Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
EROOM TECHNOLOGY, INC.
COPPER TOP ACQUISITION CORP.,
DOCUMENTUM, INC.
AND CERTAIN OTHER PARTIES
DATED AS OF OCTOBER 3, 2002
TABLE OF CONTENTS
TABLE OF CONTENTS
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Article I THE MERGER................................................................................................. 2
1.1 The Merger......................................................................................... 2
1.2 Effective Time..................................................................................... 2
1.3 Effect of the Merger............................................................................... 2
1.4 Certificate of Incorporation and Bylaws............................................................ 2
1.5 Directors and Officers............................................................................. 3
1.6 Effect of Merger on the Capital Stock of the Constituent
Corporations............................... ..................................................... 3
1.7 Dissenting Shares.................................................................................. 6
1.8 Surrender of Certificates.......................................................................... 7
1.9 No Further Ownership Rights in Company Capital Stock............................................... 9
1.10 Lost, Stolen or Destroyed Certificates............................................................. 9
1.11 Tax Consequences................................................................................... 9
1.12 Taking of Necessary Action; Further Action......................................................... 9
1.13 Definitions........................................................................................ 9
Article II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................. 13
2.1 Organization of the Company........................................................................ 13
2.2 Company Capital Structure.......................................................................... 13
2.3 Subsidiaries....................................................................................... 15
2.4 Authority.......................................................................................... 15
2.5 No Conflict........................................................................................ 16
2.6 Consents........................................................................................... 16
2.7 Company Financial Statements....................................................................... 17
2.8 No Undisclosed Liabilities......................................................................... 17
2.9 No Changes......................................................................................... 18
2.10 Tax Matters........................................................................................ 20
2.11 Restrictions on Business Activities................................................................ 22
2.12 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment; Customer Information ................................................ 22
2.13 Intellectual Property.............................................................................. 24
2.14 Agreements, Contracts and Commitments.............................................................. 29
2.15 Interested Party Transactions...................................................................... 30
2.16 Governmental Authorization......................................................................... 31
2.17 Litigation......................................................................................... 31
2.18 Accounts Receivable................................................................................ 31
2.19 Minute Books....................................................................................... 31
2.20 Environmental Matters.............................................................................. 32
2.21 Brokers' and Finders' Fees......................................................................... 33
2.22 Employee Benefit Plans and Compensation............................................................ 33
2.23 Insurance.......................................................................................... 38
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2.24 Compliance with Laws............................................................................... 38
2.25 Foreign Corrupt Practices Act...................................................................... 38
2.26 Complete Copies of Materials....................................................................... 39
2.27 Representations Complete........................................................................... 39
2.28 Information Statement.............................................................................. 39
2.29 Spreadsheet........................................................................................ 39
2.30 Approvals.......................................................................................... 39
Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB......................................................... 39
3.1 Organization, Standing and Power................................................................... 39
3.2 Authority.......................................................................................... 40
3.3 Consents........................................................................................... 40
3.4 Parent Common Stock................................................................................ 40
3.5 Capital Resources.................................................................................. 40
3.6 Broker's and Finders' Fees......................................................................... 40
3.7 SEC Documents; Parent Financial Statements......................................................... 41
3.8 No Parent Material Adverse Effect.................................................................. 41
3.9 No Conflict........................................................................................ 41
3.10 Parent Capital Structure........................................................................... 42
Article IV CONDUCT PRIOR TO THE EFFECTIVE TIME....................................................................... 42
4.1 Conduct of Business of the Company................................................................. 42
4.2 No Solicitation.................................................................................... 45
Article V ADDITIONAL AGREEMENTS...................................................................................... 46
5.1 Fairness Hearing; Stockholder Approval............................................................. 46
5.2 Access to Information.............................................................................. 49
5.3 Confidentiality.................................................................................... 49
5.4 Expenses........................................................................................... 49
5.5 Public Disclosure.................................................................................. 50
5.6 Consents........................................................................................... 50
5.7 FIRPTA Compliance.................................................................................. 50
5.8 Reasonable Efforts................................................................................. 50
5.9 Notification of Certain Matters.................................................................... 51
5.10 Additional Documents and Further Assurances........................................................ 51
5.11 S-8 Registration................................................................................... 51
5.12 New Employment Arrangements........................................................................ 51
5.13 Vesting Modification Agreements.................................................................... 52
5.14 Company Affiliates................................................................................. 52
5.15 Statement of Expenses.............................................................................. 52
5.16 Termination of 401(k) Plan......................................................................... 52
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5.17 Resignation of Officers and Directors.............................................................. 53
5.18 Proprietary Information and Inventions Assignment Agreement........................................ 53
5.19 HSR Act............................................................................................ 53
5.20 Termination of Warrants............................................................................ 53
5.21 Spreadsheet........................................................................................ 53
5.22 Option Grants...................................................................................... 54
5.23 Voting Agreements.................................................................................. 54
5.24 Non-Competition Agreements......................................................................... 54
5.25 Key Employee Lock-up Agreements.................................................................... 54
5.26 Certificate of Executive Officers.................................................................. 54
5.27 Termination of Agreements.......................................................................... 55
5.28 Indemnification of Directors and Officers.......................................................... 55
5.29 Tax Matters........................................................................................ 57
5.30 Tax Certificate.................................................................................... 57
5.31 Share Consideration/Cash Consideration Adjustment.................................................. 57
Article VI CONDITIONS TO THE MERGER.................................................................................. 57
6.1 Conditions to Obligations of Each Party to Effect the Merger....................................... 57
6.2 Conditions to the Obligations of Parent and Sub.................................................... 58
6.3 Conditions to Obligations of the Company........................................................... 61
Article VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW....................................................... 62
7.1 Survival of Representations, Warranties and Covenants.............................................. 62
7.2 Indemnification.................................................................................... 62
7.3 Escrow Arrangements................................................................................ 63
7.4 Stockholder Representative......................................................................... 70
7.5 Maximum Payments; Remedy........................................................................... 71
Article VIII TERMINATION, AMENDMENT AND WAIVER....................................................................... 72
8.1 Termination........................................................................................ 72
8.2 Effect of Termination.............................................................................. 72
8.3 Amendment.......................................................................................... 73
8.4 Extension; Waiver.................................................................................. 73
Article IX GENERAL PROVISIONS........................................................................................ 73
9.1 Notices............................................................................................ 73
9.2 Interpretation..................................................................................... 74
9.3 Counterparts....................................................................................... 75
9.4 Entire Agreement; Assignment....................................................................... 75
9.5 Severability....................................................................................... 75
9.6 Other Remedies..................................................................................... 75
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9.7 Governing Law...................................................................................... 75
9.8 Rules of Construction.............................................................................. 75
9.9 WAIVER OF JURY TRIAL............................................................................... 76
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A-1 Form of Voting Agreement
Exhibit A-2 Form of Voting Agreement
Exhibit B Form of Non-Competition Agreement
Exhibit C Form of Key Employee Lock-Up Agreement
Exhibit D Form of Vesting Modification Agreement
Exhibit E Form of Certificate of Merger
SCHEDULES
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Schedule 1.6(a) Company Optionholders
Schedule 1.6(b) Company Warrants
Schedule 5.4 Assumptions for Estimated Legal, Accounting and Tax Fees and Expenses
Schedule 5.14 Rule 145 Affiliates
Schedule 5.22 Grantees of Parent Options
Schedule 5.23 Parties to the Voting Agreements
Schedule 5.24 Parties to the Non-Competition Agreement
Schedule 5.25 Key Employees Delivering Key Employee Lock-Up Agreements
Schedule 6.2(b) Required Third Party Consents
Schedule 6.2(c) Terminated Agreements
Schedule 6.2(d) Released Liens
Schedule 6.2(p) Continuing Employees
Schedule 9.1(c) Address for Notice to Stockholder Representative
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THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of October 3, 2002 by and among Documentum, Inc., a Delaware
corporation ("PARENT"), Copper Top Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of Parent ("SUB"), eRoom Technology, Inc., a Delaware
corporation (the "COMPANY"), Xxxxxxx X. Xxxx as stockholder representative (the
"STOCKHOLDER REPRESENTATIVE"), and U.S. Bank, N.A. as escrow agent (the "ESCROW
AGENT").
RECITALS
A.The Boards of Directors of each of Parent, Sub and the Company believe
it is in the best interests of each company and its respective stockholders that
Parent acquire the Company through the statutory merger of Sub with and into the
Company (the "MERGER") and, in furtherance thereof, have approved the Merger.
B.Pursuant to the Merger, among other things, and subject to the terms and
conditions of this Agreement, all of the issued and outstanding capital stock of
the Company shall be converted into the right to receive the consideration set
forth herein, all issued and outstanding options to purchase capital stock of
the Company shall be assumed by Parent and converted into options to purchase
common stock of Parent as set forth herein and all outstanding warrants to
purchase capital stock of the Company, if any, shall be cancelled and
extinguished.
C.The Company and certain stockholders of the Company on the one hand, and
Parent and Sub, on the other hand, desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger.
D.Concurrent with the execution and delivery of this Agreement, as a
material inducement to Parent and Sub to enter into this Agreement, (a) all
officers and directors of the Company, and certain other stockholders of the
Company are entering into Voting Agreements, in substantially the form attached
hereto as EXHIBIT A (each a "VOTING AGREEMENT"), with Parent, and (b) the Key
Employees are entering into Non-Competition Agreements, each in substantially
the form attached hereto as EXHIBIT B (each a "NON-COMPETITION AGREEMENT"), Key
Employee Lock-Up Agreements, each in substantially the form attached hereto as
EXHIBIT C (each a "KEY EMPLOYEE LOCK-UP AGREEMENT"), and Vesting Modification
Agreements, each in substantially the form attached hereto as EXHIBIT D (each a
"VESTING MODIFICATION AGREEMENT").
E.For federal income tax purposes, the parties intend that (a) the Merger
shall qualify as a "reorganization" within the meaning of Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended (the "CODE") and the rules and
regulations promulgated thereunder, and (b) this Agreement constitutes a plan of
reorganization.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
other promises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in SECTION 1.2 hereof)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the General Corporation Law of the State of Delaware
("DELAWARE LAW"), Sub shall be merged with and into the Company, the separate
corporate existence of Sub shall cease, and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. The surviving
corporation after the Merger is sometimes referred to hereinafter as the
"SURVIVING CORPORATION." Following the Merger, Parent intends to cause the
Surviving Corporation to be merged with and into Parent, whereby the separate
corporate existence of the Surviving Corporation shall cease, and Parent shall
continue as the Surviving Corporation. The parties intend for the Merger and the
subsequent merger of the Surviving Corporation with and into Parent to be
treated as an integrated transaction which shall qualify as a "reorganization"
pursuant to Section 368(a)(1)(A) of the Code, in accordance with Revenue Ruling
2001-46, 2001-2 CB 321.
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated pursuant
to SECTION 8.1 hereof, the closing of the Merger (the "CLOSING") will take place
as promptly as practicable after the execution and delivery hereof by the
parties hereto, and following satisfaction or waiver of the conditions set forth
in ARTICLE VI hereof, at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, unless
another time or place is mutually agreed upon in writing by Parent and the
Company. The date upon which the Closing actually occurs shall be referred to
herein as the "CLOSING DATE." On the Closing Date, the parties hereto shall
cause the Merger to be consummated by filing a Certificate of Merger in
substantially the form attached hereto as EXHIBIT E, with the Secretary of State
of the State of Delaware (the "CERTIFICATE OF MERGER"), in accordance with the
applicable provisions of Delaware Law (the time of acceptance by the Secretary
of State of the State of Delaware such filing, or at such other time as Parent
and the Company shall agree and specify in the Certificate of Merger, shall be
referred to herein as the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise agreed to pursuant to the terms of this Agreement, all
the property, rights, privileges, powers and franchises of the Company and Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) Unless otherwise determined by Parent prior to the Effective Time,
the certificate of incorporation of the Surviving Corporation shall be amended
and restated as of the Effective Time to conform to the certificate of
incorporation of Sub as in effect immediately prior to the Effective Time, until
thereafter amended in accordance with Delaware Law and as provided in
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such certificate of incorporation; provided, however, that at the Effective
Time, Article I of the certificate of incorporation of the Surviving Corporation
shall be amended and restated in its entirety to read as follows: "The name of
the corporation is eRoom Technology, Inc."
(b) Unless otherwise determined by Parent prior to the Effective Time,
the bylaws of Sub, as in effect immediately prior to the Effective Time, shall
be the bylaws of the Surviving Corporation at the Effective Time until
thereafter amended in accordance with Delaware Law and as provided in the
certificate of incorporation of the Surviving Corporation and such bylaws.
1.5 DIRECTORS AND OFFICERS.
(a) DIRECTORS OF COMPANY. Unless otherwise determined by Parent prior
to the Effective Time, the directors of Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation immediately after the
Effective Time, each to hold the office of a director of the Surviving
Corporation in accordance with the provisions of Delaware Law and the
certificate of incorporation and bylaws of the Surviving Corporation until their
successors are duly elected and qualified.
(b) OFFICERS OF COMPANY. Unless otherwise determined by Parent prior to
the Effective Time, the officers of Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation immediately after the
Effective Time, each to hold office in accordance with the provisions of the
bylaws of the Surviving Corporation.
(c) DIRECTORS OF SUBSIDIARY. Unless otherwise determined by Parent
prior to the Effective Time, Parent, the Company and the Surviving Corporation
shall cause the directors of Sub immediately prior to the Effective Time to be
the directors of any Subsidiary (as defined in SECTION 2.3 hereof) immediately
after the Effective Time, each to hold office as a director of such Subsidiary
in accordance with the provisions of the laws of the jurisdiction of
incorporation and charter documents and the bylaws of such Subsidiary.
(d) OFFICERS OF SUBSIDIARY. Unless otherwise determined by Parent prior
to the Effective Time, Parent, the Company and the Surviving Corporation shall
cause the officers of Sub immediately prior to the Effective Time to be the
officers of any Subsidiary immediately after the Effective Time, each to hold
office as a director of Subsidiary in accordance with the provisions of the laws
of the jurisdiction of incorporation and charter documents and the bylaws of
such Subsidiary.
1.6 EFFECT OF MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS.
(a) EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Sub, the Company or the
holders of shares of the Company Capital Stock, each share of Company Capital
Stock issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares (as defined in SECTION 1.7(a) hereof), upon the terms and
subject to conditions set forth in this SECTION 1.6 and throughout this
Agreement, including,
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without limitation, the escrow provisions set forth in ARTICLE VII hereof, will
be canceled and extinguished and be converted automatically into the right to
receive, upon surrender of the certificate representing such shares of Company
Capital Stock in the manner provided in SECTION 1.8 hereof, such number of
shares of Parent Common Stock and an amount of cash (without interest) as set
forth below:
(i) Each share of Company Capital Stock issued and outstanding
immediately prior to the Effective Time shall be entitled to receive a fraction
of a share of Parent Common Stock equal to the Common Equivalent Share Amount
and an amount of cash equal to the Common Equivalent Cash Amount.
(ii) Each share of Parent Common Stock issued for a share of
Company Unvested Common Stock pursuant to this SECTION 1.6 shall, except as
otherwise set forth in this Agreement or the Related Agreements, continue to
have, and be subject to, the same terms and conditions (including vesting terms)
set forth in the Stock Plan, as applicable, and the agreements relating to such
Company Unvested Common Stock, as in effect immediately prior to the Effective
Time.
(iii) The aggregate number of shares of Parent Common Stock
issuable to each Stockholder shall be rounded down to the nearest whole number
of shares of Parent Common Stock, and no cash will be paid for fractional
shares.
(b) ASSUMPTION OF COMPANY OPTIONS; CANCELLATION OF COMPANY WARRANTS.
(i) At the Effective Time, Parent shall assume each Company
Option. Each Company Option so assumed by Parent pursuant to this section shall
continue to have, and be subject to, the same terms and conditions (including
vesting terms) set forth in the Stock Plan and the option agreements relating
thereto, as in effect immediately prior to the Effective Time, except that:
(A) each assumed Company Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of shares
of Parent Common Stock, rounded down to the nearest whole number of shares of
Parent Common Stock, equal to the sum of (1) the product of (x) the number of
shares of Company Common Stock subject to such Company Option immediately prior
to the Effective Time multiplied by (y) the Common Equivalent Share Amount, plus
(2) the product of (x) the number of shares of Company Common Stock subject to
such Company Option immediately prior to the Effective Time multiplied by (y)
the quotient of (i) the Common Equivalent Cash Amount divided by (ii) the
Trading Price. After the Effective Time, the per share exercise price for each
such assumed Company Option shall be determined by dividing the exercise price
per share of Company Common Stock subject to such Company Option, as in effect
immediately prior to the Effective Time, by the sum of (1) the Common Equivalent
Share Amount, plus (2) the quotient of (x) the Common Equivalent Cash Amount
divided by (y) the Trading Price, rounded up to the nearest whole cent. It is
the intention of the parties that the Company Options so assumed by Parent
qualify following the Effective Time as incentive stock
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options as defined in Section 422 of the Code to the extent that such Company
Options qualified as incentive stock options prior to the Effective Time and
Parent and Company will act consistently therewith.
(B) Upon the exercise of a Company Option after the
Effective Time and before the distribution of all of the Escrow Funds (to the
Stockholders, Parent, or a combination of the foregoing), on behalf of the
person exercising such Company Option and without any further action on the part
of such person, Parent shall deposit into the Stock Escrow Fund a number of
shares of Parent Common Stock equal to such person's pro rata share of the
Escrow Amount out of the aggregate number of shares of Parent Common Stock
otherwise issuable to such person. The shares of Parent Common Stock to be
deposited into the Stock Escrow Fund shall be deemed to have been deposited into
the Stock Escrow Fund at the Effective Time and shall be treated in a manner
consistent with the treatment of the shares of Parent Common Stock deposited
into the Stock Escrow Fund pursuant to SECTION 7.3(a) and shares of Parent
Common Stock held in the Stock Escrow Fund, whether deposited pursuant to
SECTION 7.3(a) hereof or upon the exercise of a Company Option, as set forth in
this SUBSECTION 1.6(b)(i)(b), shall be treated in the same manner for purposes
of ARTICLE VII.
(ii) At the Effective Time, each Warrant shall not be assumed
by Parent and will by virtue of the Merger, and without any further action on
the part of any holder thereof, be cancelled and extinguished.
(iii) Prior to the Effective Time, the Company shall take all
action necessary to effect the transactions anticipated by this SECTION 1.6
under all Company Option agreements, all agreements related to Company Unvested
Common Stock, all Company Warrant agreements and any other plan or arrangement
of the Company (whether written or oral, formal or informal).
(c) ASSUMPTION AGREEMENT. As soon as practicable following the Closing,
but in no event later than twenty (20) days after the Closing Date, Parent shall
issue to each holder of a Company Option to be assumed by Parent pursuant to
SECTION 1.6(b), a document evidencing the assumption of such Company Option by
Parent, and each former holder of a Company Option so assumed by Parent shall
acknowledge the receipt of the same in exchange for such holder's Company
Option.
(d) WITHHOLDING TAXES. Any number of shares of Parent Common Stock
issuable to a Stockholder pursuant to SECTION 1.6(a) shall be subject to
applicable state, federal and foreign withholding taxes incurred (and not
previously paid by or on behalf of such Stockholder or the Company) in
connection with the acquisition of Company Capital Stock upon the exercise of
Company Options, upon the lapsing of repurchase rights in respect of shares of
Company Common Stock, or upon payment of a bonus in the form of Company Common
Stock, if any, to such Stockholder. A Stockholder shall not be entitled to
receive its portion of the Share Consideration until it delivers an amount in
cash by check equal to the amount of applicable withholding taxes.
