the manner described in the preceding sentence.
If any holder of shares or any officer, director or Other Holder
disapproves of the terms of any such underwriting, such person may elect to
withdraw therefrom by written notice to the Buyer, and any shares or other
securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
7.4 Registration Procedures.
(a) In connection with the filing by the Buyer of each Registration
Statement, the Buyer shall furnish to each Company Stockholder a copy of
the prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act.
(b) The Buyer shall use its best efforts to register or qualify the
Merger Shares covered by the Registration Statement under the securities
laws of each state of the United States; provided, however, that the Buyer
shall not be required in connection with this paragraph (b) to qualify as a
foreign corporation or execute a general consent to service of process in
any jurisdiction.
(c) If the Buyer has delivered preliminary or final prospectuses to
the Company Stockholders and after having done so the prospectus is amended
or supplemented to comply with the requirements of the Securities Act, the
Buyer shall promptly notify the Company Stockholders and, if requested by
the Buyer, the Company Stockholders shall immediately cease making offers
or sales of shares under the Registration Statement and return all
prospectuses to the Buyer. The Buyer shall promptly provide the Company
Stockholders with revised or supplemented prospectuses and, following
receipt of the revised or supplemented prospectuses, the Company
Stockholders shall be free to resume making offers and sales under such
Registration Statement.
(d) The Buyer shall pay the expenses incurred by it in complying with
its obligations under this Article VII, including all registration and
filing fees, exchange listing fees, fees and expenses of counsel for the
Buyer, and fees and expenses of accountants for the Buyer, but excluding
(i) any brokerage fees, selling commissions or underwriting discounts
incurred by the Company Stockholders in connection with sales under any
Registration Statement and (ii) the fees and expenses of any counsel
retained by Company Stockholders.
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7.5 Requirements of Company Stockholders. The Buyer shall not be required
to include any Merger Shares in any Registration Statement unless:
(a) the Company Stockholder owning such shares furnishes to the Buyer
in writing such information regarding such Company Stockholder and the
proposed sale of Merger Shares by such Company Stockholder as the Buyer may
reasonably request in writing in connection with a Registration Statement
or as shall be required in connection therewith by the SEC or any state
securities law authorities;
(b) such Company Stockholder shall have provided to the Buyer its
written agreement:
(i) to indemnify the Buyer and each of its directors and
officers against, and hold the Buyer and each of its directors and officers
harmless from, any losses, claims, damages, expenses or liabilities
(including reasonable attorneys fees) to which the Buyer or such directors
and officers may become subject by reason of any statement or omission in
the Registration Statement made in reliance upon, or in conformity with, a
written statement by such Company Stockholder furnished pursuant to this
Section 7.5; and
(ii) to report to the Buyer sales made pursuant to any
Registration Statement.
7.6 Indemnification. The Buyer agrees to indemnify and hold harmless each
Company Stockholder whose shares are included in any Registration Statement
against any losses, claims, damages, expenses or liabilities to which such
Company Stockholder may become subject by reason of any untrue statement of a
material fact contained in such Registration Statement or any omission to state
therein a fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages, expenses
or liabilities arise out of or are based upon information furnished to the Buyer
by or on behalf of a Company Stockholder for use in such Registration Statement.
The Buyer shall have the right to assume the defense and settlement of any claim
or suit for which the Buyer may be responsible for indemnification under this
Section 7.6.
7.7 Assignment of Rights. A Company Stockholder may not assign any of its
rights under this Article VII except in connection with the transfer of some or
all of his, her or its Merger Shares to a child or spouse, or trust for their
benefit or, in the case of a partnership, to the partners of such partnership
pursuant to a pro rata distribution, provided each such transferee agrees in a
written instrument delivered to the Buyer to be bound by the provisions of this
Article VII.
7.8 Availability of Information. With a view to making available to
Company Stockholders the benefits of Rule 144 promulgated under the Securities
Act and any other rule or regulation of the SEC that may at any time permit a
Company Stockholder to sell securities of the Buyer to the public without
registration or pursuant to a registration on Form S-3, the Buyer agrees to:
(a) make and keep current public information about the Buyer
available, as those terms are understood and defined in SEC Rule 144;
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(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Buyer under the
Securities Act and the Exchange Act; and
(c) furnish to any Company Stockholder upon request (i) a written
statement by the Buyer as to its compliance with the reporting requirements
of SEC Rule 144 and of the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Buyer, and (iii) such
other reports and documents of the Buyer as such holder may reasonably
request to avail itself of any similar rule or regulation of the SEC
allowing it to sell any such securities without registration.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval), as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice to
the Company in the event the Company is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach,
individually or in combination with any other such breach, (i) would cause
the conditions set forth in clauses (c) or (d) of Section 5.2 not to be
satisfied and (ii) is not cured within 20 days following delivery by the
Buyer to the Company of written notice of such breach;
(c) the Company may terminate this Agreement by giving written notice
to the Buyer in the event the Buyer or the Transitory Subsidiary is in
breach of any representation, warranty or covenant contained in this
Agreement, and such breach, individually or in combination with any other
such breach, (i) would cause the conditions set forth in clauses (c) or (d)
of Section 5.3 not to be satisfied and (ii) is not cured within 20 days
following delivery by the Company to the Buyer of written notice of such
breach;
(d) any Party may terminate this Agreement by giving written notice to
the other Parties at any time after the Company Stockholders have voted on
whether to approve this Agreement and the Merger in the event this
Agreement and the Merger failed to receive the Requisite Stockholder
Approval;
(e) the Buyer may terminate this Agreement by giving written notice to
the Company if the Closing shall not have occurred on or before November 8,
2000 by reason of the failure of any condition precedent under Section 5.1
or 5.2 hereof (unless the failure results primarily from a breach by the
Buyer or the Transitory Subsidiary of any representation, warranty or
covenant contained in this Agreement); or
(f) the Company may terminate this Agreement by giving written notice
to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before November 8, 2000 by reason of the failure of any
condition precedent under Section 5.1 or 5.3
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hereof (unless the failure results primarily from a breach by the Company
of any representation, warranty or covenant contained in this Agreement).