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(e) CAPITAL STOCK OF SUB. Each share of capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one (1) validly issued, fully paid and nonassessable share of
Common Stock of the Surviving Corporation. Each stock certificate of Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(f) SHARES SUBJECT TO VESTING. If any shares of Company Capital Stock
issued and outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable stock restriction agreement or other agreement with the Company,
then the shares of Parent Common Stock issued in exchange for such shares of
Company Capital Stock shall also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition (including any requirement that
any unvested shares be held in escrow), and the certificate representing such
shares of Parent Common Stock may accordingly be marked with appropriate legends
in the discretion of Parent, except that prior to the Effective Time, each Key
Employee who holds Company Unvested Common Stock shall have waived and amended
all rights regarding acceleration of vesting or lapsing of repurchase rights
upon the Merger that would take effect as a result of the terms of employment
offered to such Key Employee set forth in an Offer Letter (as defined in SECTION
5.12), to the extent such provisions exist, by entering into a Vesting
Modification Agreement.
1.7 DISSENTING SHARES.
(a) Notwithstanding any other provisions of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has not
effectively withdrawn or lost such holder's appraisal rights under Delaware Law
("DISSENTING SHARES") shall not be converted into or represent a right to
receive the applicable consideration for Company Capital Stock set forth in
SECTION 1.6(A) hereof, but the holder thereof shall only be entitled to such
rights as are provided by Delaware Law.
(b) Notwithstanding the provisions of SECTION 1.7(a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
or otherwise) such holder's appraisal rights under Delaware Law, then, as of the
later of the Effective Time and the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive the consideration for Company Capital Stock, as applicable, set forth in
SECTION 1.6, without interest thereon, and subject to the provisions of SECTION
7.3, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to any such demands or offer to settle or settle any such demands.
Notwithstanding the foregoing, to the extent that Parent or the Company (i)
makes any payment or payments in respect of any Dissenting Shares in excess of
the consideration that otherwise would have been payable in
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respect of such shares in accordance with this Agreement or (ii) incurs any
other costs or expenses, (including specifically, but without limitation,
attorneys' fees, costs and expenses in connection with any action or proceeding
or in connection with any investigation) in respect of any Dissenting Shares
(excluding payments for such shares) (together "DISSENTING SHARE PAYMENTS"),
Parent shall be entitled to recover under the terms of ARTICLE VII the amount of
such Dissenting Share Payments.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. An institution selected by Parent shall serve as
the exchange agent (the "EXCHANGE AGENT") for the Merger.
(b) PARENT TO PROVIDE PARENT COMMON STOCK AND CASH. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this ARTICLE I the shares of Parent Common Stock issuable and
cash payable pursuant to SECTION 1.6 in exchange for outstanding shares of
Company Capital Stock; provided, however, that, on behalf of the Stockholders,
Parent shall deposit into the Stock Escrow Fund a number of shares of Parent
Common Stock equal to the Escrow Share Amount out of the aggregate number of
shares of Parent Common Stock otherwise issuable to the Stockholders pursuant to
SECTION 1.6 and cash equal to the Cash Escrow Amount out of the aggregate amount
of cash otherwise issuable to the Stockholders pursuant to SECTION 1.6. In the
event any Stockholder holds shares of Company Capital Stock that include shares
of Company Unvested Common Stock, the proportion of vested and unvested Parent
Common Stock deposited into the Stock Escrow Fund shall be equal to the
proportion of vested and unvested Company Capital Stock held by such
Stockholder. Each Stockholder shall be deemed to have contributed his, her or
its pro rata portion of the Escrow Amount to the Escrow Funds, in the case of
the Stock Escrow Fund, rounded to the nearest whole number of shares of Parent
Common Stock.
(c) EXCHANGE PROCEDURES. On or within five (5) days after the Closing
Date, Parent shall mail a letter of transmittal in such form and having such
provisions as Parent may reasonably determine and, if applicable, a Lock-Up
Agreement, to each Stockholder at the address set forth opposite each such
Stockholder's name on the Spreadsheet (as defined in SECTION 5.21 hereof). After
receipt of such letter of transmittal, the Stockholders will surrender the
certificates representing their shares of Company Capital Stock (the "COMPANY
STOCK CERTIFICATES") to the Exchange Agent for cancellation together with a duly
completed and validly executed letter of transmittal. Subject to SECTION 1.8(d),
upon surrender of a Company Stock Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto subject to the terms of
SECTION 1.8(f), the holder of such Company Stock Certificate shall be entitled
to receive from the Exchange Agent in exchange therefor, a certificate
representing the number of whole shares of Parent Common Stock and the cash
amounts less the number of shares of Parent Common Stock and cash to be
deposited in the Escrow Funds on such holder's behalf pursuant to SECTION 1.8(b)
and ARTICLE VII hereof to which such holder is entitled pursuant to SECTION
1.6(a), and the Company Stock Certificate so surrendered shall be canceled.
Until so surrendered, each Company Stock Certificate outstanding
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after the Effective Time will be deemed from and for all corporate purposes to
evidence only the right to receive the consideration provided for in this
ARTICLE I plus any dividends and distributions pursuant to SECTION 1.8(e) and
any New Shares as provided in SECTION 7.3(d).
(d) LOCK-UP PROVISIONS. The obligations of the Exchange Agent to
deliver shares of Parent Common Stock to a Stockholder that is, or is affiliated
with, a Preferred Stockholder and that has not previously executed and delivered
to Parent a Voting Agreement, shall be to deliver the shares Parent Common Stock
issuable to such Stockholder under SECTION 1.6(a) pursuant to the following
schedule: 25% of such shares shall be delivered on the first business day
following the 60-day anniversary of the Effective Time, and an additional 25% of
such shares shall be delivered on the first business day following each of the
90-day, 120-day and 150-day anniversaries of the Effective Time. If a
Stockholder that is, or is affiliated with, a Preferred Stockholder executes and
delivers to Parent a Voting Agreement, the Exchange Agent shall as soon as
practicable thereafter deliver to the Stockholder all of the remaining shares of
Parent Common Stock deliverable to such Stockholder under SECTION 1.6(a).
(e) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Company Stock Certificate shall surrender such Company Stock Certificate.
Subject to applicable law, following surrender of any such Company Stock
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock. No interest shall be
payable on any cash deliverable upon the exchange of any Company Common Stock
for cash.
(f) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock or any cash amounts are to be disbursed pursuant to SECTION 1.6 to
any person other than the person or entity whose name is reflected on the
Company Stock Certificate surrendered in exchange therefore, it will be a
condition of the issuance or delivery thereof that the certificate so
surrendered will be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange will have paid to Parent or any
agent designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name other
than that of the registered holder of the certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(g) EXCHANGE AGENT TO RETURN CASH CONSIDERATION. At any time following
the last day of the twelfth (12th) month following Effective Time, Parent shall
be entitled to require the Exchange Agent to deliver to Parent or its designated
successor or assign all cash amounts that have been deposited with the Exchange
Agent, and any and all interest thereon or other income or proceeds thereof, not
disbursed to the Stockholders pursuant to this section, and thereafter the
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Stockholders shall be entitled to look only to Parent (subject to the terms of
SECTION 1.8(h)) only as general creditors thereof with respect to any and all
cash amounts that may be payable to such Stockholder pursuant to SECTION 1.6(a)
upon the due surrender of such Company Capital Stock in the manner set forth in
this section.
(h) NO LIABILITY. Notwithstanding anything to the contrary in this
Agreement, neither the Exchange Agent, the Surviving Corporation, nor any party
hereto shall be liable to a holder of shares of Company Capital Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. The shares of
Parent Common Stock and cash amounts paid in respect of the surrender for
exchange of shares of Company Capital Stock in accordance with the terms hereof
shall be deemed to be full satisfaction of all rights pertaining to such shares
of Company Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Capital Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, certificates representing Company Capital Stock
are presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this ARTICLE I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Company
Stock Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed certificates, upon
the making of an affidavit of that fact by the holder thereof, such amount, if
any, as may be required pursuant to SECTION 1.6; provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance thereof,
require the Stockholder who is the owner of such lost, stolen or destroyed
certificates to either (i) deliver a bond, if required by the transfer agent, in
such amount as the transfer agent may reasonably direct or (ii) provide an
indemnification agreement in a form and substance reasonably acceptable to
Parent, against any claim that may be made against Parent or the Exchange Agent
with respect to the certificates alleged to have been lost, stolen or destroyed.
1.11 TAX CONSEQUENCES. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Code.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, Parent, Sub, and the officers and directors of
the Company, Parent and Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
1.13 DEFINITIONS.
(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
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(i) "CASH CONSIDERATION" shall mean an amount equal to fifteen million
dollars ($15,000,000), less the Third Party Expense Adjustment Amount.
(ii) "COMMON EQUIVALENT SHARE AMOUNT" shall mean the quotient obtained
by dividing (x) the Share Consideration by (y) the Total Outstanding Common
Equivalent Shares.
(iii) "COMMON EQUIVALENT CASH AMOUNT" shall mean the quotient obtained
by dividing the (x) Cash Consideration by (y) the Total Outstanding Common
Equivalent Shares.
(iv) "COMPANY CAPITAL STOCK" shall mean the Company Common Stock, the
Company Preferred Stock and any other shares of capital stock, if any, of the
Company, taken together.
(v) "COMPANY COMMON STOCK" shall mean shares of common stock, $0.01 par
value per share, of the Company.
(vi) "COMPANY MATERIAL ADVERSE EFFECT" shall mean any change, event or
effect that is materially adverse to the business, assets (tangible or
intangible), condition (financial or otherwise), results of operations or
capitalization of the Company and Subsidiaries, taken as a whole; provided,
however, that "Company Material Adverse Effect" shall not include or take into
account (i) any change, event or effect that is primarily caused by conditions
affecting the economy generally; (ii) any change, event or effect primarily
caused by conditions generally affecting the software industry; (iii) any
change, event or effect primarily arising out of or resulting from the actions
specifically contemplated by this Agreement or which are primarily attributable
to the announcement of the transaction contemplated by this Agreement; and (iv)
any effect resulting primarily from changes in accounting rules or procedures
announced subsequent to the date hereof by the Financial Accounting Standards
Board.
(vii) "COMPANY OPTIONS" shall mean all issued and outstanding options
(including commitments to grant options, but excluding Company Warrants) to
purchase or otherwise acquire Company Common Stock (whether or not vested) held
by any person or entity, each of whom are listed on SCHEDULE 1.6(a).
(viii) "COMPANY PREFERRED STOCK" shall mean the Company Series A
Preferred Stock, the Company Series B Preferred Stock, the Company's Series B-1
Preferred Stock, the Company's Series C Preferred Stock, and the Company's
Series D Preferred Stock, taken together.
(ix) "COMPANY UNVESTED COMMON STOCK" shall mean any shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time that
are unvested or are subject to a repurchase option, risk of forfeiture or other
condition under any applicable stock restriction agreement or other agreement
with the Company.
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(x) "COMPANY WARRANTS" shall mean the Warrants.
(xi) "ESCROW AGENT" shall mean U.S. Bank, N.A., or another institution
acceptable to Parent and the Stockholder Representative.
(xii) "ESCROW AMOUNT" shall mean the Cash Escrow Amount and the Escrow
Share Amount.
(xiii) "ESCROW CASH AMOUNT" shall mean the amount of cash equal to the
sum of (A) the product of 0.15 multiplied by the Cash Consideration, plus (B)
$500,000.
(xiv) "ESCROW FUNDS" shall have the meaning ascribed to it in ARTICLE
VII hereof.
(xv) "ESCROW SHARE AMOUNT" shall mean the whole number of shares of
Parent Common Stock equal to the product of 0.15 multiplied by the Share
Consideration.
(xvi) "ESTIMATED THIRD PARTY EXPENSES" shall mean the amount of Third
Party Expenses (as defined in SECTION 5.4 hereof) paid or payable by the
Company, as estimated by the Company in good faith and based on reasonable
assumptions, as of the Closing Date.
(xvii) "FAIR MARKET VALUE" shall mean, on any particular date, the
average of the closing prices of the Parent Common Stock on the Nasdaq National
Market for the ten-day period ending three days prior to such date.
(xviii) "GAAP" shall mean United States generally accepted accounting
principles consistently applied.
(xix) "KEY EMPLOYEES" shall mean the employees listed in SCHEDULE 5.24
hereof.
(xx) "KNOWLEDGE" or "KNOWN" shall mean, with respect to the Company,
the knowledge of the Company's executive officers, directors and Key Employees;
provided, however, that such persons shall have made due and diligent inquiry of
those employees of the Company and its Subsidiaries whom such executive
officers, directors and Key Employees reasonably believe would have actual
knowledge of the matters represented.
(xxi) "LIEN" shall mean any lien, pledge, charge, claim, mortgage,
security interest or other encumbrance of any sort.
(xxii) "LOCK-UP AGREEMENT" shall mean a Key Employee Lock-Up Agreement.
(xxiii) "MULTIEMPLOYER PLAN" shall mean any Pension Plan (as defined
herein) that is a "multiemployer plan," as defined in Section 3(37) of ERISA.
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(xxiv) "PARENT MATERIAL ADVERSE EFFECT" shall mean any change,
event or effect that is materially adverse to the business, assets (tangible or
intangible), condition (financial or otherwise), results of operations or
capitalization of Parent and its Subsidiaries, taken as a whole; provided,
however, that "Parent Material Adverse Effect" shall not include or take into
account (i) any change, event or effect that is primarily caused by conditions
affecting the economy generally; (ii) any change, event or effect primarily
caused by conditions generally affecting the software industry; (iii) any
change, event or effect primarily arising out of or resulting from the actions
specifically contemplated by this Agreement or which are attributable to the
announcement of the transaction contemplated by this Agreement; (iv) in and of
itself, any change or changes in the price per share of Parent Common Stock or
changes in the trading volume; and (v) any effect resulting primarily from
changes in accounting rules or procedures announced subsequent to the date
hereof by the Financial Accounting Standards Board.
(xxv) "PARENT COMMON STOCK" shall mean shares of the common
stock, par value $0.001 per share, of Parent.
(xxvi) "PREFERRED STOCKHOLDER" shall mean a holder of Company
Preferred Stock.
(xxvii) "RELATED AGREEMENTS" shall mean the Certificate of
Merger, Voting Agreements, Non-Competition Agreements, Vesting Modification
Agreements, Lock-Up Agreements and Offer Letters.
(xxviii) "SEC" shall mean the United States Securities and
Exchange Commission.
(xxix) "SHARE CONSIDERATION" shall mean 9,250,000 shares of
Parent Common Stock, as adjusted for stock splits, stock dividends and similar
events.
(xxx) "STOCKHOLDER" shall mean any holder of any Company
Capital Stock immediately prior to the Effective Time.
(xxxi) "STOCK PLAN" shall mean the Company's 1996 Stock Plan.
(xxxii) "THIRD PARTY EXPENSE ADJUSTMENT AMOUNT" shall mean the
amount by which the Estimated Third Party Expenses exceed $625,000, as reflected
in the Statement of Expenses (as defined in SECTION 5.15 hereof).
(xxxiii) "TOTAL CONSIDERATION" shall mean the Share
Consideration and the Cash Consideration, collectively.
(xxxiv) "TOTAL OUTSTANDING COMMON EQUIVALENT SHARES" shall
mean the aggregate number of shares of Company Common Stock, together with the
aggregate number of shares of Company Preferred Stock, Company Options, Warrants
and any other rights whether
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vested or unvested convertible into, exercisable for or exchangeable for, shares
of Company Common Stock on an as-converted, exercised or exchanged to Company
Common Stock basis, issued and outstanding immediately prior to the Effective
Time.
(xxxv) "TRADING PRICE" shall mean the Fair Market Value of the
Parent Common Stock determined as of the Closing Date.
(xxxvi) "WARRANT" shall mean any issued and outstanding
warrant to purchase Company Capital Stock, each of which is listed on SCHEDULE
1.6(b) hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub, subject to
such exceptions as are specifically disclosed in the disclosure schedule
(referencing the appropriate section and paragraph numbers) supplied by the
Company to Parent (the "DISCLOSURE SCHEDULE") and dated as of the date hereof,
on the date hereof and as of the Effective Time, as though made at the Effective
Time, as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power to own its properties and to carry
on its business as currently conducted and as currently contemplated to be
conducted. Except as set forth in SECTION 2.1 of the Disclosure Schedule, the
Company is duly qualified or licensed to do business and in good standing as a
foreign corporation in each jurisdiction in which it conducts business. The
Company has delivered a true and correct copy of its certificate of
incorporation and bylaws, each as amended to date and in full force and effect
on the date hereof, to Parent. SECTION 2.1 of the Disclosure Schedule lists the
directors and officers of the Company as of the date hereof. Except as set forth
in SECTION 2.1 of the Disclosure Schedule, the operations now being conducted by
the Company are not now and have never been conducted by the Company under any
other name. SECTION 2.1 of the Disclosure Schedule also lists every state or
foreign jurisdiction in which the Company has employees or facilities or
otherwise carries on business.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of
60,000,000 shares of Common Stock, of which 5,290,307 shares are issued and
outstanding, 3,565,000 shares of Series A Preferred Stock, all of which are
issued and outstanding, 2,851,065 shares of Series B Preferred Stock, all of
which are issued and outstanding, 1,250,000 shares of Series B-1 Preferred
Stock, all of which are issued and outstanding, 3,236,918 shares of Series C
Preferred Stock, all of which are issued and outstanding, and 2,009,571 shares
of Series D Preferred Stock, all of which are issued and outstanding. Each share
of Company Preferred Stock is convertible on a one-share for one-share basis
into Company Common Stock. The Company Capital Stock is held by the persons and
in the
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amounts set forth in SECTION 2.2(a)(1) of the Disclosure Schedule. All
outstanding shares of Company Capital Stock are duly authorized, validly issued,
fully paid and non-assessable and, except as set forth in SECTION 2.2(a)(2) of
the Disclosure Schedule, not subject to preemptive rights created by statute,
the certificate of incorporation or bylaws of the Company, or any agreement to
which the Company is a party or by which it is bound, and have been issued in
compliance with federal and state securities laws. All outstanding shares of
Company Capital Stock, Company Options and Company Warrants have been issued in
material compliance with all applicable federal, state, foreign, or local
statutes, laws, rules, or regulations, including federal and state securities
laws. The Company has not, and will not have, suffered or incurred any liability
(contingent or otherwise) or claim, loss, liability, damage, deficiency, cost or
expense relating to or arising out of the repurchase of any Company Capital
Stock or options or warrants to purchase Company Capital Stock, or out of any
agreements or arrangements relating thereto (including any amendment of the
terms of any such agreement or arrangement). There are no declared or accrued
but unpaid dividends with respect to any shares of Company Capital Stock. The
Company has no other capital stock authorized, issued or outstanding. SECTION
2.2(a)(3) of the Disclosure Schedule sets forth for all holders of Company
Unvested Common Stock, the name of the holder of such Company Unvested Common
Stock, the repurchase price of such Company Unvested Common Stock, and the
vesting schedule for such Company Unvested Common Stock, including the extent
vested to date and whether the vesting of such Company Unvested Common Stock
will be accelerated by the transaction contemplated by this Agreement. Except as
set forth in SECTION 2.2(a)(4) of the Disclosure Schedule, no vesting provisions
applicable to any shares of Company Unvested Common Stock, to Company Options or
Company Warrants, or to any other rights to purchase Company Common Stock will
accelerate as a result of the Merger or as a result of any other events.
(b) Except as set forth in SECTION 2.2(b)(1) of the Disclosure
Schedule and except for the Stock Plan, neither the Company nor any of its
Subsidiaries has ever adopted, sponsored or maintained any stock option plan or
any other plan or agreement providing for equity compensation to any person. The
Company has reserved a total of 7,384,302 shares of Company Common Stock for
issuance to employees and directors of, and consultants to, the Company under
the Stock Plan or any other plan, agreement or arrangement (whether written or
oral, formal or informal), of which (i) 3,526,652 shares are issuable, as of the
date hereof, upon the exercise of outstanding, unexercised Company Options, and
(ii) 2,360,073 shares have been issued and remain outstanding, as of the date
hereof, upon the exercise of options granted under the Stock Plan. SECTION
2.2(b)(2) of the Disclosure Schedule sets forth for each outstanding Company
Option and Company Warrant, the name of the holder of such option or warrant,
the number of shares of Company Capital Stock issuable upon the exercise of such
option or warrant, the exercise price of such option or warrant, the vesting
schedule for such option or warrant, including the extent vested to date, and
whether such option is a nonstatutory option or intended to qualify as an
incentive stock option as defined in Section 422 of the Code. SECTION 2.2(b)(3)
of the Disclosure Schedule sets forth the outstanding principal, accrued
interest and applicable rate of interest of all outstanding Stockholder loans.
Except for the Company Options, there are no options, warrants, calls, rights,
convertible securities, commitments or agreements of any character, written or
oral, to which the Company or any of its Subsidiaries is a party or by which the
Company is bound obligating the Company to issue, deliver,
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sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the Company
or any of its Subsidiaries. Except as contemplated hereby and as set forth in
SECTION 2.2(b)(4) of the Disclosure Schedule, (i) to the Company's Knowledge,
there are no voting trusts, proxies, or other agreements or understandings with
respect to the voting stock of the Company or any of its Subsidiaries, and (ii)
there are no voting trusts, proxies, or other agreements or understandings with
respect to the voting stock of the Company or any of its Subsidiaries to which
the Company or any of its Subsidiaries is a party. Except as set forth in
SECTION 2.2(b)(5) of the Disclosure Schedule, there are no agreements to which
the Company or any of its Subsidiaries is a party relating to the registration,
sale or transfer (including agreements relating to rights of first refusal,
co-sale rights or "drag-along" rights) of any Company Capital Stock.
(c) The allocation of the Total Consideration set forth in SECTION
1.6(a) is consistent with the certificate of incorporation of the Company, as
amended, immediately prior to the Effective Time.
2.3 SUBSIDIARIES. SECTION 2.3(a) of the Disclosure Schedule lists each
entity in which the Company owns any shares of capital stock or any interest in,
or control, directly or indirectly, any other corporation, limited liability
company, partnership, association, joint venture or other business entity.
SECTION 2.3(a) of the Disclosure Schedule lists each corporation, limited
liability company, partnership, association, joint venture or other business
entity of which the Company owns, directly or indirectly, more than fifty
percent (50%) of the stock or other equity interest entitled to vote on the
election of the members of the board of directors or similar governing body
(each, a "SUBSIDIARY" and, collectively the "SUBSIDIARIES"), none of which is
material to the Company's business, operations or financial condition. Except as
set forth in SECTION 2.3(b) of the Disclosure Schedule, the Company does not
have and has never had any Subsidiaries or affiliated companies and does not
otherwise own and has never otherwise owned any shares of capital stock or any
interest in, or control, directly or indirectly, any other corporation, limited
liability company, partnership, association, joint venture or other business
entity. None of the entities set forth in SECTION 2.3(b) of the Disclosure
Schedule is material to the Company's business, operations or financial
condition.
2.4 AUTHORITY. The Company has all requisite corporate power and authority
to enter into this Agreement and any Related Agreements (as hereinafter defined
in this SECTION 2.4) to which it or he, as the case may be, is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and any Related Agreements to which the Company is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Company and no further action is required on the part of the Company to
authorize the Agreement and any Related Agreements to which it is a party and
the transactions contemplated hereby and thereby, subject only
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to the approval of this Agreement by the Stockholders. The votes or consents
required to approve this Agreement by the Stockholders are set forth in SECTION
2.4 of the Disclosure Schedule. This Agreement and the Merger have been
unanimously approved by the Board of Directors of the Company. This Agreement
and each of the Related Agreements to which the Company is a party has been duly
executed and delivered by the Company and assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute the
valid and binding obligations of the Company, enforceable against each such
party in accordance with their respective terms, except as such enforceability
may be limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency, and the relief of debtors and
rules of law governing specific performance, injunctive relief, or other
equitable remedies.
2.5 NO CONFLICT. The execution and delivery by the Company of this
Agreement and any Related Agreement to which the Company is a party, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation of or default under (with or without
notice or lapse of time, or both) or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "CONFLICT") (i) any provision of the
certificate of incorporation, bylaws or charter documents of the Company or any
of its Subsidiaries, in effect on the date hereof, (ii) any mortgage, indenture,
lease, contract, covenant or other agreement, instrument or commitment, permit,
concession, franchise or license (each a "CONTRACT" and collectively the
"CONTRACTS") to which the Company or any of its Subsidiaries or any of their
respective properties or assets (whether tangible or intangible) is subject, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties (whether tangible or intangible) or assets. The Company and each of
its Subsidiaries are in compliance with and have not breached, violated or
defaulted under, or received notice that they have breached, violated or
defaulted under, any of the terms or conditions of any Contract, nor does the
Company have Knowledge of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice or both. Each
Contract is in full force and effect, and neither the Company nor any of its
Subsidiaries is subject to any default thereunder, nor to the Knowledge of the
Company is any party obligated to the Company or any of its Subsidiaries
pursuant to any such Contract subject to any default thereunder. SECTION 2.5 of
the Disclosure Schedule sets forth all notices to, and all necessary consents,
waivers and approvals of parties to any Contracts as are required thereunder in
connection with the Merger, or for any such Contract to remain in full force and
effect without limitation, modification or alteration (including payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which the Company or any of its Subsidiaries, as the case may be, would
otherwise be required to pay pursuant to the terms of such Contracts had the
transactions contemplated by this Agreement not occurred) after the Effective
Time so as to preserve all rights of, and benefits to, the Company and its
Subsidiaries, as the case may be, under such Contracts from and after the
Effective Time.
2.6 CONSENTS. Except as set forth in SCHEDULE 2.6 of the Disclosure
Schedule, no consent, notice, waiver, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other federal, state, county, local or other foreign
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governmental authority, instrumentality, agency or commission (each, a
"GOVERNMENTAL ENTITY") or any third party, including a party to any Contract
with the Company or any of its Subsidiaries (so as not to trigger any Conflict),
is required by, or with respect to, the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and any Related
Agreement to which the Company or any of its Subsidiaries is a party or the
consummation of the transactions contemplated hereby and thereby, except for (i)
such consents, notices, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws, (ii) the issuance of the California Permit (as defined in
SECTION 5.1 hereof) by the California Department of Corporations, (iii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended ("HSR ACT"), (iv) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and (iv) the adoption of this Agreement and approval of the transactions
contemplated by this Agreement by the Stockholders.
2.7 COMPANY FINANCIAL STATEMENTS. SECTION 2.7 of the Disclosure Schedule
sets forth the Company's (i) audited consolidated balance sheet as of December
31, 2001, and the related consolidated statements of income, cash flow and
stockholders' equity for the twelve (12) month period then ended (the "YEAR-END
FINANCIALS"), and (ii) unaudited consolidated balance sheet as of August 31,
2002 (the "BALANCE SHEET DATE"), and the related unaudited consolidated
statement of income, cash flow and stockholders' equity for the eight (8) months
then ended (the "INTERIM FINANCIALS"). Except as set forth in SECTION 2.7 of the
Disclosure Schedule, the Year-End Financials and the Interim Financials
(collectively referred to as the "FINANCIALS") are true and correct in all
material respects and have been prepared in accordance with GAAP consistently
applied on a consistent basis throughout the periods indicated and consistent
with each other (except that the Interim Financials do not contain footnotes,
adjustments related to deferred stock-based compensation and other presentation
items that may be required by GAAP). The Financials present fairly the Company's
consolidated financial condition, operating results and cash flows as of the
dates and during the periods indicated therein (except that the Interim
Financials do not contain adjustments related to deferred stock-based
compensation and other presentation items that may be required by GAAP), subject
in the case of the Interim Financials to normal year-end adjustments, which are
not material in amount or significant in any individual case or in the
aggregate. The Company's unaudited consolidated balance sheet as of the Balance
Sheet Date is referred to hereinafter as the "CURRENT BALANCE SHEET."
2.8 NO UNDISCLOSED LIABILITIES. Except as set forth in SECTION 2.8 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other (whether or not required to be reflected in financial
statements in accordance with GAAP), which are individually or in the aggregate
material to the business, operations or financial condition of the Company and
Subsidiaries, taken as a whole, except for liabilities, indebtedness and
obligations (i) reflected in the Current Balance Sheet, or (ii) which have
arisen in the ordinary course of business consistent with past practices since
the Balance Sheet Date.
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2.9 NO CHANGES. Except as set forth in SECTION 2.9 of the Disclosure
Schedule, since the Balance Sheet Date, there has not been, occurred or arisen
any:
(a) transaction by the Company or any of its Subsidiaries except in
the ordinary course of business as conducted on that date and consistent with
past practices;
(b) amendments or changes to the certificate of incorporation or
bylaws of the Company or the organizational documents of any of its
Subsidiaries;
(c) capital expenditure or commitment by the Company or any of its
Subsidiaries exceeding $50,000 individually or $100,000 in the aggregate;
(d) payment, discharge or satisfaction, in any amount in excess of
$50,000 in any one case, or $100,000 in the aggregate, of any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise of the Company or any of its Subsidiaries), other than payments,
discharges or satisfactions in the ordinary course of business or liabilities
reflected or reserved against in the Current Balance Sheet;
(e) destruction of, damage to, or loss of any material assets
(whether tangible or intangible), material business or material customer of the
Company or any of its Subsidiaries (whether or not covered by insurance);
(f) employment dispute, including but not limited to, claims or
matters raised by any individuals or any workers' representative organization,
bargaining unit or union regarding labor trouble or claim of wrongful discharge
or other unlawful employment or labor practice or action with respect to the
Company or any of its Subsidiaries;
(g) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company or any of its
Subsidiaries other than as required by GAAP;
(h) change in any material election in respect of Taxes (as defined
in SECTION 2.10(a) hereof), adoption or change in any accounting method in
respect of Taxes, agreement or settlement of any claim or assessment in respect
of Taxes, or extension (other than a properly filed extension attributable to an
extension of time for the filing of any tax returns) or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes;
(i) revaluation by the Company or any of its Subsidiaries of any of
its assets (whether tangible or intangible);
(j) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any Company
Common Stock or any Company Preferred Stock, or any split, combination or
reclassification in respect of any shares of Company Common Stock or Company
Preferred Stock, or any issuance or authorization of any issuance of any
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other securities in respect of, in lieu of or in substitution for shares of
Company Common Stock or Company Preferred Stock, or any direct or indirect
repurchase, redemption, or other acquisition by the Company of any shares of
Company Common Stock or Company Preferred Stock (or options, warrants or other
rights convertible into, exercisable or exchangeable therefor), except in
accordance with the agreements evidencing Company Options or Company Unvested
Shares;
(k) increase in the salary or other compensation payable or to
become payable by the Company or any of its Subsidiaries to any of their
respective officers, directors, employees or advisors, or the declaration,
payment or commitment or obligation of any kind for the payment (whether in cash
or equity) by the Company or any of its Subsidiaries of a severance payment,
termination payment, bonus or other additional salary or compensation to any
such person;
(l) agreement, contract, covenant, instrument, lease, license or
commitment to which the Company or any of its Subsidiaries is a party or by
which it or any of its assets (whether tangible or intangible) are bound or any
termination, extension, amendment or modification of the terms of any agreement,
contract, covenant, instrument, lease, license or commitment to which the
Company or any of its Subsidiaries is a party or by which it or any of their
assets are bound;
(m) sale, lease, license or other disposition of any of the assets
(whether tangible or intangible) or properties of the Company or any of its
Subsidiaries, including, but not limited to, the sale of any accounts receivable
of the Company or any of its Subsidiaries, or any creation of any security
interest in such assets or properties;
(n) loan by the Company or any of its Subsidiaries to any person or
entity, incurring by the Company or any of its Subsidiaries of any indebtedness,
guaranteeing by the Company or any of its Subsidiaries of any indebtedness,
issuance or sale of any debt securities of the Company or any of its
Subsidiaries or guaranteeing of any debt securities of others, except for
advances to employees for travel and business expenses in the ordinary course of
business consistent with past practices;
(o) waiver or release of any right or claim of the Company or any of
its Subsidiaries, including any write-off or other compromise of any account
receivable of the Company or any of its Subsidiaries;
(p) commencement or settlement of any lawsuit by the Company or any
of its Subsidiaries, the commencement, settlement, notice or, to the Knowledge
of the Company, threat of any lawsuit or proceeding or other investigation
against the Company or any of its Subsidiaries or their affairs, or any
reasonable basis for any of the foregoing;
(q) notice of any claim or potential claim of ownership by any
person other than the Company or any of its Subsidiaries of the Company
Intellectual Property (as defined in SECTION 2.13 hereof) owned by or developed
or created by the Company or any of its Subsidiaries or of infringement by the
Company or any of its Subsidiaries of any other person's Intellectual Property
(as defined in SECTION 2.13 hereof);
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(r) issuance or sale, or contract or agreement to issue or sell, by
the Company or any of its Subsidiaries of any shares of Company Capital Stock or
shares of Capital Stock of any of its Subsidiaries or securities convertible
into, or exercisable or exchangeable for, shares of Company Capital Stock or
shares of Capital Stock of any of its Subsidiaries, or any securities, warrants,
options or rights to purchase any of the foregoing, except for issuances of
Company Capital Stock upon the exercise of options issued under the Plans;
(s) (i) sale or license of any Company Intellectual Property or
execution, modification or amendment of any agreement with respect to the
Company Intellectual Property with any person or entity or with respect to the
Intellectual Property of any person or entity, or (ii) purchase or license of
any Intellectual Property or execution, modification or amendment of any
agreement with respect to the Intellectual Property of any person or entity,
(iii) agreement or modification or amendment of an existing agreement with
respect to the development of any Intellectual Property with a third party, or
(iv) change in pricing or royalties set or charged by the Company or any of its
Subsidiaries to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to the Company or any
of its Subsidiaries;
(t) agreement or modification to any agreement pursuant to which any
other party was granted marketing, distribution, development, manufacturing or
similar rights of any type or scope with respect to any products or technology
of the Company or any of its Subsidiaries;
(u) event or condition of any character that has had or is
reasonably likely to have a Company Material Adverse Effect;
(v) lease, license, sublease or other occupancy of any Leased Real
Property (as defined in SECTION 2.12(a) hereof) by the Company or any of its
Subsidiaries; or
(w) agreement by the Company or any of its Subsidiaries, or any
officer or employees on behalf of the Company or any of its Subsidiaries, to do
any of the things described in the preceding clauses (a) through (v) of this
SECTION 2.9 (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement and the Related
Agreements).
2.10 TAX MATTERS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, the
term "TAX" or, collectively, "TAXES" shall mean (i) any and all federal, state,
local and foreign taxes, or taxes of any kind, whatsoever, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes as well as public imposts, fees
and social security charges (including but not limited to health, unemployment
and pension insurance), together with all interest, penalties and additions
imposed with respect to such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) of this SECTION 2.10(a) as a result
of being a member
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of an affiliated, consolidated, combined or unitary group for any period, and
(iii) any liability for the payment of any amounts of the type described in
clauses (i) or (ii) of this SECTION 2.10(a) as a result of any express or
implied obligation to indemnify any other person or as a result of any
obligation under any agreement or arrangement with any other person with respect
to such amounts and including any liability for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS.
(i) Except as set forth in SECTION 2.10(b)(i) of the Disclosure
Schedule, as of the Closing Date, the Company and each of its Subsidiaries will
have (a) prepared and timely filed (taking into account any extensions of time
for filing) all required federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") relating to any and all Taxes
concerning or attributable to the Company or any of its Subsidiaries or their
respective operations and such Returns are or will be true and correct and (b)
timely paid all Taxes it is required to pay or accrued or reserved such Taxes on
the Current Balance Sheet in accordance with GAAP.
(ii) Except as set forth in SECTION 2.10(b)(ii) of the Disclosure
Schedule, as of the Closing Date, the Company and each of its Subsidiaries will
have withheld with respect to its Employees all federal, state and foreign
income taxes and social security charges and similar fees, Federal Insurance
Contribution Act ("FICA"), Federal Unemployment Tax Act ("FUTA") and other Taxes
required to be withheld, and will have timely paid such taxes withheld over to
the appropriate authorities.
(iii) Neither the Company nor any of its Subsidiaries has executed
any waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax (other than an extension attributable to an
extension of time for filing any tax returns).
(iv) Except as set forth in SECTION 2.10(b)(iv) of the Disclosure
Schedule, no audit or other examination of any Return of the Company or any of
its Subsidiaries is presently in progress, nor has the Company or any of its
Subsidiaries been notified in writing of any request for such an audit or other
examination.
(v) Neither the Company nor any of its Subsidiaries has any
liabilities for unpaid Taxes as of the Balance Sheet Date which have not been
accrued or reserved on the Current Balance Sheet in accordance with GAAP, and
neither the Company nor any of its Subsidiaries has incurred any liability for
Taxes since the Balance Sheet Date other than in the ordinary course of
business.
(vi) There are, and immediately following the Effective Time there
will be, no Liens on the assets of the Company or any of its Subsidiaries
relating to or attributable to Taxes other than Liens for Taxes not yet due and
payable.
(vii) Neither the Company nor any of its Subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(4) of the Code apply to
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any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company or any of its Subsidiaries.
(viii) Neither the Company nor any of its Subsidiaries (a) has ever
been a member of an affiliated group (within the meaning of Code Section1504(a))
filing a consolidated federal income Tax Return (other than a group the common
parent of which was Company), (b) has ever been a party to any Tax sharing,
indemnification or allocation agreement, (c) has any liability for the Taxes of
any person (other than Company or any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or agreement, or otherwise and
(d) is a party to any joint venture, partnership or other arrangement that is
being treated as a partnership for Tax purposes.
(ix) Neither the Company nor any of its Subsidiaries has been, at
any time, a "United States Real Property Holding Corporation" within the meaning
of Section 897(c)(2) of the Code.
(x) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock intended to qualify for tax-free treatment under Section
355 of the Code (x) in the two (2) years prior to the date of this Agreement or
(y) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
2.11 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in SECTION
2.11 of the Disclosure Schedule, there is no agreement (non-competition or
otherwise), commitment, judgment, injunction, order or decree to which the
Company or any of its Subsidiaries is a party or otherwise binding upon the
Company or any of its Subsidiaries which has or may reasonably be expected to
have the effect of prohibiting or impairing any business practice of the Company
or any of its Subsidiaries, any acquisition of property (tangible or intangible)
by the Company or any of its Subsidiaries, the conduct of business by the
Company or any of its Subsidiaries, or otherwise limiting the freedom of the
Company or any of its Subsidiaries to engage in any line of business or to
compete with any person. Without limiting the generality of the foregoing,
neither the Company nor any of its Subsidiaries has entered into any agreement
under which the Company or any of its Subsidiaries is restricted from selling,
licensing, manufacturing or otherwise distributing any of its technology or
products or from providing services to customers or potential customers or any
class of customers, in any geographic area, during any period of time, or in any
segment of the market.
2.12 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT; CUSTOMER INFORMATION.
(a) Neither the Company or any of its Subsidiaries owns any real
property, nor has the Company or any of its Subsidiaries ever owned any real
property. SECTION 2.12(a) of the Disclosure Schedule sets forth, for all real
property currently leased, subleased or licensed by or to
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the Company or any of its Subsidiaries or otherwise used or occupied by the
Company or any of its Subsidiaries for the operation of their business (the
"LEASED REAL PROPERTY"), the name of the lessor, licensor, sublessor, master
lessor and/or sublessee, the date and term of the lease, license, sublease or
other occupancy right and each amendment thereto and, with respect to any
current lease, license, sublease or other occupancy right, the aggregate monthly
rent payable thereunder.