8.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 8.1, all obligations of the Parties under this Agreement shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party for breaches of this Agreement) other than the
obligations of the parties under the Confidentiality Agreement dated as of
September 2, 2000 between the Buyer and the Company, the Consulting Agreement
dated as of October 10, 2000 between the Buyer and the Company, and Section
4.5(c).
ARTICLE IX DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
ADR Procedure 6.3(d)
ADR Service 6.3(d)
Affiliate 2.14(a)(vii)
Agreed Amount 6.3(c)
Average Closing Price 1.5(b)
Buyer Introduction
Buyer Certificate 5.3(e)
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
CERCLA 2.22(a)
Certificates 1.7(a)
Certificate of Merger 1.1
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.2
Closing Date 1.2
Code Introduction
Common Shares 1.5(a)
Company Introduction
Company Certificate 5.2(f)
Company Intellectual Property 2.13(a)
Company Material Adverse Effect 2.1
Company Shares 1.5(a)
Company Stockholder 1.3(d)
Confidential Information 4.5(c)
Controlling Party 6.3(a)
Conversion Ratio 1.5(b)
Customer Deliverables 2.13(a)
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Damages 6.1
Disclosure Schedule Article II
Disclosure Statement 4.3(a)
Dispute 6.3(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.21(a)(i)
Environmental Law 2.22(a)
ERISA 2.21(a)(ii)
ERISA Affiliate 2.21(a)(iii)
Escrow Agreement 1.3(f)
Escrow Agent 1.3(f)
Escrow Shares 1.5(c)
Expected Claim Notice 6.4
Exchange Act 2.14(a)(vii)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Representatives 1.9(b)
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Indemnifying Stockholders 6.1
Initial Shares 1.5(b)
Initial Stockholder Registration Statement 7.1
Intellectual Property 2.13(a)
Internal Systems 2.13(a)
Key Employees 4.3(e)
Legal Proceeding 2.18
Materials of Environmental Concern 2.22(b)
Merger 1.1
Merger Shares 1.5(c)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-controlling Party 6.3(a)
Other Holders 7.1(b)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.25
Reasonable Best Efforts 4.1
Registration Statements 7.1
Response 6.3(c)
Requisite Stockholder Approval 2.3
SEC 3.5
Securities Act 2.2
Security Interest 2.4
Software 2.13(e)
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Subsequent Stockholder Registration Statement 7.1
Surviving Corporation 1.1
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
Transitory Subsidiary Introduction
Value 6.3(c)
Warrant 1.8(a)
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use reasonable efforts to advise the other Parties and provide them
with a copy of the proposed disclosure prior to making the disclosure).
10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares, Article VI concerning
indemnification and Article VII concerning registration rights are intended for
the benefit of the Company Stockholders and (b) the provisions in Section 4.9
concerning indemnification are intended for the benefit of the individuals
specified therein and their successors and assigns.
10.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
Confidentiality Agreement dated as of September 2, 2000 between the Buyer and
the Company shall remain in effect in accordance with its terms.
10.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
10.5 Counterparts and Facsimile Signature. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
If to the Company: IP Performance, Inc. Copy to: Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxx Xxxxxxx Xxxxxx 4801 Plaza on the Lake
Suite 200 Austin, TX 78746
Xxxxxx, XX 00000 Attention: S. Xxxxxxx Xxxx, P.C.
Attention: Xxx Xxxxxx
If to the Buyer or Network Engines, Inc. Copy to: Xxxx and Xxxx LLP
the Transitory 00 Xxx Xxxx 00 Xxxxx Xxxxxx
Subsidiary: Xxxxxx, XX 00000 Xxxxxx, XX 00000
Attention: President Attention: Xxxxxx X. Xxxxxxxx, Esq.
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
10.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment effected subsequent to the Requisite Stockholder Approval
shall be subject to any restrictions contained in the Delaware General
Corporation Law. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
of any right or remedy hereunder shall be valid unless the same shall be in
writing and signed by the Party giving such waiver. No waiver by any Party with
respect to any default, misrepresentation or breach of warranty or covenant
hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
10.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the
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Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified.
10.11 Submission to Jurisdiction. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in Delaware in any action or
proceeding arising out of or relating to this Agreement, (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, and (c) agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety or other security that might be required
of any other Party with respect thereto. Any Party may make service on another
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10.7. Nothing in this Section 10.11, however, shall affect the right of any
Party to serve legal process in any other manner permitted by law.
10.12 Construction.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
NETWORK ENGINES, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: President and CEO
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IPP ACQUISITION CO.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: President and CEO
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IP PERFORMANCE, INC.
By:/s/ Xxxxxx Xxxxxx
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Title: President
--------------------------
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The following stockholders of the Company hereby execute this Agreement for
the limited purpose of agreeing to and becoming bound by the provisions of
Section 4.3(e).
/s/ Xxx Xxxxxx
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XXX XXXXXX
/s/ Xxxx Xxxxx
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XXXX XXXXX
/s/ Xxxx Xxxxxxx
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XXXX XXXXXXX
/s/ Xxxxx Xxxx
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XXXXX XXXX
/s/ Xxx Xxxxxx
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XXX XXXXXX
/s/ Xxxxxx Xxxxxx
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XXXXXX XXXXXX
/s/ Xxxx Xxxxxx
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XXXX XXXXXX
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