(b) The Company has provided Parent true, correct and complete
copies of all leases, lease guaranties, subleases, agreements for the leasing,
use or occupancy of, or otherwise granting a right in or relating to the Leased
Real Property, including all amendments, terminations and modifications thereof
("LEASE AGREEMENTS"); and there are no other Lease Agreements for real property
affecting the Leased Real Property or to which Company or any of its
Subsidiaries is bound, other than those identified in SECTION 2.12(a) of the
Disclosure Schedule. All such Lease Agreements are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default of the Company or, to the Knowledge of the Company,
of any other party to each such Lease Agreement, and no rentals are past due, or
event of default (or event which with notice or lapse of time, or both, would
constitute a default). Neither the Company nor any of its Subsidiaries has
received any notice of a default, alleged failure to perform, or any offset or
counterclaim with respect to any such Lease Agreement, which has not been fully
remedied and withdrawn. The Company or any of its Subsidiaries currently
occupies all of the Leased Real Property for the operation of its business
except as set forth in SECTION 2.12(a) of the Disclosure Schedule. There are no
other parties occupying, or with a right to occupy, the Leased Real Property,
except as set forth in SECTION 2.12(a) of the Disclosure Schedule.
(c) To the Knowledge of the Company, the Leased Real Property is in
good operating condition and repair, free from material structural, physical and
mechanical defects, is maintained in a manner consistent with standards
generally followed with respect to similar properties, and is structurally
sufficient and otherwise suitable for the conduct of the business as presently
conducted. The operation of the Company's business does not violate in any
material respect any applicable building code, zoning requirement or statute
relating to such property or operations thereon, and any such non-violation is
not dependent on so-called non-conforming use exceptions.
(d) Except as set forth in SECTION 2.12(d) of the Disclosure
Schedule, the Company and each of its Subsidiaries has good and valid title to,
or, in the case of leased properties and assets, valid leasehold interests in,
all of its tangible properties and assets, real, personal and mixed, used or
held for use in its business, free and clear of any Liens, except (i) as
reflected in the Current Balance Sheet, (ii) Liens for Taxes not yet due and
payable, and (iii) such imperfections of title and encumbrances, if any, which
do not detract from the value or interfere with the present use of the property
subject thereto or affected thereby.
(e) SECTION 2.12(e) of the Disclosure Schedule lists all material
items of equipment (the "EQUIPMENT") owned or leased by the Company or any of
its Subsidiaries, and such Equipment is (i) adequate for the conduct of the
business of the Company and its Subsidiaries as
-23-
currently conducted and as currently contemplated to be conducted, and (ii) in
good operating condition, regularly and properly maintained, subject to normal
wear and tear.
(f) The Company and each of its Subsidiaries has used all
commercially reasonable efforts to maintain sole and exclusive ownership, free
and clear of any Liens, of all customer lists, customer contact information,
customer correspondence and customer licensing and purchasing histories relating
to its current and former customers (the "CUSTOMER INFORMATION"). Neither the
Company nor its Subsidiaries has acquired from, or have sold to, any third party
any rights in the Customer Information.
2.13 INTELLECTUAL PROPERTY.
(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"INTELLECTUAL PROPERTY" shall mean any or all of the following
(i) works of authorship including, without limitation, computer programs, source
code, and executable code, whether embodied in software, firmware or otherwise,
architecture, documentation, designs, files, records, and data, (ii) inventions
(whether or not patentable), discoveries, improvements, and technology, (iii)
proprietary and confidential information, trade secrets and know how, (iv)
databases, data compilations and collections and technical data, (v) logos,
trade names, trade dress, trademarks and service marks, (vi) domain names, web
addresses and sites, (vii) tools, methods and processes, (viii) devices,
prototypes, schematics, breadboards, netlists, maskworks, test methodologies,
verilog files, emulation and simulation reports, test vectors and hardware
development tools, and (ix) any and all instantiations of the foregoing in any
form and embodied in any media.
"INTELLECTUAL PROPERTY RIGHTS" shall mean worldwide common law
and statutory rights associated with (i) patents and patent applications, (ii)
copyrights, copyright registrations and copyright applications, "moral" rights
and mask work rights, (iii) the protection of trade and industrial secrets and
confidential information, (iv) other proprietary rights relating to intangible
intellectual property, (v) trademarks, trade names and service marks, (vi)
analogous rights to those set forth above, and (vii) divisions, continuations,
renewals, reissuances and extensions of the foregoing (as applicable).
"COMPANY INTELLECTUAL PROPERTY" shall mean any and all
Intellectual Property and Intellectual Property Rights that are owned by or
exclusively licensed to the Company or its Subsidiaries and all such Company
Intellectual Property are identified in SECTION 2.13(a) of the Disclosure
Schedule.
"REGISTERED INTELLECTUAL PROPERTY" shall mean Intellectual
Property and Intellectual Property Rights that have been registered, filed,
certified or otherwise perfected or recorded with or by any state, government or
other public or quasi-public legal authority.
-24-
(b) SECTION 2.13(b) of the Disclosure Schedule (i) lists all
Registered Intellectual Property owned by, or filed in the name of, the Company
or its Subsidiaries (the "COMPANY REGISTERED INTELLECTUAL PROPERTY") and (ii)
lists any proceedings or actions before any court, tribunal (including the
United States Patent and Trademark Office (the "PTO") or equivalent authority
anywhere in the world) related to any of the Company Registered Intellectual
Property.
(c) Each item of Company Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Company Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Company
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. There are no actions that must be taken by the
Company or any of its Subsidiaries within sixty (60) days of the Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Registered Intellectual
Property. For each product, technology or service of the Company or any of its
Subsidiaries that constitutes or includes Intellectual Property, the Company has
taken commercially reasonable measures to make Intellectual Property Registered
Intellectual Property, when deemed appropriate by the Company. In each case in
which the Company or any of its Subsidiaries has acquired any Intellectual
Property Rights from any person, the Company or such Subsidiary, as the case may
be, has obtained a valid and enforceable assignment sufficient to irrevocably
transfer all rights in such Intellectual Property and the associated
Intellectual Property Rights (including the right to seek past and future
damages with respect thereto) to the Company or such Subsidiary, as the case may
be, and, to the extent provided for by, and in accordance with, applicable laws
and regulations, the Company or such Subsidiary, as the case may be, has
recorded each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office, or their respective equivalents in
any relevant foreign jurisdiction, as the case may be.
(d) All Company Intellectual Property is fully transferable,
alienable or licensable by Surviving Corporation and/or Parent without
restriction and without payment of any kind to any third party, but excluding
restrictions or payments to the extent resulting from contracts or agreements to
which Parent is a party or other restrictions (e.g., court orders) to which
Parent is bound (other than those contracts or agreements transferred to Parent
or other restrictions assumed by Parent as part of the transactions contemplated
hereby).
(e) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed in SECTION 2.13(b) of the
Disclosure Schedule, and all Intellectual Property licensed to the Company or
its Subsidiary, is free and clear of any Liens other than those set forth in
SECTION 2.13(e) of the Disclosure Schedule. The Company is the exclusive owner
or exclusive licensee of all Company Intellectual Property.
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(f) To the extent that any Intellectual Property has been developed
or created independently or jointly by any person other than the Company or any
of its Subsidiaries for which the Company or any of its Subsidiaries has,
directly or indirectly, provided consideration for such development or creation,
the Company or such Subsidiary, as the case may be, has a written agreement with
such person with respect thereto, and the Company or such Subsidiary, as the
case may be, thereby has obtained ownership of, and is the exclusive owner of,
all such Intellectual Property therein and associated Intellectual Property
Rights by operation of law or by valid assignment, and has required the waiver
of all non-assignable rights, including but not limited to, all author or moral
rights.
(g) Except as set forth in SECTION 2.13(G) of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has (i) transferred
ownership of, or granted any exclusive license of or exclusive right to use, or
authorized the retention of any exclusive rights to use or joint ownership of,
any Intellectual Property or Intellectual Property Rights that is or was Company
Intellectual Property, to any other person or (ii) permitted the Company's or
any of its Subsidiaries' rights in such Company Intellectual Property to enter
into the public domain.
(h) Other than "shrink-wrap" and similar widely available binary
code and commercial end-user licenses, and except as set forth in SECTION
2.13(h) of the Disclosure Schedule, all Intellectual Property used in or
necessary to the conduct of Company's business as presently conducted or planned
to be conducted by the Company prior to the Effective Date, was written and
created solely by either (i) employees of the Company acting within the scope of
their employment who have validly and irrevocably assigned all of their rights,
including all Intellectual Property Rights therein, to the Company or (ii) by
third parties who have validly and irrevocably assigned all of their rights,
including all Intellectual Property Rights therein, to the Company, and no third
party owns or has any rights to any of the Company Intellectual Property.
(i) Other than "shrink-wrap" and similar widely available binary
code and commercial end-user licenses, but not including the licenses set forth
in SECTION 2.13(i) of the Disclosure Schedule, the Company Intellectual Property
constitutes all of the Intellectual Property and Intellectual Property Rights
used in or necessary to the conduct of the business of the Company (including
conduct of the business by the Company, its Subsidiaries, Parent and the
Surviving Corporation) (i) as it is presently conducted, or is planned to be
conducted, by the Company and its Subsidiaries prior to the Effective Date, or
(ii) substantially as it is presently conducted, or is planned to be conducted
by the Company and its Subsidiaries prior to the Effective Date so long as such
use or necessity would have arisen had the operation of the business occurred as
it is presently conducted, or is planned to be conducted, by the Company and its
Subsidiaries prior to the Effective Date; and in each of (i) and (ii) including,
without limitation, the design, development, manufacture, use, import and sale
of any product, technology or service (including products, technology or
services currently under development).
(j) Other than (i) "shrink-wrap" and similar widely available binary
code and commercial end-user licenses, but not including public or open
technology, and (ii) other
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non-exclusive licenses and related agreements with respect thereto of the
Company's products to end-users pursuant to written agreements that have been
entered into in the ordinary course of business that do not materially differ in
substance from the Company's standard form(s) of end-user license including
attachments (which is or are included in SECTION 2.13(j) of the Disclosure
Schedule), SECTION 2.13(j) of the Disclosure Schedule lists all contracts,
licenses and agreements to which the Company or any of its Subsidiaries is a
party with respect to any Intellectual Property and Intellectual Property
Rights.
(k) No third party who has licensed Intellectual Property or
Intellectual Property Rights to the Company or any of its Subsidiaries has
ownership rights or license rights to improvements made by the Company or any of
its Subsidiaries in such Intellectual Property which has been licensed to the
Company or any of its Subsidiaries.
(l) Other than (i) "shrink-wrap" and similar widely available binary
code and commercial end-user licenses, but not including public or open
technology, and (ii) other non-exclusive licenses and related agreements with
respect thereto of the Company's products to end-users pursuant to written
agreements that have been entered into in the ordinary course of business that
do not materially differ in substance from the Company's standard form(s) of
end-user license including attachments (which is or are included in SECTION
2.13(l) of the Disclosure Schedule), SECTION 2.13(l) of the Disclosure Schedule
lists and sets forth all contracts, licenses and agreements between the Company
or any of its Subsidiaries and any other person wherein or whereby the Company
has agreed to, or assumed, any obligation or duty to warrant, indemnify,
reimburse, hold harmless, guaranty or otherwise assume or incur any obligation
or liability or provide a right of rescission with respect to the infringement
or misappropriation by the Company, any of its Subsidiaries or such other person
of the Intellectual Property Rights of any person other than the Company or any
of its Subsidiaries.
(m) Except as set forth in SECTION 2.13(m) of the Disclosure
Schedule, there are no contracts, licenses or agreements between the Company or
any of its Subsidiaries and any other person with respect to Company
Intellectual Property or other Intellectual Property used in and/or necessary to
the conduct of the business as it is currently conducted or planned to be
conducted under which there is any dispute regarding the scope of such
agreement, or performance under such agreement including with respect to any
payments to be made or received by the Company or any of its Subsidiaries
thereunder.
(n) The operation of the business of the Company and its
Subsidiaries (including operation by the Company, its Subsidiaries, Parent and
the Surviving Corporation) (i) as it is presently conducted, or is planned to be
conducted, by the Company and its Subsidiaries prior to the Effective Date, or
(ii) substantially as it is presently conducted, or is planned to be conducted
prior to Effective Date, so long as the infringement or misappropriation would
have arisen had the operation of the business occurred as it is presently
conducted, or is planned to be conducted, by the Company and its Subsidiaries
prior to the Effective Date; and with respect to each of (i) and (ii) including
but not limited to the design, development, use, import, branding, advertising,
promotion, marketing,
-27-
manufacture and sale of any product, technology or service (including products,
technology or services currently under development) of the Company, does not
infringe or misappropriate and will not infringe or misappropriate, any
Intellectual Property Rights of any person, violate any right of any person
(including any right to privacy or publicity), or constitute unfair competition
or trade practices under the laws of any jurisdiction. Further, neither the
Company nor any of its Subsidiaries has received notice from any person claiming
that such operation or any act, any product, technology or service (including
products, technology or services currently under development) or Intellectual
Property of the Company or any of its Subsidiaries infringes or misappropriates
any Intellectual Property Rights of any person or constitutes unfair competition
or trade practices under the laws of any jurisdiction (nor does the Company have
Knowledge of any basis therefor).
(o) Except as set forth in SECTION 2.13(o) of the Disclosure
Schedule, neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Parent by operation of law or otherwise
of any contracts or agreements to which the Company or any of its Subsidiaries
is a party (but excluding any contracts or agreements to which Parent is a party
or other restrictions (e.g., court orders) to which Parent is bound (other than
those contracts and agreements transferred to Parent or other restrictions
assumed by Parent as part of the transactions contemplated hereby)), will result
in: (i) Parent or the Surviving Corporation granting to any third party any
right to or with respect to any Intellectual Property Rights owned by, or
licensed to, Parent or the Surviving Corporation, (ii) Parent or the Surviving
Corporation, being bound by, or subject to, any non-compete or other material
restriction on the operation or scope of their respective businesses, or (iii)
Parent or the Surviving Corporation being obligated to pay any royalties or
other material amounts to any third party in excess of those payable by Parent
or the Surviving Corporation, in the absence of this Agreement or the
transactions contemplated hereby.
(p) Except as set forth in SECTION 2.13(p) of the Disclosure
Schedule, to the Company's Knowledge, no person or entity is infringing or
misappropriating any Company Intellectual Property.
(q) Except as set forth in SECTION 2.13(q) of the Disclosure
Schedule, each of the Company and its Subsidiaries has taken all reasonable
steps that are required or necessary to protect the Company's rights in
confidential information and trade secrets of the Company and any of its
Subsidiaries or provided by any other person to the Company or any of its
Subsidiaries. Without limiting the foregoing, each of the Company and its
Subsidiaries has, and enforces, a policy requiring each employee, consultant,
and contractor to execute proprietary information, confidentiality and
assignment agreements substantially in the Company's standard forms, and all
current and former employees, consultants and contractors of the Company and its
Subsidiaries have executed such an agreement in substantially the Company's
standard form.
(r) No Company Intellectual Property, Intellectual Property Rights
or service of the Company or any of its Subsidiaries is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or
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licensing thereof by the Company or any of its Subsidiaries or may affect the
validity, use or enforceability of such Company Intellectual Property.
(s) To the Company's Knowledge, no (i) product, technology, service
or publication of the Company or any of its Subsidiaries, (ii) material
published or distributed by the Company or any of its Subsidiaries, or (iii)
conduct or statement of the Company or any of its Subsidiaries constitutes
obscene material, a defamatory statement or material, false advertising or
otherwise violates any law or regulation.
(t) (i) No government funding, facilities or resources of a
university, college, other educational institution or research center or funding
from third parties was used in the development of the Company Intellectual
Property and no Governmental Entity, university, college, other educational
institution or research center has any claim or right in or to the Company
Intellectual Property.
(ii) To the Company's Knowledge, no current or former
employee, consultant or independent contractor of the Company or any of its
Subsidiaries who was involved in, or who contributed to, the creation or
development of any Company Intellectual Property, has performed services for the
government, a university, college or other educational institution, or a
research center, during a period of time during which such employee, consultant
or independent contractor was also performing services for the Company or any of
its Subsidiaries.
(u) SECTION 2.13(u) of the Disclosure Schedule sets forth all
Intellectual Property of the Company or any of its Subsidiaries that constitutes
open source, public source or freeware Intellectual Property, or any
modification or derivative thereof, including any version of any software
licensed pursuant to any GNU general public license or limited general public
license, that was used in, incorporated into, integrated or bundled with any
Intellectual Property that is, or was, used by the Company or any of its
Subsidiaries in its business, or incorporated in or used in the development or
compilation of any products or technology of the Company or any of its
Subsidiaries.
2.14 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in
SECTION 2.14 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to, nor is it bound by:
(a) any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson, or consulting or sales
agreement, contract, or commitment with a firm or other organization;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
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(c) any fidelity or surety bond or completion bond;
(d) any lease of personal property having a value in excess of
$50,000 individually or $100,000 in the aggregate;
(e) any agreement of indemnification or guaranty;
(f) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $50,000 individually or
$100,000 in the aggregate;
(g) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business;
(h) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(i) any purchase order or contract for the purchase of materials,
goods, services, or other items involving in excess of $50,000 individually or
$100,000 in the aggregate;
(j) any material construction contracts;
(k) any dealer, distribution, joint marketing or development
agreement;
(l) any sales representative, original equipment manufacturer,
manufacturing, value added, remarketer, reseller, or independent software
vendor, or other agreement for use or distribution of the products, technology
or services of the Company or any of its Subsidiaries; or
(m) any other agreement, contract or commitment that involves
payment by the Company or any of its Subsidiaries of $50,000 individually or
$100,000 in the aggregate or more and is not cancelable without penalty within
thirty (30) days.
2.15 INTERESTED PARTY TRANSACTIONS. Except as set forth in SECTION 2.15 of
the Disclosure Schedule, no officer, director or 10% stockholder of the Company
or any of its Subsidiaries (nor any ancestor, sibling, descendant or spouse of
any of such persons, or any trust, partnership or corporation in which any of
such persons has or has had an interest), has or has had, directly or
indirectly, (i) a material interest in any entity which furnished or sold, or
furnishes or sells, services, products, technology or Intellectual Property that
the Company or any of its Subsidiaries furnishes or sells, or proposes to
furnish or sell, or (ii) any interest in any entity that purchases from or sells
or furnishes to the Company or any of its Subsidiaries, any goods or services,
or (iii) a beneficial interest in any Contract to which the Company or any of
its Subsidiaries is a party; provided, however, that ownership of no more than
one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed to be an "interest in any entity" for purposes
of this
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SECTION 2.15. There are no agreements, contracts, or commitments with regard to
contribution or indemnification between or among any of the Stockholders.
2.16 GOVERNMENTAL AUTHORIZATION. Each consent, license, permit, grant or
other authorization (i) pursuant to which the Company or any of its Subsidiaries
currently operates or holds any interest in any of their respective properties,
or (ii) which is required for the operation of the Company's or any of its
Subsidiaries' business as currently conducted or currently contemplated to be
conducted or the holding of any such interest (collectively, "COMPANY
AUTHORIZATIONS") has been issued or granted to the Company or any of its
Subsidiaries, as the case may be. The Company Authorizations are in full force
and effect and constitute all Company Authorizations required to permit the
Company and its Subsidiaries to operate or conduct their respective businesses
or hold any interest in their respective properties or assets.
2.17 LITIGATION. There is no action, suit, claim or proceeding of any
nature pending, or to the Knowledge of the Company, threatened, against the
Company or any of its Subsidiaries, their properties (tangible or intangible) or
any of their officers or directors, nor to the Knowledge of the Company is there
any reasonable basis therefor. There is no investigation or other proceeding
pending or, to the Company's Knowledge, threatened, against the Company or any
of its Subsidiaries, any of their respective properties (tangible or intangible)
or any of their officers or directors by or before any Governmental Entity, nor
to the Company's Knowledge is there any reasonable basis therefor. To the
Company's Knowledge, no Governmental Entity has at any time challenged or
questioned the legal right of the Company or any of its Subsidiaries to conduct
their respective operations as presently or previously conducted or as presently
contemplated to be conducted.
2.18 ACCOUNTS RECEIVABLE.
(a) Except as set forth in SECTION 2.18(a) of the Disclosure
Schedule, the Company has made available to Parent a list of all accounts
receivable of the Company and its Subsidiaries as of the Balance Sheet Date,
together with an aging schedule indicating a range of days elapsed since
invoice.
(b) All of the accounts receivable of the Company and its
Subsidiaries arose in the ordinary course of business, are carried at values
determined in accordance with GAAP consistently applied, and are collectible
except to the extent of reserves therefor set forth in the Current Balance Sheet
or, for receivables arising subsequent to Balance Sheet Date, as reflected on
the books and records of the Company (which are prepared in accordance with GAAP
consistently applied). Except as set forth in SECTION 2.18(b) of the Disclosure
Schedule, no person has any Lien on any accounts receivable of the Company and
its Subsidiaries and no request or agreement for deduction or discount has been
made with respect to any accounts receivable of the Company and its
Subsidiaries.
2.19 MINUTE BOOKS. The minutes of the Company and its Subsidiaries made
available to counsel for Parent contain materially complete and accurate records
of all actions taken, and
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summaries of all meetings held, by the stockholders, the Board of Directors of
the Company and its Subsidiaries (and any committees thereof) since the time of
incorporation of the Company and each Subsidiary, as the case may be. At the
Closing, the minute books of the Company and each Subsidiary will be in the
possession of the Company.
2.20 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Neither the Company nor any of its
Subsidiaries has: (i) operated any underground storage tanks at any property
that the Company or any of its Subsidiaries has at any time owned, operated,
occupied or leased, or (ii) released any amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state or local
law to be radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment, including, without limitation, PCBs, asbestos,
petroleum, and urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws (a "HAZARDOUS MATERIAL"),
but excluding office and janitorial supplies properly and safely maintained. To
the Knowledge of the Company, no Hazardous Materials are present in, on or under
any property, including the land and the improvements, ground water and surface
water thereof, that the Company or any of its Subsidiaries has at any time
owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Neither the Company nor any of
its Subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed their employees or others to Hazardous Materials in
violation of any law or in a manner that would result in liability to the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries disposed of, transported, sold, or manufactured any product
containing a Hazardous Material (any or all of the foregoing being collectively
referred to herein as "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) PERMITS. The Company and each of its Subsidiaries currently hold
all environmental approvals, permits, licenses, clearances and consents (the
"ENVIRONMENTAL PERMITS") necessary for the conduct of their Hazardous Material
Activities, and other businesses of each of the Company and each of its
Subsidiaries as such activities and businesses are currently being conducted and
as currently contemplated to be conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's Knowledge, threatened, concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company or any of its
Subsidiaries. The Company has no Knowledge of any fact or circumstance which
could involve the Company or any of its Subsidiaries result in any environmental
litigation or liability which could reasonably be expected to impose upon the
Company or any of its Subsidiaries any environmental liability.
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(e) REPORTS AND RECORDS. The Company and each of its Subsidiaries
have delivered to Parent all records in the Company's or each such Subsidiary's
possession concerning the Hazardous Materials Activities of the Company and each
of its Subsidiaries relating to their business and all environmental audits and
environmental assessments of any Leased Real Property conducted at the request
of, or otherwise in the possession of the Company or any of its Subsidiaries.
The Company and each of its Subsidiaries have complied with all environmental
disclosure obligations imposed by applicable law with respect to this
transaction.
2.21 BROKERS' AND FINDERS' FEES. Other than with respect to its obligation
to pay Xxxxxx Xxxxxx Partners for financial services provided in connection with
the transactions specifically contemplated by this Agreement, neither the
Company nor any of its Subsidiaries has incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement, any Related Agreement
or any transaction specifically contemplated hereby or thereby. True, correct
and complete copies of all agreements with Xxxxxx Xxxxxx Partners have been
provided to Parent.
2.22 EMPLOYEE BENEFIT PLANS AND COMPENSATION.
(a) DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
"AFFILIATE" shall mean any other person or entity under common
control with the Company or any of its Subsidiaries within the meaning of
Section 414(b), (c), (m) or (o) of the Code, and the regulations issued
thereunder.
"COMPANY EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement (other than an Employee
Agreement as defined herein) providing for compensation, severance, termination
pay, deferred compensation, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
written, unwritten or otherwise, funded or unfunded, including without
limitation, each "employee benefit plan," within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company, any of its Subsidiaries or any Affiliate for the
benefit of any Employee, or with respect to which the Company, any of its
Subsidiaries or any Affiliate has or may have any liability or obligation and
any International Employee Plan.
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
"DOL" shall mean the United States Department of Labor.
"EMPLOYEE" shall mean any current or former employee,
consultant or director of the Company, any of its Subsidiaries or any Affiliate.
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"EMPLOYEE AGREEMENT" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, or contract (including, without limitation, any offer
letter or any agreement providing for acceleration of Company Options or Company
Unvested Common Stock, or any other agreement providing for compensation or
benefits) between the Company, any of its Subsidiaries or any Affiliate and any
Employee.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"FMLA" shall mean the Family Medical Leave Act of 1993, as
amended.
"HIPAA" shall mean the Health Insurance Portability and
Accountability Act of 1996, as amended.
"INTERNATIONAL EMPLOYEE PLAN" shall mean each Company Employee
Plan or Employee Agreement that has been adopted or maintained by the Company,
any of its Subsidiaries or any Affiliate, whether formally or informally or with
respect to which the Company, any of its Subsidiaries or any Affiliate will or
may have any liability with respect to Employees who perform services outside
the United States.
"IRS" shall mean the United States Internal Revenue Service.
"PBGC" shall mean the United States Pension Benefit Guaranty
Corporation.
"PENSION PLAN" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) SCHEDULE. SECTION 2.22(b)(1) of the Disclosure Schedule contains
an accurate and complete list of each Company Employee Plan and each Employee
Agreement. Neither Company nor any of its Subsidiaries has made any commitment
to establish any new Company Employee Plan, to modify any Company Employee Plan
or Employee Agreement (except to the extent required by law or to conform any
such Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Employee Agreement. SECTION
2.22(B)(2) of the Disclosure Schedule sets forth a table setting forth the name
and salary of each employee of the Company and each Subsidiary.
(c) DOCUMENTS. The Company and each of its Subsidiaries has provided
or made available to Parent (i) correct and complete copies of all documents
embodying each Company Employee Plan and each Employee Agreement including,
without limitation, all amendments thereto and all related trust documents, (ii)
the three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan, (iii) if the Company Employee
Plan is funded, the
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most recent annual and periodic accounting of Company Employee Plan assets, (iv)
the most recent summary plan description together with the summary(ies) of
material modifications thereto, if any, required under ERISA with respect to
each Company Employee Plan, (v) all material written agreements and contracts
relating to each Company Employee Plan, including, without limitation,
administrative service agreements and group insurance contracts, (vi) all
material communications to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any material amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company or any of its
Subsidiaries, (vii) all material correspondence to or from any governmental
agency relating to any Company Employee Plan, (viii) a model COBRA form and
related notices, (ix) all policies pertaining to fiduciary liability insurance
covering the fiduciaries for each Company Employee Plan, (x) all discrimination
tests for each Company Employee Plan for the three (3) most recent plan years,
(xi) all registration statements, annual reports (Form 11-K and all attachments
thereto) and prospectuses prepared in connection with each Company Employee
Plan, and (xii) the most recent IRS determination or opinion letter issued with
respect to each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. The Company and each of its
Subsidiaries has performed all obligations required to be performed by them
under, is not in default or violation of, and the Company and each of its
Subsidiaries has no Knowledge of any default or violation by any other party to,
any Company Employee Plan, and each Company Employee Plan has been established
and maintained in all material respects in accordance with its terms and in
material compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code. Except as set forth
in SECTION 2.22(d) of the Disclosure Schedule, any Company Employee Plan
intended to be qualified under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code (i) has either applied for
or obtained a favorable determination, notification, advisory and/or opinion
letter, as applicable, as to its qualified status from the IRS or still has a
remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such letter and make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has been
amended to incorporate all provisions required to comply with the Tax Reform Act
of 1986 and subsequent legislation. For each Company Employee Plan that is
intended to be qualified under Section 401(a) of the Code there has been no
event, condition of circumstance that has adversely affected or is likely to
adversely affect such qualified status. No "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan. There are no actions, suits or claims pending or, to the
Company's Knowledge, threatened or reasonably anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the assets of
any Company Employee Plan. Each Company Employee Plan can be amended, terminated
or otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Parent, the Company, any of its Subsidiaries or any
Affiliate (other than for benefits accrued to date and ordinary administration
expenses). There are no audits, inquiries or proceedings pending or to the
Knowledge of the Company or any Affiliates, threatened by the IRS, DOL, or any
other Governmental Entity with
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respect to any Company Employee Plan. Neither the Company, any of its
Subsidiaries nor any Affiliate is subject to any penalty or tax with respect to
any Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code. The Company and each of its Subsidiaries have made all
contributions and other payments required by and due under the terms of each
Company Employee Plan.
(e) NO PENSION PLANS. Neither the Company, any of its Subsidiaries
nor any Affiliate has ever maintained, established, sponsored, participated in,
or contributed to, any Pension Plans subject to Title IV of ERISA.
(f) NO SELF-INSURED PLANS. Except as set forth in SECTION 2.22(f) of
the Disclosure Schedule, neither the Company, any of its Subsidiaries nor any
Affiliate has ever maintained, established sponsored, participated in or
contributed to any self-insured plan that provides benefits to employees
(including, without limitation, any such plan pursuant to which a stop-loss
policy or contract applies).
(g) COLLECTIVELY BARGAINED, MULTIEMPLOYER AND MULTIPLE-EMPLOYER
PLANS. At no time has the Company, any of its Subsidiaries or any Affiliate
contributed to or been obligated to contribute to any Multiemployer Plan.
Neither the Company, any of its Subsidiaries nor any Affiliate has at any time
ever maintained, established, sponsored, participated in or contributed to any
multiple employer plan or to any plan described in Section 413 of the Code.
(h) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in SECTION
2.22(h) of the Disclosure Schedule, no Company Employee Plan or Employee
Agreement provides, or reflects or represents any liability to provide, retiree
life insurance, retiree health or other retiree employee welfare benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, and neither the Company nor any of its Subsidiaries has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefits, except to
the extent required by statute.
(i) COBRA; FMLA; HIPAA. The Company, each Subsidiary and each
Affiliate has, prior to the Effective Time, complied in all material respects
with COBRA, FMLA, HIPAA, the Women's Health and Cancer Rights Act of 1998, the
Newborns' and Mothers' Health Protection Act of 1996, and any similar provisions
of state law applicable to its Employees.
(j) EFFECT OF TRANSACTION. (i) Except as set forth in SECTION
2.22(j)(i) of the Disclosure Schedule, the execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits, and (ii) no payment or benefit which will or may be
made by Company or its Affiliates with respect
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to any Employee will be characterized as a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code.
(k) EMPLOYMENT MATTERS. The Company and each of its Subsidiaries is
in material compliance with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment, employee safety and wages and hours, and in each
case, with respect to Employees: (i) has withheld and reported all amounts
required by law or by agreement to be withheld and reported with respect to
wages, salaries and other payments to Employees, (ii) is not liable for any
arrears of wages, severance pay or any taxes or any penalty for failure to
comply with any of the foregoing, and (iii) is not liable for any payment to any
trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no action, suits, claims or administrative matters
pending or, to the Company's Knowledge, threatened against the Company, any of
its Subsidiaries, or any of their Employees relating to any Employee, Employee
Agreement or Company Employee Plan. There are no pending or, to the Company's
Knowledge, threatened claims or actions against Company, any of its
Subsidiaries, any Company trustee or any trustee of any Subsidiary under any
worker's compensation policy. Except as set forth in SECTION 2.22(k) of the
Disclosure Schedule, the services provided by each of the Company's, each
Subsidiary's and their Affiliates' Employees is terminable at the will of the
Company and its Affiliates and any such termination would result in no liability
to the Company or any Affiliate.
(l) LABOR. No work stoppage or labor strike against the Company or
any of its Subsidiaries is pending, or to the Company's Knowledge, threatened,
or reasonably anticipated. Neither the Company nor any of its Subsidiaries knows
of any activities or proceedings of any labor union to organize any Employees.
Except as set forth in SECTION 2.22(l) of the Disclosure Schedule, there are no
actions, suits, claims, labor disputes or grievances pending or threatened or
reasonably anticipated relating to any labor matters involving any Employee,
including, without limitation, charges of unfair labor practices. Neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act. Neither the Company nor
any of its Subsidiaries does presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company or any of its Subsidiaries.
(m) NO INTERFERENCE OR CONFLICT. To the Company's Knowledge, no
stockholder, director, officer, Employee or consultant of the Company or any of
its Subsidiaries is obligated under any contract or agreement, subject to any
judgment, decree, or order of any court or administrative agency that would
interfere with such person's efforts to promote the interests of the Company or
any of its Subsidiaries or that would interfere with the Company's business.
Neither the execution nor delivery of this Agreement, nor the carrying on of the
Company's business as presently conducted or proposed to be conducted nor any
activity of such officers, directors, Employees or consultants in connection
with the carrying on of the Company's business or any of its
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Subsidiaries' businesses as presently conducted or currently proposed to be
conducted will, to the Company's Knowledge, conflict with or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, any
contract or agreement under which any of such officers, directors, Employees, or
consultants is now bound.
(n) INTERNATIONAL EMPLOYEE PLAN. Except as set forth in SECTION
2.22(n) of the Disclosure Schedule, each International Employee Plan has been
established, maintained and administered in compliance with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Effective Time will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent Company or Parent from
terminating or amending any International Employee Plan at any time for any
reason without liability to Parent, Company or its Affiliates (other than
ordinary administration expenses or routine claims for benefits).
2.23 INSURANCE. The information provided in SECTION 2.23 of the Disclosure
Schedule summarizes the terms of all insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, any of its Subsidiaries or any Affiliate,
including the type of coverage, the carrier, the amount of coverage, the term
and the annual premiums of such policies. There is no claim by the Company or
any of its Subsidiaries or any Affiliate pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed or that the
Company, any of its Subsidiaries or any Affiliate has a reason to believe will
be denied or disputed by the underwriters of such policies or bonds. In
addition, there is no pending claim of which its total value (inclusive of
defense expenses) will exceed the policy limits. All premiums due and payable
under all such policies and bonds have been paid, (or if installment payments
are due, will be paid if incurred prior to the Closing Date) and the Company,
any of its Subsidiaries and its Affiliates are otherwise in material compliance
with the terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). The Company has no Knowledge or
reasonable belief of threatened termination of, or premium increase with respect
to, any of such policies. Neither the Company, any of its Subsidiaries nor any
Affiliate of either has ever maintained, established, sponsored, participated in
or contributed to any self-insurance plan.
2.24 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation.
2.25 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of its
Subsidiaries (including any of their officers or directors) has taken any action
which would cause it to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any rules or regulations thereunder.
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2.26 COMPLETE COPIES OF MATERIALS. The Company has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by Parent or its counsel.
2.27 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company (as modified by the Disclosure Schedule) in this
Agreement, any Related Agreement or in any exhibit, schedule or certificate
furnished by the Company pursuant to this Agreement or a Related Agreement
contains, or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
2.28 INFORMATION STATEMENT. The information furnished on or in any
document mailed, delivered or otherwise furnished to Stockholders by the Company
in connection with the solicitation of their consent to this Agreement and the
Merger, will not contain, at or prior to the Effective Time, any untrue
statement of a material fact and will not omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which made not misleading.
2.29 SPREADSHEET. The information contained in the Spreadsheet (as
defined in SECTION 5.21 hereof) shall be complete and correct as of the Closing
Date.
2.30 APPROVALS. The aggregate number of shares of Company Common Stock
and Company Preferred Stock owned by those Stockholders entering into Voting
Agreements as of the date hereof constitutes a sufficient number of shares of
the Company Common Stock and the Company Preferred Stock to approve this
Agreement, the Merger and the transactions contemplated hereby under the
Company's certificate of incorporation and Delaware Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub hereby represents and warrants to the Company
that on the date hereof and as of the Effective Time, as though made at the
Effective Time, as follows:
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Parent and Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the failure to
be so qualified or licensed would have a Parent Material Adverse Effect. Parent
has delivered or made available to the Company or its legal counsel a true and
correct copy of its certificate of incorporation and bylaws, each as amended to
date and in full force and effect on the date hereof.
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3.2 AUTHORITY. Each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and any Related Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and any Related Agreements
to which it is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub and no further action is required on the part of
Parent or Sub to authorize the Agreement and any Related Agreements to which it
is a party and the transaction contemplated hereby and thereby. This Agreement
and any Related Agreements to which Parent and Sub are parties have been duly
executed and delivered by Parent and Sub and constitute the valid and binding
obligations of Parent and Sub, enforceable against each of Parent and Sub in
accordance with their terms, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
This Agreement and any other Related Agreements to which Parent and Sub are
parties have been approved by the stockholders of the Sub and the board of
directors of Parent and Sub. The issuance of the Parent Common Stock pursuant to
this Agreement has been duly authorized by all necessary corporate action.
3.3 CONSENTS. No consent, notice, waiver, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, or any third party is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement and any Related
Agreements to which Parent or Sub is a party or the consummation of the
transactions contemplated hereby and thereby, except for (i) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable securities laws, (ii) the issuance
of the California Permit, (iii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the HSR Act and any applicable foreign antitrust or competition laws, and (iv)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware.
3.4 PARENT COMMON STOCK. The Parent Common Stock which constitutes the
Share Consideration has been duly authorized, and upon consummation of the
transactions contemplated by this Agreement, will be validly issued, fully paid
and nonassessable and will not be subject to any preemptive rights or rights of
first refusal created by statute or the certificate of incorporation or bylaws
of Parent or Sub or any agreement to which Parent or Sub is a party or is bound.
3.5 CAPITAL RESOURCES. Parent has sufficient capital resources to pay
the Cash Consideration.
3.6 BROKER'S AND FINDERS' FEES. Other than with respect to its
obligations to Xxxxxxx Xxxxx for financial services provided in connection with
the transactions contemplated by this Agreement, neither Parent nor Sub has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this
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Agreement, any Related Agreement to which they are parties or any transaction
contemplated hereby or thereby.
3.7 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. A true and complete
copy of each annual, quarterly and other report, registration statement, and
definitive proxy statement filed by Parent with the Securities and Exchange
Commission ("SEC") since June 30, 2000 (the "PARENT SEC DOCUMENTS") is available
on the web site maintained by the SEC at xxxx://xxx.xxx.xxx. As of their
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and none of the
Parent SEC Documents contained on their respective filing dates any untrue
statement of a material fact or omitted 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, except to the extent
corrected by a subsequently filed Parent SEC Document. The financial statements
of Parent included in the Parent SEC Documents (the "PARENT FINANCIAL
STATEMENTS") complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto, except in the case
of pro forma statements, or, in the case of unaudited financial statements,
except as permitted under Form 10-Q under the Exchange Act) and fairly presented
the consolidated financial position of Parent and its consolidated Subsidiaries
as of the respective dates thereof and the consolidated results of Parent's
operations and cash flows for the periods indicated (subject to, in the case of
unaudited statements, normal and recurring year-end audit adjustments). Parent
knows of no reason why it would not be able to provide the certifications
required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002 in connection
with the filing of Parent's quarterly report on Form 10-Q for the quarter ended
September 30, 2002.
3.8 NO PARENT MATERIAL ADVERSE EFFECT. Since August 14, 2002, there has
not been any Parent Material Adverse Effect.
3.9 NO CONFLICT. The execution and delivery by Parent of this Agreement
and any Related Agreement to which Parent is a party do not, and the
consummation of the transactions contemplated hereby and thereby will not
conflict with or result in any violation of or default under (with or without
notice or lapse of time, or both) or give rise to a Conflict under (i) any
provision of the certificate of incorporation or bylaws of Parent or Sub, as in
effect on the date hereof, (ii) any Contract to which Parent or Sub or any of
their respective properties or assets (whether tangible or intangible) is
subject, or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or Sub or any of their respective properties
(whether tangible or intangible) or assets, except, in each case, for such
conflicts as would not individually or in the aggregate have a Parent Material
Adverse Effect.
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3.10 PARENT CAPITAL STRUCTURE. The authorized stock of Parent consists
of 100,000,000 shares of common stock, $0.001 par value, of which 39,886,070
shares were issued and outstanding as of August 31, 2002, and an aggregate of
5,000,000 shares of preferred stock, $0.001 par value, 1,000,000 of which
shares are designated Series A Junior Preferred Stock, 4,000,000 of which shares
are undesignated and none of which shares of preferred stock are issued or
outstanding. As of August 31, 2002, Parent has also reserved 20,084,616 shares
of common stock for issuance pursuant to its employee and director stock and
option and stock purchase plans and 4,163,313 shares of common stock for
issuance upon conversion of outstanding convertible notes. The authorized
capital stock of Sub consists of 1,000 shares of common stock, $0.01 par value,
1,000 shares of which, as of the date hereof, are issued and outstanding. All
outstanding shares of the Sub capital stock are held by Parent. Except for
Parent's Stockholders Rights Agreement, there are no other options, warrants,
calls, rights, commitments or agreements of any character to which Parent is a
party or by which it is bound obligating Parent to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of Parent or obligating Parent to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement. There are no declared or accrued but unpaid dividends with respect to
any shares of Parent capital stock. Parent and Sub have no other capital stock
authorized, issued or outstanding.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees to conduct the business of
Company and its Subsidiaries, except to the extent that Parent shall otherwise
consent in writing, in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, to pay the debts and Taxes of the
Company and its Subsidiaries when due, to pay or perform other obligations when
due, and, to the extent consistent with such business, use their commercially
reasonable efforts consistent with past practices to preserve intact the present
business organizations of the Company and its Subsidiaries, keep available the
services of the present officers and key employees of the Company and its
Subsidiaries and preserve the relationships of the Company and its Subsidiaries
with customers, suppliers, distributors, licensors, licensees and others having
business dealings with them. The Company shall promptly notify Parent of any
event or occurrence or emergency not in the ordinary course of business of the
Company and any material event involving the Company or any of its Subsidiaries
that arises during the period from the date of this Agreement and continuing
until the earlier of the termination date of this Agreement or the Effective
Time. Except as expressly contemplated by this Agreement and except as expressly
set forth in SECTION 4.1 of the Disclosures Schedule, neither the Company nor
any of its Subsidiaries shall, without the written consent of the Chief
Financial Officer of Parent or his designee (which consent may be requested by
e-mail or facsimile transmission and shall be delivered or denied within two (2)
business days of the receipt of such request at the address set forth in SECTION
9.1(A) hereof), from and after the date of this Agreement until the earlier of
the termination of this Agreement or the Effective Time:
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(a) make any expenditures or enter into any commitment or transaction
exceeding $50,000 individually or $100,000 in the aggregate or any commitment or
transaction of the type described in SECTION 2.9 hereof;
(b) (i) sell, license or transfer to any person or entity any rights to
any Company Intellectual Property or enter into any agreement with respect to
any Company Intellectual Property with any person or entity, except in the
ordinary course of business consistent with past practices, (ii) buy or license
any Intellectual Property or enter into any agreement with respect to the
Intellectual Property of any person or entity, except in the ordinary course of
business consistent with past practices, (iii) enter into any agreement with
respect to the development of any Intellectual Property with a third party, (iv)
or change pricing or royalties charged by the Company or any of its Subsidiaries
to its customers or licensees, or the pricing or royalties set or charged by
persons who have licensed Intellectual Property to the Company or any of its
Subsidiaries, except in the ordinary course of business consistent with past
practices;
(c) enter into or amend any Contract pursuant to which any other party
is granted marketing, distribution, development, manufacturing or similar rights
of any type or scope with respect to any products or technology of the Company
or any of its Subsidiaries;
(d) amend or otherwise modify (or agree to do so), or violate the terms
of, any of the Contracts set forth or described in the Disclosure Schedule;
(e) commence or settle any litigation;
(f) declare, set aside, or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any Company Capital Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Company Capital Stock (except for the
issuance of Company Common Stock pursuant to the exercise of Company Options
outstanding as of the date hereof or Company Options granted after the date
hereof without breaching the terms of this Agreement), or repurchase, redeem or
otherwise acquire, directly or indirectly, any shares of Company Capital Stock
(or options, warrants or other rights exercisable therefor) except in accordance
with the agreements evidencing Company Unvested Common Stock;
(g) other than the grant of Company Options to new employees hired
after the date hereof without breaching the terms of this Agreement, issue,
grant, deliver or sell or authorize or propose the issuance, grant, delivery or
sale of, or purchase or propose the purchase of, any Company Capital Stock or
any securities convertible into, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating it to
issue or purchase any such shares or other convertible securities, except for
the issuance of Company Common Stock pursuant to the exercise of Company Options
outstanding on the date hereof or Company Options granted after the date hereof
without breaching the terms of this Agreement;
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(h) cause or permit any amendments to the certificate of incorporation,
bylaws or other organizational documents of the Company or any of its
Subsidiaries;
(i) acquire or agree to acquire by merging or consolidating with, or by
purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company or any of its Subsidiaries;
(j) sell, lease, license or otherwise dispose of any of its tangible
properties or assets, including without limitation the sale of any accounts
receivable of the Company or any of its Subsidiaries, except properties or
assets (whether tangible or intangible) which are not Intellectual Property and
only in the ordinary course of business and consistent with past practices;
(k) incur any indebtedness (other than existing lending facilities) or
guarantee any indebtedness or issue or sell any debt securities or guarantee any
debt securities of others;
(l) grant any loans to others or purchase debt securities of others or
amend the terms of any outstanding loan agreement;
(m) other than in the ordinary course of business consistent with past
practices, grant any severance or termination pay (in cash or otherwise) to any
Employee, including any officer, except payments made pursuant to standard
written agreements outstanding on the date hereof and disclosed in the
Disclosure Schedule;
(n) other than normal year-end salary increases individually no greater
than seven percent (7%) of base salary or spot bonuses in the ordinary course of
business consistent with past practices and not in excess of $5,000 in any
individual case, adopt or amend any Company Employee Plan, enter into any
employment contract, pay or agree to pay any bonus or special remuneration to
any director or Employee, or increase or modify the salaries, wage rates, or
other compensation (including, without limitation, any equity-based
compensation) of its Employees except payments made pursuant to standard written
agreements outstanding on the date hereof and disclosed in SECTION 4.1(n) of the
Disclosure Schedule or except to the extent required to conform any such Company
Employee Plan with the Uruguay Round Agreements Act, the Small Business Job
Protection Act of 1996, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Taxpayer Relief Act of 1997 and the Internal Revenue
Service Restructuring and Reform Act of 1998 or Employee Agreement to the
requirements of applicable law or as required by this Agreement;
(o) revalue any of its assets (whether tangible or intangible),
including without limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business
consistent with past practice;
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(p) pay, discharge, waive or satisfy, in an amount in excess of $50,000
in any one case, or $100,000 in the aggregate, any claim, liability, right or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Current Balance
Sheet;
(q) make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension (other than an extension attributable to a properly filed extension of
time for the filing of any tax returns) or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(r) enter into any strategic alliance, affiliate agreement or joint
marketing arrangement or agreement;
(s) take any action to accelerate the vesting schedule of any of the
outstanding Company Options, Company Unvested Common Stock or Company Common
Stock;
(t) except as set forth on SECTION 4.1(t) of the Disclosure Schedule,
hire any Employees, or encourage any Employees to resign from the Company or any
of its Subsidiaries;
(u) promote any employees or change the employment status or titles of
any of the employees of the Company or any of its Subsidiaries;
(v) alter, or enter into any commitment to alter, its interest in any
Subsidiary, corporation, association, joint venture, partnership or business
entity in which the Company directly or indirectly holds any interest;
(w) cancel, amend or renew any insurance policy, except in the ordinary
course of business consistent with past practices;
(x) enter into any agreement to purchase or sell any interest in real
property, grant any security interest in any real property, enter into any
lease, sublease, license or other occupancy agreement with respect to any real
property or materially alter, amend, modify or terminate any of the terms of any
Lease Agreements; or
(y) take, or agree in writing or otherwise to take, any of the actions
described in SECTIONS 4.1(a) through 4.1(x) hereof, or any other action that
would (i) prevent the Company from performing, or cause the Company not to
perform, its covenants hereunder or (ii) cause or result in any of its
representations and warranties contained herein being untrue or incorrect in any
material respect.
4.2 NO SOLICITATION. Until the earlier of (i) the Effective Time, or
(ii) the date of termination of this Agreement pursuant to the provisions of
SECTION 8.1 hereof, the Company shall
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not (nor shall the Company permit, any of its officers, directors, employees,
stockholders, agents, representatives or affiliates to), directly or indirectly,
take any of the following actions with any party other than Parent and its
designees: (a) solicit, encourage, seek, entertain, support, assist, initiate or
participate in any inquiry, negotiations or discussions, or enter into any
agreement, with respect to any offer or proposal to acquire all or any material
part of the business, properties or technologies of the Company and its
Subsidiaries, or any amount of the Company Capital Stock or capital stock of any
Subsidiary (whether or not outstanding), whether by merger, purchase of assets,
tender offer, license or otherwise, or effect any such transaction, (b) disclose
any information not customarily disclosed to any person concerning the business,
technologies or properties of the Company and its Subsidiaries, or afford to any
person or entity access to their respective properties, technologies, books or
records, not customarily afforded such access, (c) assist or cooperate with any
person to make any proposal to purchase all or any part of the Company Capital
Stock or assets of the Company and its Subsidiaries (other than inventory in the
ordinary course of business), or (d) enter into any agreement with any person
providing for the acquisition of the Company or any of its Subsidiaries, whether
by merger, purchase of assets, license, tender offer or otherwise. The Company
shall immediately cease and cause to be terminated any such negotiations,
discussions or agreements (other than with Parent) that are the subject matter
of clause (a), (b), (c) or (d) above. In the event that the Company or any of
the Company's affiliates shall receive, prior to the Effective Time or the
termination of this Agreement in accordance with SECTION 8.1 hereof, any offer,
proposal, or request, directly or indirectly, of the type referenced in clause
(a), (c), or (d) above, or any request for disclosure or access as referenced in
clause (b) above, the Company, shall immediately (x) suspend any discussions
with such offeror or party with regard to such offer, proposal, or request and
(y) notify Parent thereof, including information as to the material terms of
such offer or proposal, as the case may be. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this SECTION
4.2 were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed by the parties hereto that Parent shall be
entitled to an immediate injunction or injunctions, without the necessity of
proving the inadequacy of money damages as a remedy and without the necessity of
posting any bond or other security, to prevent breaches of the provisions of
this SECTION 4.2 and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which Parent may be entitled at law or in
equity. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth above by any officer, director, agent, representative
or affiliate of Company shall be deemed to be a breach of this Agreement by
Company.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FAIRNESS HEARING; STOCKHOLDER APPROVAL.
(a) Parent and the Company shall use commercially reasonable efforts to
file, within ten (10) business days following the execution of this Agreement,
the necessary documents
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and Parent shall apply to obtain a permit (a "CALIFORNIA PERMIT") from the
Commissioner of Corporations of the State of California (after a hearing before
such Commissioner) pursuant to Sections 25121 and 25142 of the California
Corporate Securities Law of 1968 (the "FAIRNESS HEARING LAW"), so that the
issuance of (i) Parent Common Stock in the Merger and (ii) Company Options,
shall be exempt from registration under the Securities Act, by virtue of the
exemption provided by SECTION 3(a)(10) thereof, and the Company shall prepare,
with the cooperation of Parent, a related information statement or other
disclosure document (the "INFORMATION STATEMENT"). The Information Statement
shall constitute a disclosure document for the offer and issuance of the shares
of Parent Common Stock to be received by the holders of Company Capital Stock in
the Merger. The Company shall cooperate with, and provide information to, Parent
in connection with Parent's application for the California Permit. Company and
Parent will respond to any comments from the California Department of
Corporations and work together in good faith to use their commercially
reasonable efforts to have the California Permit granted as soon as practicable
after such filing. Each of Parent and the Company agrees to provide promptly to
the other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate under the Fairness Hearing Law and applicable
securities laws for inclusion in the Information Statement, or in any amendments
or supplements thereto, and to cause its counsel and auditors to cooperate with
the other's counsel and auditors in preparation of the Information Statement.
Anything to the contrary contained herein notwithstanding, the Company shall not
include in the Information Statement any information with respect to Parent or
its affiliates or associates, the form and content of which shall not have been
approved by Parent prior to such inclusion, except as required pursuant to the
Fairness Hearing Law or other applicable securities laws. As promptly as
practical after the date of this Agreement, Parent and Company shall prepare and
make such filings as are required under applicable blue sky laws relating to the
transactions contemplated by this Agreement. Company shall use reasonable and
good faith efforts to assist Parent as may be necessary to comply with the
securities and blue sky laws relating to the transactions contemplated by this
Agreement.
(b) In the event that the Commissioner of Corporations of the State of
California denies the California Permit or if the parties mutually determine
that they will not receive the California Permit by December 2, 2002 (provided
that the Company and the signatories to the Voting Agreements have cooperated in
good faith to obtain the California Permit), Parent shall, if requested by the
Company, promptly, but in no event more than twenty (20) business days after
denial of the California Permit or such mutual determination, file a
registration statement on Form S-4 filed with the SEC (the "REGISTRATION
STATEMENT") to cause the issuance of the shares of Parent Common Stock to be
issued in the Merger to be registered, in which case:
(i) the Company shall promptly advise Parent, and Parent shall promptly
advise the Company, in writing if at any time prior to the Effective Time either
the Company or Parent shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Registration Statement or
the proxy statement and/or prospectus to be sent to Stockholders in connection
with the Company Stockholders Meeting (the "PROXY STATEMENT"), in order to make
the statements contained or incorporated by reference therein not misleading or
to
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comply with applicable law, and the Company and Parent shall cooperate in filing
with the SEC or its staff or any other government officials, and/or delivery to
the holders of Company Capital Stock, any such amendment or supplement;
(ii) the Company and Parent shall prepare, and Parent shall file
with the SEC, the Registration Statement, which shall include the Proxy
Statement, and shall use its commercially reasonable efforts to cause the
Registration Statement to become effective as soon thereafter as practicable;
(iii) each party hereto shall notify the other promptly of the
receipt of any comments from the SEC or its staff and or any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Registration Statement or the Proxy Statement or any other filing or for
additional information and shall supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement or the Proxy Statement or other
filing; and
(iv) the Registration Statement, the Proxy Statement and any other
materials submitted to the Stockholders in connection with the Company
Stockholders' Meeting (as defined in SECTION 5.1(C) below) will comply in all
material respects with applicable law and the rules and regulations thereunder.
(c) As promptly as practicable after the receipt of a California Permit
or following the effectiveness of the Registration Statement, the Company shall
submit this Agreement and the transactions contemplated hereby to the
Stockholders for approval and adoption as provided by Delaware Law and the
certificate of incorporation and bylaws of the Company. Such submission, and any
proxy or consent in connection therewith, shall specify that adoption of this
Agreement shall constitute approval by the Stockholders of: (A) the escrow and
indemnification obligations of the Stockholders set forth in ARTICLE VII hereof
and the deposit of Parent Common Stock and cash equal to the Escrow Amount into
the Escrow Funds and (B) in favor of the appointment of Xxxxxxx Xxxx as
Stockholder Representative, under and as defined in this Agreement. Any
materials to be submitted to the Stockholders in connection with the
solicitation of their approval of the Merger and this Agreement (the "SOLICITING
MATERIALS") shall be subject to review and approval by Parent and shall include
information regarding the Company, the terms of the Merger and this Agreement,
and the unanimous recommendation of the Board of Directors of the Company in
favor of the Merger and this Agreement and that the terms of the Merger and this
Agreement are advisable and in the best interests of the Stockholders of the
Company. Anything to the contrary contained herein notwithstanding, the Company
shall not include in the Soliciting Materials any information with respect to
Parent or its affiliates or associates, the form and content of which shall not
have been approved by Parent prior to such inclusion which approval shall not be
unreasonably withheld. The Company shall consult with Parent regarding the date
of the Company Stockholders' meeting to approve this Agreement and the Merger
(the "COMPANY STOCKHOLDERS' MEETING") and shall not postpone or adjourn (other
than for absence of a quorum) the Company Stockholders' Meeting
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without the consent of Parent which consent shall not be unreasonably withheld.
The Company shall use commercially reasonable efforts to obtain the consent of
its Stockholders sufficient to approve the Merger and this Agreement and to
enable the Closing to occur as promptly as practicable following the date hereof
and, in any event, within thirty (30) days following the receipt of the
California Permit or effectiveness of the Registration Statement.
Notwithstanding the foregoing, the Company shall give Stockholders sufficient
notice such that no Stockholder will be able to exercise appraisal rights if
such Stockholder has not perfected such appraisal rights prior to Closing,
pursuant to Section 262 of Delaware Law.
5.2 ACCESS TO INFORMATION. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during the
period from the date hereof and prior to the Effective Time to (i) all of the
properties, books, contracts, commitments and records of the Company and its
Subsidiaries, including the Company's source code, (ii) all other information
concerning the business, properties and personnel (subject to restrictions
imposed by applicable law) of the Company and its Subsidiaries as Parent may
reasonably request, and (iii) all Employees of the Company and its Subsidiaries
as identified by Parent. The Company agrees to provide to Parent and its
accountants, counsel and other representatives copies of internal financial
statements (including Tax Returns and supporting documentation) promptly upon
request. No information or knowledge obtained in any investigation pursuant to
this SECTION 5.2 or otherwise shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger in accordance with the terms and
provisions hereof.
5.3 CONFIDENTIALITY. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to SECTION 5.2 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Confidential Disclosure Agreement effective as of April 26, 2002 (the
"CONFIDENTIAL DISCLOSURE AGREEMENT") between the Company and Parent. In this
regard, the Company acknowledges that the Parent Common Stock is publicly traded
and that any information obtained during the course of its due diligence could
be considered to be material non-public information within the meaning of
federal and state securities laws.
5.4 EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, including, without limitation,
all legal, accounting, tax and all other fees and expenses of third parties
(excluding the fees of Xxxxxx Xxxxxx Partners for investment banking services),
incurred by a party in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby
("THIRD PARTY EXPENSES"), shall be the obligation of the respective party
incurring such fees and expenses; provided, however, that Parent agrees to pay
up to an aggregate of $625,000 in reasonable and documented Third Party Expenses
for expenses incurred by the Company up to and including the Closing Date if the
Merger is consummated. Any Third Party Expenses incurred by the Company in
excess of $625,000 that are not part of the Third Party Expense Adjustment
Amount, if any ("EXCESS THIRD PARTY EXPENSES"), shall be paid out of the Escrow
Amount. Third Party Expenses shall not be incurred by the Company after the
Closing Date without the express prior written consent of
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Parent. No Subsidiary shall incur any Third Party Expenses. Notwithstanding this
SECTION 5.4, if the scope of legal, accounting and tax services required by the
Company (excluding fees relating to investment banking services) are materially
different than those transaction assumptions set forth in SCHEDULE 5.4 of this
Agreement, due to necessary changes to the transactions contemplated by the
parties hereto, then Parent and the Company agree to renegotiate in good faith
the amount of Third Party Expenses that Parent agrees to pay hereunder.
5.5 PUBLIC DISCLOSURE. Other than with respect to the termination of
this Agreement pursuant to ARTICLE VIII hereof, no party shall issue any
statement or communication to any third party (other than their respective
agents that are bound by confidentiality restrictions) regarding the subject
matter of this Agreement or the transactions contemplated hereby, without the
consent of the other party (provided, however, that Parent, in its sole
discretion, can determine the timing of any such statement or communication made
on or after the execution of this Agreement), except that this restriction shall
be subject to Parent's obligation to comply with applicable securities laws and
the rules of the Nasdaq Stock Market.
5.6 CONSENTS. The Company shall use commercially reasonable efforts to
obtain all necessary consents, waivers and approvals of any parties to any
Contract (including with respect to the Lease Agreements) as are required
thereunder in connection with the Merger or for any such Contracts to remain in
full force and effect, all of which are listed in SECTION 2.5 of the Disclosure
Schedule, so as to preserve all rights of, and benefits to, the Company under
such Contract from and after the Effective Time. Such consents, waivers and
approvals shall be in a form reasonably acceptable to Parent. In the event that
the other parties to any such Contract, including lessor or licensor of any
Leased Real Property, conditions its grant of a consent, waiver or approval
(including by threatening to exercise a "recapture" or other termination right)
upon the payment of a consent fee, "profit sharing" payment or other
consideration, including increased rent payments or other payments under the
Contract, the Company shall be responsible for making all payments required to
obtain such consent, waiver or approval and shall indemnify, defend, protect and
hold harmless Parent from all losses, costs, claims, liabilities and damages
arising from the same pursuant to SECTION 7.3.
5.7 FIRPTA COMPLIANCE. On the Closing Date, the Company shall deliver
to Parent a properly executed statement (a "FIRPTA COMPLIANCE CERTIFICATE") in a
form reasonably acceptable to Parent for purposes of satisfying Parent's
obligations under Treasury Regulation Section 1.1445-2(c)(3).
5.8 REASONABLE EFFORTS. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this
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Agreement; provided, however, that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's Subsidiaries or
affiliates, of shares of capital stock or of any business, assets or property of
Parent or its Subsidiaries or affiliates, or of the Company, its affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent of: (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of the Company contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time, and (ii) any failure of the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder.
5.10 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of the Merger
and the transactions contemplated hereby.
5.11 S-8 REGISTRATION. Not later than thirty (30) days after the
Closing Date, Parent shall file with the SEC a registration statement on Form
S-8 (to the extent available) registering that number of shares of Parent Common
Stock equal to the number of shares of Parent Common Stock issuable upon the
exercise of all Company Options assumed by Parent pursuant to SECTION 1.6(b)
hereof.
5.12 NEW EMPLOYMENT ARRANGEMENTS. Parent may offer certain Employees
"at-will" employment by Parent and/or the Surviving Corporation, to be effective
as of the Closing Date, upon proof of a legal right to work in the United
States. Such "at-will" employment will: (i) be set forth in offer letters (each,
an "OFFER LETTER"), (ii) be subject to and in compliance with Parent's
applicable policies and procedures, including, but not limited to, employment
background checks and the execution of an employee proprietary information
agreement, governing employment conduct and performance, (iii) have terms,
including the position and salary, which will be determined by Parent after
consultation with the Company's management, and (iv) supersede any prior express
or implied employment agreements, arrangement or offer letter in effect prior to
the Closing Date. At the same time as the execution of this Agreement, each Key
Employee shall execute an Offer Letter which shall be effective as of the
Closing Date. Each employee of the Company who remains an employee of Parent or
the Surviving Corporation after the Closing Date shall be referred to hereafter
as a "CONTINUING EMPLOYEE." Continuing Employees shall be eligible to receive
benefits consistent with Parent's applicable human resources policies. For
purposes of any length of service requirements, waiting periods, vesting periods
or differential benefits based on length of service under any benefit plans of
Parent (except for Parent's sabbatical plan) for which a Continuing Employee may
be eligible after the Closing Date, Parent shall make commercially reasonable
efforts to ensure that service by such Continuing Employee with the Company or
any Subsidiary shall be deemed to have been service with Parent. If the Company
terminates its 401(k)
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Plan prior to the Closing Date in accordance with SECTION 5.16 below, then
Parent shall provide that Continuing Employees will be eligible to participate
in Parent's 401(k) Plan as soon as administratively practicable following the
Closing Date.
5.13 VESTING MODIFICATION AGREEMENTS. Concurrently with the execution
of this Agreement, each Key Employee of the Company holding Company Unvested
Common Stock and/or unvested Company Options shall enter into a Vesting
Modification Agreement for Key Employees in substantially the form attached
hereto as EXHIBIT D.
5.14 COMPANY AFFILIATES. SCHEDULE 5.14 to this Agreement sets forth
those persons who, in the Company's reasonable judgment, are or may be
"affiliates" of the Company within the meaning of Rule 145 (each such person, a
"RULE 145 AFFILIATE") promulgated under the Securities Act ("RULE 145"). The
Company shall provide Parent such information and documents as Parent shall
reasonably request for purposes of reviewing such list. Parent and Sub shall be
entitled to issue appropriate stop transfer instructions to the transfer agent
for Parent Common Stock and to place the following legend on the certificates
evidencing any Parent Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN
CONFORMITY WITH RULE 145(d) OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IN
ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO
THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a
substitute certificate without such legend) and Parent shall so instruct its
transfer agent, if the Rule 145 Affiliate delivers to Parent (i) satisfactory
written evidence that the shares have been sold in compliance with Rule 145 (in
which case, the substitute certificate shall be issued in the name of the
transferee), or (ii) an opinion of counsel, in form and substance reasonably
satisfactory to Parent, to the effect that public sale of the shares by the
holder thereof is no longer subject to Rule 145.
5.15 STATEMENT OF EXPENSES. The Company shall provide Parent with a
statement of Estimated Third Party Expenses incurred by the Company three (3)
business days prior to the Closing Date in form reasonably satisfactory to
Parent (the "STATEMENT OF EXPENSES").
5.16 TERMINATION OF 401(k) PLAN. Effective as of the day immediately
preceding the Closing Date, each of the Company and its Subsidiaries shall
terminate any and all Company Employee Plans intended to include a Code Section
401(k) arrangement (each, a "401(k) Plan") (unless Parent provides written
notice to the Company that such 401(k) plans shall not be terminated). Unless
Parent provides such written notice to the Company, no later than five (5)
business days prior to the Closing Date, the Company shall provide Parent with
evidence that such
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Company Employee Plan(s) have been terminated (effective as of the day
immediately preceding the Closing Date) pursuant to resolutions of the Board of
Directors of the Company, or its Subsidiaries, as the case may be. The form and
substance of such resolutions shall be subject to review and approval of Parent.
The Company also shall take such other actions in furtherance of terminating
such Company Employee Plan(s) as Parent may reasonably require.
5.17 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall obtain
the resignations of all officers and directors of the Company and its
Subsidiaries, effective as of the Effective Time.
5.18 PROPRIETARY INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENT. Each
employee and contractor of the Company shall enter into and execute a
proprietary information and inventions assignment agreement with the Company in
a form satisfactory to Parent.
5.19 HSR ACT. To the extent applicable, Company and Parent (and any
applicable Stockholder of the Company) shall use commercially reasonable efforts
to file within ten (10) business days after the date hereof, and the Company
shall use commercially reasonable efforts to cause any applicable Stockholder of
the Company to file with the United States Federal Trade Commission (the "FTC")
and the Antitrust Division of the United States Department of Justice ("DOJ"),
Notification and Report Forms (as defined in the HSR Act) relating to the
transactions contemplated herein as required by the HSR Act as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Company and Parent (and/or any applicable Stockholder) shall use
commercially reasonable efforts to cause any applicable stockholder of the
Company to promptly (a) supply the others with any information which reasonably
may be required in order to effectuate such filings and (b) supply any
additional information which reasonably may be required by the FTC, the DOJ or
the competition or merger control authorities of any other jurisdiction and
which the parties may reasonably deem appropriate; provided, however, that
Parent shall not be required to agree to any divestiture by Parent or the
Company or any of Parent's affiliates of share capital stock or of any business,
assets or property of Parent or its affiliates or of the Company or its
affiliates, or the imposition of any material limitation on the ability of any
of them to conduct their businesses or to own or exercise control of such
assets, property and stock.
5.20 TERMINATION OF WARRANTS. The Company shall use its commercially
reasonable efforts to terminate all outstanding unexercised Warrants, if any, as
of immediately prior to the Effective Time.
5.21 SPREADSHEET. The Company shall deliver a spreadsheet (the
"SPREADSHEET") which spreadsheet shall be certified as complete and correct by
the Chief Executive Officer and Chief Financial Officer of the Company as of the
Closing and which shall separately list, as of the Closing, (i) all Stockholders
and their respective addresses, the number of shares of Company Capital Stock
held by such persons (including whether such shares are Company Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, the respective certificate
numbers, whether such shares constitute Company Unvested Common Stock
(including, for each certificate, the number of shares that are
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vested as of the Closing) and the liquidation preference applicable to each
share of Preferred Stock), the date of acquisition of such shares, the number of
shares of the Share Consideration to be issued to each holder, the number of
shares, if any, to be paid by the Stockholder in settlement of outstanding
Stockholder loans and such other information relevant thereto or which the
Exchange Agent may reasonably request, and (ii) all holders of Company Options
and their respective addresses, the number of shares of Company Capital Stock
underlying each such Company Option, the grant dates of such Company Options and
the vesting arrangement with respect to such Company Options and such other
information relevant thereto or which Parent may reasonably request. Parent
shall confirm the Company's calculations of the number of shares of the Share
Consideration to be issued hereunder, based on the number of shares of Company
Capital Stock outstanding as represented in SECTION 2.2. The Company shall
deliver the Spreadsheet three (3) business days prior to the Closing Date.
5.22 OPTION GRANTS. Parent will grant, effective upon the Closing Date,
that number of non-qualified options to purchase Parent Common Stock to the
individuals listed in SCHEDULE 5.22 as set forth opposite such individual's
name; provided, however, that the total aggregate number of options granted
pursuant to this SECTION 5.22 shall not exceed 500,000. Such options will be
granted with an exercise price equal to the fair market value of Parent Common
Stock on the Closing Date. Such options will vest twenty-five percent (25%) on
the date that is one (1) year after the Closing Date and 1/48th per month
thereafter.
5.23 VOTING AGREEMENTS. Concurrently with execution of this Agreement,
each Stockholder of the Company (and any affiliated entities) set forth in
SCHEDULE 5.23 to this Agreement shall have executed and delivered to Parent
Voting Agreements in the form attached hereto as EXHIBIT A-1 or EXHIBIT A-2, as
applicable.
5.24 NON-COMPETITION AGREEMENTS. Concurrently with execution of this
Agreement, the Key Employees set forth on SCHEDULE 5.24 to this Agreement shall
have executed and delivered to Parent a Non-Competition Agreement in the form
attached hereto as EXHIBIT B.
5.25 KEY EMPLOYEE LOCK-UP AGREEMENTS. Concurrently with execution of
this Agreement, each of the Key Employees set forth in SCHEDULE 5.25 of this
Agreement shall have executed and delivered to Parent a Key Employee Lock-Up
Agreement in the form attached hereto as EXHIBIT C.
5.26 CERTIFICATE OF EXECUTIVE OFFICERS. Concurrently with execution of
this Agreement, Parent shall have received a certificate, validly executed by
each of the Chief Executive Officer and Chief Financial Officer of the Company,
in such respective capacities, to the effect that, each such officer, severally
and not jointly, represents and warrants to Parent and Sub as of the date hereof
that (i) he has read the representations and warranties of the Company set forth
in ARTICLE II of this Agreement and the Disclosure Schedule attached hereto and
(ii) to his actual knowledge, such representations and warranties taken as a
whole (as modified by the Disclosure Schedule) do not contain any untrue
statement of a material fact, or omit to state any material fact necessary in
order
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to make such representations and warranties taken as a whole (as modified by the
Disclosure Schedule) in light of the circumstances under which they were made,
not misleading.
5.27 TERMINATION OF AGREEMENTS. The Company shall use its best efforts
to terminate each of the agreements listed on SCHEDULE 6.2(c) to this Agreement
(the "Terminated Agreements"), concurrent with or prior to Closing, such that
each such agreement shall be of no further force or effect. Prior to Closing,
the Company shall pay all amounts owed under the Terminated Agreements (as a
result of the termination of the Terminated Agreements or otherwise), and the
Surviving Corporation will not incur any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) under any
Terminated Agreement following the Closing Date.
5.28 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) After the Effective Time, Parent will cause the Surviving
Corporation to indemnify and hold harmless each person who is now, or has been
at any time prior to the date of this Agreement or who becomes prior to the
Effective Time, an officer, director or employee of the Company or any of its
Subsidiaries (the "COMPANY INDEMNIFIED PARTIES") against all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement, in each case to the extent actually and reasonably incurred with the
approval of the indemnifying party, which approval shall not be unreasonably
withheld (the "COMPANY INDEMNIFIED LIABILITIES") of or in connection with any
claim, action, suit, proceeding or investigation by reason of the fact that such
person is or was a director, officer or employee of the Company or any of its
Subsidiaries, whether pertaining to any matter existing or occurring at or prior
to the Effective Time and whether asserted or claimed prior to, or at or after
the Effective Time and all Company Indemnified Liabilities based on, or
primarily arising out of, or primarily relating to this Agreement or the
transactions contemplated hereby (to the extent that such losses, claims,
damages, costs, expenses, liabilities or judgments or amounts arose from or are
related directly to this Agreement or the transactions contemplated hereby), in
each case to the full extent a corporation is permitted by law to indemnify its
own directors, officers and employees (the "COMPANY INDEMNIFIED PROCEEDINGS").
In the event any Company Indemnified Party is or becomes involved in any Company
Indemnified Proceeding, Parent shall, or shall cause the Surviving Corporation
to, pay expenses in advance of the final disposition of any such Company
Indemnified Proceeding to each Company Indemnified Party to the full extent
permitted by law upon receipt of any undertaking contemplated by Section 145 of
Delaware Law. Without limiting the foregoing, in the event any such Company
Indemnified Proceeding is brought against any Company Indemnified Party, (i) the
Company Indemnified Parties may retain counsel of their choosing, provided,
however, that such counsel is reasonably satisfactory to Parent and the
Surviving Corporation, (ii) Parent shall, or shall cause the Surviving
Corporation to, pay all reasonable and documented fees and expenses of such
counsel for the Company Indemnified Parties promptly as statements therefor are
received, and (iii) Parent and the Surviving Corporation will use all reasonable
efforts to assist in the vigorous defense of any such matter; provided, however,
that neither Parent nor the Surviving Corporation shall be liable for any
settlement of any claim effected without its written consent, which consent
shall not be unreasonably withheld. Any Company Indemnified Party wishing to
claim indemnification under this
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SECTION 5.28(a) upon becoming aware of any such Company Indemnified Proceeding
shall promptly notify Parent and the Surviving Corporation (but the failure to
so notify Parent or the Surviving Corporation shall not relieve Parent or the
Surviving Corporation from any liability it may have under this SECTION 5.28(a)
except to the extent such failure materially prejudices Parent or the Surviving
Corporation), and shall deliver to Parent and the Surviving Corporation the
undertaking contemplated by Section 145 of Delaware Law. The Company Indemnified
Parties as a group may retain only one law firm, which law firm shall be
reasonably acceptable to Parent, to represent them with respect to each such
Company Indemnified Proceeding unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Company Indemnified Parties, in which case, Parent shall only
pay an amount equal to the aggregate reasonable fees and expenses of all of the
Company Indemnified Parties divided by the number of law firms, each of which
must be reasonably acceptable to Parent, engaged by the Company Indemnified
Parties on such Company Indemnified Proceeding.
(b) From and after the Effective Time and for a period of six (6)
years from the Effective Time, Parent will cause the Surviving Corporation to
fulfill and honor in all respects, to the extent permitted by applicable law,
the obligations of Company pursuant to the indemnification provisions, if any,
of the Company's certificate of incorporation and bylaws in effect on the date
hereof. The Surviving Corporation's certificate of incorporation and bylaws will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the indemnified parties thereunder as those contained in
the Company's certificate of incorporation and bylaws as in effect on the date
hereof, which provisions shall not be repealed, amended or otherwise modified
for a period of six (6) years from the Effective Date in a manner that would
adversely affect the rights of individuals who, at any time prior to the
Effective Time, were indemnified parties thereunder, except as required by
applicable law.
(c) Parent's and the Surviving Corporation's respective obligations
under paragraphs (a) and (b) above: (i) shall be subject to any limitation
imposed by applicable law, (ii) shall be subject to any limitations that would
be imposed by Section 145 of Delaware Law or otherwise by Delaware Law on a
corporation seeking to indemnify its own directors, officers, employees, agents
or affiliates, (iii) shall not apply to any action, suit, proceeding, complaint,
claim or demand by Parent, whether such claim is brought pursuant to this
Agreement, applicable law or otherwise, (iv) shall not apply to any Company
Indemnified Liability that result from actions, events or circumstances that
would constitute a knowing breach by the Company of any its representations,
warranties or covenants in this Agreement, any Related Agreement or any document
or instrument delivered hereunder and (v) shall not be deemed to release any
Stockholder who is also an officer, director, employee, agent or affiliate of
the Company from his or her indemnity obligations under ARTICLE VII.
(d) This section will be binding on Parent, the Surviving
Corporation and their respective successors and assigns and will be enforceable
by the officers and directors of the Company immediately prior to the Effective
Time as third party beneficiaries hereof.
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5.29 TAX MATTERS. Each of Parent, Sub and the Company agrees that it will
not take, or fail to take, any action (including the failure to merge the
Surviving Corporation with and into Parent) which would reasonably be expected
to cause the Merger to fail to qualify as a "reorganization" within the meaning
of Section 368(a) of the Code.
5.30 TAX CERTIFICATE. To the extent requested by Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, counsel to Parent and Sub, and/or Xxxxx,
Xxxxxxx & Xxxxxxxxx, LLP, counsel to the Company, the parties hereto shall
provide customary representations, in form and substance reasonably satisfactory
to the requesting counsel, on which such counsel may rely in rendering a tax
opinion, if any, in connection with the Merger and any subsequent merger of the
Surviving Corporation with and into Parent, with Parent continuing as the
Surviving Corporation.
5.31 SHARE CONSIDERATION/CASH CONSIDERATION ADJUSTMENT. In the event that
the number of shares of Parent Common Stock to be issued directly to the
Stockholders in the Merger (including shares placed into the Share Escrow Fund
on behalf of the Stockholders but excluding any shares issuable upon the
exercise of stock options, warrants or rights assumed in the Merger) such number
of shares, the "DIRECTLY ISSUED SHARES") exceeds 20% of the number of shares of
Parent Common Stock actually outstanding immediately prior to the Effective Time
(the "SHARE LIMIT") as a result of changes in the capitalization of Company
between the date of this Agreement and the Effective Time (including changes in
the number of outstanding shares of Company Capital Stock), the parties agree to
appropriately adjust the amount of Share Consideration and Cash Consideration so
that the number of Directly Issued Shares does not exceed the Share Limit. Such
adjustment shall be determined in good faith by the parties using the Fair
Market Value of the Parent Common Stock at the Effective Time.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of the Company and Parent to effect the Merger shall be
subject to the satisfaction, at or prior to the Effective Time, of the following
conditions:
(a) CALIFORNIA PERMIT; REGISTRATION STATEMENT. Either: (a) the
Commissioner of Corporations for the State of California shall have approved the
terms and conditions of the transactions contemplated by this Agreement, and the
fairness of such terms and conditions following a hearing for such purpose, and
shall have issued a California Permit or (b) the SEC shall have declared the
Registration Statement effective, no stop order suspending the effectiveness of
the Registration Statement shall be in effect, and no proceedings for such
purpose shall be pending before or threatened by the Securities and Exchange
Commission.
(b) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order
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(whether temporary, preliminary or permanent) which is in effect and which has
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be threatened or pending.
(d) HSR ACT. If applicable, all waiting periods under the HSR Act
relating to the transactions contemplated hereby will have expired or terminated
early and all material foreign antitrust approvals required to be obtained prior
to the Merger in connection with the transactions contemplated hereby have been
obtained.
(e) GOVERNMENTAL APPROVAL. Approvals from any court, administrative
agency, commission, or other federal, state, county, local or other foreign
governmental authority, instrumentality, agency, or commission (if any) required
by the transactions contemplated hereby shall have been obtained.
6.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The obligations of
Parent and Sub to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by Parent and Sub:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The
representations and warranties of the Company in this Agreement (other than the
representations and warranties of the Company as of a specified date, which
shall be true and correct as of such date) shall have been true and correct on
the date they were made and shall be true and correct in all material respects
(without giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) on and as of the Closing Date as though such
representations and warranties were made on and as of such time, except for such
failures to be true and correct which in the aggregate would not reasonably be
expected to have a Company Material Adverse Effect, and (ii) the Company shall
have performed and complied in all material respects with all covenants and
obligations under this Agreement required to be performed and complied with by
it as of the Closing.
(b) THIRD PARTY CONSENTS. (i) The Company shall have delivered to
Parent all consents, waivers and approvals of parties to any Contract set forth
on SCHEDULE 6.2(b) hereto as are required thereunder in connection with the
Merger, or for any such Contract to remain in full force and effect without
limitation, modification or alteration after the Effective Time; or
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(ii) After first using its commercially reasonable efforts to
obtain such consents, waivers and approvals of parties to any Contract set forth
on SCHEDULE 6.2(b), the Company shall have entered into a Contract that is
assignable to Parent and which is suitable in the discretion of Parent to
replace any such Contract for which consent, waiver or approval was not obtained
(at no additional material cost to, burden on, or decreased functionality to,
the Company or the Surviving Corporation).
(c) TERMINATION OF AGREEMENTS. The Company shall have terminated
each of those agreements listed on SCHEDULE 6.2(C) to this Agreement and each
such agreement shall be of no further force or effect.
(d) NO MATERIAL ADVERSE EFFECT. There shall not have occurred any
event or condition of any character that has had or is reasonably likely to have
a Company Material Adverse Effect since the date of this Agreement.
(e) RESIGNATION OF OFFICERS AND DIRECTORS. Parent shall have
received a written resignation from each of the officers and directors of the
Company and its Subsidiaries effective as of the Effective Time.
(f) LEGAL OPINION. Parent shall have received a legal opinion from
legal counsel to the Company, in a form mutually acceptable to Parent and the
Company.
(g) UNANIMOUS BOARD APPROVAL. This Agreement, the Merger and the
transactions contemplated hereby shall have been unanimously approved by the
Board of Directors of the Company, which unanimous approval shall not have been
revoked.
(h) STOCKHOLDER APPROVAL. The requisite vote of Stockholders under
the Company's certificate of incorporation, bylaws and Delaware Law shall have
approved this Agreement, the Merger, and the transactions contemplated hereby
and thereby, including the appointment of the Stockholder Representative and the
deposit of the Escrow Share Amount and Escrow Cash Amount into the Escrow Funds.
(i) APPRAISAL RIGHTS. Stockholders holding no more than 10% of the
aggregate number of issued and outstanding shares of Company Capital Stock (on
an as converted to Company Common Stock basis) as of the Closing Date shall
continue to have a right to exercise appraisal, dissenters' or similar rights
under applicable law with respect to their Company Capital Stock by virtue of
the Merger.
(j) CERTIFICATE OF THE COMPANY. Parent shall have received a
certificate, validly executed by each of the Chief Executive Officer and Chief
Financial Officer of the Company, in such respective capacities, to the effect
that, as of the Closing:
(i) all representations and warranties made by the Company and
the Management Stockholders in this Agreement (other than the representations
and warranties of the
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Company as of a specified date, which were true and correct as of such date)
were true and correct on the date they were made and are true and correct in all
material respects on and as of the Closing Date as though such representations
and warranties were made on and as of such time, except for such failures to be
true and correct which in the aggregate would not reasonably be expected to have
a Company Material Adverse Effect.
(ii) all covenants and obligations under this Agreement to be
performed or complied with by the Company on or before the Closing have been so
performed or completed with in all material respects; and
(iii) the conditions to the obligations of Parent and Sub set
forth in this SECTION 6.2 have been satisfied (unless otherwise waived in
accordance with the terms hereof).
(k) CERTIFICATE OF SECRETARY OF COMPANY. Parent shall have received
a certificate, executed by the Secretary of the Company, certifying as to (i)
the effectiveness of the certificate of incorporation and the bylaws of the
Company, and (ii) the valid adoption of resolutions of the Board of Directors of
the Company (whereby the Merger and the transactions contemplated hereunder,
were unanimously approved by the Board of Directors) and the Stockholders
approving this Agreement and the consummation of the transactions contemplated
hereby.
(l) CERTIFICATE OF EXECUTIVE OFFICERS. Parent shall have received a
certificate dated as of the Closing Date, validly executed by each of the Chief
Executive Officer and Chief Financial Officer of the Company, in such respective
capacities, to the effect that, each such officer, severally and not jointly,
represents and warrants to Parent and Sub as of the Closing that (i) he has read
the representations and warranties of the Company set forth in ARTICLE II of
this Agreement and the Disclosure Schedule attached hereto and (ii) to his
actual knowledge, such representations and warranties taken as a whole (as
modified by the Disclosure Schedule) do not contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to make
such representations and warranties taken as a whole (as modified by the
Disclosure Schedule) in light of the circumstances under which they were made,
not misleading.
(m) CERTIFICATE OF GOOD STANDING. Parent shall have received a
long-form certificate of good standing from the Secretary of State of the State
of Delaware which is dated within a reasonable period prior to Closing with
respect to each of the Company and each of its Subsidiaries.
(n) TERMINATION OF 401(k) PLANS. Unless Parent has provided notice
to the Company pursuant to SECTION 5.16 that the 401(k) Plans shall not be
terminated, Parent shall have received from the Company reasonably satisfactory
evidence that all 401(k) Plans have been terminated pursuant to resolution of
the Board of Directors of the Company or each of its Subsidiaries, as the case
may be, (the form and substance of which shall have been subject to review and
approval of Parent), effective as of the day immediately preceding the Closing
Date, and Parent shall have received from the Company evidence of the taking of
any and all further actions as provided in SECTION 5.16 hereof.
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(o) STATEMENT OF EXPENSES. Parent shall have received from the
Company the Statement of Expenses pursuant to SECTION 5.15 hereof three (3)
business days prior to the Closing Date.
(p) CONTINUING EMPLOYEE ARRANGEMENTS. The employees listed on
SCHEDULE 6.2(p) of this Agreement (i) shall have entered into an "at-will"
employment arrangement with Parent and/or the Surviving Corporation pursuant to
their execution of an Offer Letter which shall be in full force and effect, and
such employees shall not have taken or threatened to take any actions to
repudiate such "at-will" employment arrangement, (ii) shall have agreed to be
employees of Parent after the Closing and (iii) shall be employees of the
Company immediately prior to the Effective Time; provided that such employee is
living at the Effective Time.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The
representations and warranties of Parent and Sub in this Agreement (other than
the representations and warranties of Parent and Sub as of a specified date,
which shall be true and correct as of such date) shall have been true and
correct when made and shall be true and correct in all material respects on and
as of the Closing Date as though such representations and warranties were made
on and as of such time, except for such failures to be true and correct which in
the aggregate would not reasonably be expected to have a Parent Material Adverse
Effect; and (ii) each of Parent and Sub shall have performed and complied in all
material respects with all covenants and obligations under this Agreement
required to be performed and complied with by such parties as of the Closing
Date.
(b) CERTIFICATE OF PARENT. Company shall have received a certificate
executed on behalf of Parent by a Vice President for and on its behalf to the
effect that, as of the Closing:
(i) all representations and warranties made by Parent and Sub
in this Agreement (other than the representations and warranties of Parent and
Sub as of a specified date, which true and correct as of such date) were true
and correct on the date they were made and are true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties were made on and as of such time; and
(ii) all covenants and obligations under this Agreement to be
performed by Parent and Sub on or before the Closing have been so performed in
all material respects; and
(iii) the conditions to the obligations of the Company set
forth in this SECTION 6.3 have been satisfied (unless otherwise waived in
accordance with the terms hereof).
(c) CERTIFICATE OF SECRETARY OF PARENT. Company shall have received
a certificate executed by the Secretary of Parent, certifying as to (i) the
effectiveness of the certificate of
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incorporation and the bylaws of Parent, and (ii) the valid adoption of
resolutions of the Board of Directors of Parent (whereby the Merger and the
transactions contemplated hereunder, were approved by Parent's board of
directors) approving this Agreement and the consummation of the transactions
contemplated hereby.
(d) NO MATERIAL ADVERSE EFFECT. There shall not have occurred any
event or condition of any character that has had or is reasonably likely to have
a Parent Material Adverse Effect since the date of this Agreement.
(e) LEGAL OPINION. The Company shall have received a legal opinion
from legal counsel to Parent, in a form mutually acceptable to the Company and
Parent.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Company contained in this Agreement, or in
any certificate or other instruments delivered pursuant to this Agreement, shall
survive for a period of twelve (12) months following the Closing Date (the
expiration of such twelve (12) month period, the "Survival Date"). The
representations and warranties of Parent and Sub contained in this Agreement, or
in any certificate or other instrument delivered pursuant to this Agreement,
shall terminate at the Closing.
7.2 INDEMNIFICATION. The Stockholders agree, severally and not jointly, to
indemnify and hold Parent, the Surviving Corporation, their direct and indirect
Subsidiaries and their respective directors, officers, employees, agents and
affiliates, (the "INDEMNIFIED PARTIES"), harmless against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses of investigation and defense and diminution in
value (hereinafter individually a "LOSS" and collectively "LOSSES") incurred or
sustained by any of the Indemnified Parties, directly or indirectly, as a result
of (i) any breach or inaccuracy of a representation or warranty of the Company
contained in this Agreement, in any Related Agreement or in any certificate or
other instruments delivered pursuant to this Agreement, (ii) any failure by the
Company to perform or comply with any covenant applicable to it contained in
this Agreement or any Related Agreement, (iii) any Dissenting Share Payments,
(iv) any Stockholder claims relating to or arising out of this Agreement or the
transactions contemplated hereby, (v) any Excess Third Party Expenses, or (vi)
any breach or inaccuracy of any representation or warranty contained in SECTION
2.10 of this Agreement with respect to any Sales Taxes (as defined in SECTION
7.3(b) hereof), without regard to any information provided by the Company in the
Disclosure Schedule regarding Sales Taxes; provided, however, with respect to
CLAUSE (vi), that any Sales Taxes giving rise to such Losses were initiated by a
tax authority upon an audit or pursuant to some other formal proceeding and
Parent used reasonable efforts to defend the Company's prior position with
respect to such Sales Taxes. The Stockholders shall not have any right of
contribution from the Surviving Corporation or
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Parent with respect to any Loss claimed by an Indemnified Party. For purposes of
this ARTICLE VII, holders of Company Options shall also be considered
Stockholders.
7.3 ESCROW ARRANGEMENTS.
(a) ESCROW FUNDS. By virtue of this Agreement and as security for
the indemnity obligations provided for in SECTION 7.2 hereof, at the Effective
Time, the Stockholders and holders of Company Options will be deemed to have
received and deposited with the Escrow Agent their pro rata portion of the
Escrow Share Amount (plus any New Shares as defined in SECTION 7.3(d)(iii)
hereof) without any act of the Stockholders. The Escrow Cash Amount will be
deposited with the Escrow Agent directly by Parent. The Escrow Amount shall be
available to compensate the Indemnified Parties for any claims by such parties
for any Losses suffered or incurred by them and for which they are entitled to
recovery under this ARTICLE VII. Promptly after the Closing, the Escrow Amount,
without any act of the Stockholders or the holders of Company Options, will be
deposited with the Escrow Agent, such deposit of the Escrow Amount to constitute
two escrow funds (the "ESCROW FUNDS") to be governed by the terms set forth
herein. The Escrow Cash Amount shall be deposited into one of the Escrow Funds
(the "CASH ESCROW FUND") and the Escrow Share Amount shall be deposited into the
other of the Escrow Funds (the "STOCK ESCROW FUND"). For tax purposes, it is
intended that the Cash Escrow Fund be established as a grantor trust with
respect to Parent and that the Stock Escrow Fund be established as a grantor
trust with respect to the Stockholders, and the parties agree to treat and
report the Escrow Funds as such. The Escrow Agent may execute this Agreement
following the date hereof and prior to the Closing, and such later execution, if
so executed after the date hereof, shall not affect the binding nature of this
Agreement as of the date hereof between the other signatories hereto.
(b) BASKET AMOUNT. Notwithstanding any provision of this Agreement
to the contrary, but subject to SECTION 7.5 hereof, except as set forth in the
second sentence of this SECTION 7.3(b), Parent may not recover any Losses under
SECTION 7.2 unless and until one or more Officer's Certificates (as defined
below) identifying such Losses under SECTION 7.2 in excess of $1,500,000 in the
aggregate (the "BASKET AMOUNT") has or have been delivered to the Escrow Agent
and the Stockholder Representative as provided in SECTION 7.3(e) hereof, and
such Losses are (x) agreed to by the Stockholder Representative, (y) not subject
to an Objection Notice, validly delivered in accordance with the provisions of
SECTION 7.3(f) hereof or (z) determined to be subject to indemnification
pursuant to SECTION 7.3(g) hereof, in which case Parent shall be entitled to
recover all Losses so identified, including the Basket Amount. Notwithstanding
the foregoing, Parent shall be entitled to recover for, and the Basket Amount
shall not apply as a threshold to, any and all claims or payments made with
respect to (A) Losses resulting from any Dissenting Share Payments, (B) Excess
Third Party Expenses, (C) Losses relating to Stockholder claims relating to or
arising out of this Agreement or the transactions contemplated hereby, and (D)
Losses resulting from any breach or inaccuracy of any representation or warranty
contained in SECTION 2.10 of this Agreement with respect to any sales, use,
excise, transfer, or similar taxes ("SALES TAXES"), without regard to any
information provided by the Company in the Disclosure Schedule regarding Sales
Taxes; provided, however, that any Sales Taxes giving rise to such Losses were
initiated by a tax
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authority upon an audit or pursuant to some other formal proceeding and Parent
used reasonable efforts to defend the Company's prior position with respect to
such Sales Taxes. For the purposes hereof, "OFFICER'S CERTIFICATE" shall mean a
certificate signed by any executive officer of Parent: (1) stating that Parent
has paid, sustained, incurred, or properly accrued, or reasonably anticipates
that it will have to pay, sustain, incur, or accrue Losses, and (2) specifying
in reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid, sustained, incurred, or properly
accrued, or the basis for such anticipated liability, and, in the case of Losses
being indemnified pursuant to SECTION 7.3(a), the nature of the
misrepresentation, breach of warranty or covenant to which such item is related.
(c) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW PERIODS.
Subject to the following requirements, the Escrow Funds shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m., local
time at Parent's headquarters, on the Survival Date (the "ESCROW PERIOD");
provided, however, that the Escrow Period shall not terminate with respect to
any amount which, in the reasonable judgment of Parent, is necessary to satisfy
any unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent and the Stockholder Representative prior to the Escrow Period
termination date with respect to facts and circumstances existing prior to the
Survival Date (the "ESCROW CLAIMS AMOUNT"). Any portion of the Escrow Funds not
subject to the Escrow Claims Amount shall be delivered to the Stockholders
within ten (10) business days after the Survival Date. As soon as any such
claims covered by the Escrow Claims Amount have been resolved, the Escrow Agent
shall deliver to the Stockholders within ten (10) business days after
notification of such resolution the remaining portion of the Escrow Funds, if
any, not required to satisfy such claims. Deliveries of the Escrow Amount out of
the Escrow Funds to the Stockholders pursuant to this SECTION 7.3(c) shall be
made in proportion to their respective pro rata portions of the Escrow Amount
remaining in the Escrow Funds.
(d) PROTECTION OF ESCROW FUNDS.
(i) The Escrow Agent shall hold and safeguard the Escrow Funds
during the Escrow Period, shall treat each such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Funds only in accordance with the terms
of this Article VII.
(ii) The cash proceeds in the Cash Escrow Fund shall be
invested in U.S. Treasury bills with maturities of not more than thirty (30)
days and any interest paid on such Escrow Cash Amount shall be added to the Cash
Escrow Fund, and become a part thereof. For any period of time before such U.S.
Treasury bills can be purchased by the Escrow Agent or after such bills mature,
the Escrow Cash Amount shall be invested in a business money market account of
the Escrow Agent (or another nationally recognized banking institution) and any
interest paid on such Escrow Cash Amount shall be added to the Cash Escrow Fund
and become a part thereof. Any interest earned on the proceeds of the Cash
Escrow Fund shall be treated as owned by Parent and Parent shall report such
interest ("CASH ESCROW INCOME") as income of Parent. The Cash Escrow Income
shall be paid by Parent to the Stockholders on a pro rata basis and, for federal
income tax
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purposes, shall be treated as an interest payment from Parent to the
Stockholders in respect of the obligation of Parent to pay the Escrow Cash
Amount to the Stockholders as additional consideration in the future; provided,
however, that for administrative ease, the Cash Escrow Income shall be added to,
and become a part of, the Cash Escrow Fund and such amount shall be distributed
to the Stockholders in accordance with the terms of this ARTICLE VII.
(iii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent after the Effective Time (including
shares issued upon a stock split) ("NEW SHARES") in respect of Parent Common
Stock in the Stock Escrow Fund which have not been released from the Stock
Escrow Fund shall be added to the Stock Escrow Fund and become a part thereof.
New Shares issued in respect of shares of Parent Common Stock which have been
released from the Stock Escrow Fund shall not be added to the Stock Escrow Fund
but shall be distributed to the record holders thereof. Cash dividends on Parent
Common Stock shall not be added to the Stock Escrow Fund but shall be
distributed to the record holders thereof.
(iv) Each of the Stockholders shall have voting rights with
respect to the shares of Parent Common Stock contributed to and held in the
Stock Escrow Fund by such Stockholder (and on any voting securities added to the
Stock Escrow Fund in respect of such shares of Parent Common Stock).
(e) CLAIMS FOR INDEMNIFICATION.
(i) Upon receipt by the Escrow Agent at any time on or before
the last day of the Escrow Period of an Officer's Certificate related to a claim
for indemnification pursuant to SECTION 7.2, the Escrow Agent shall, subject to
the provisions of SECTION 7.3(f), SECTION 7.3(g) and SECTION 7.3(h) hereof,
deliver to Parent, as promptly as practicable, Parent Common Stock held in the
Stock Escrow Fund (as valued based on the average closing sale price of one
share of Parent Common Stock as reported on the Nasdaq National Market for the
ten (10) consecutive trading days ending three (3) trading days immediately
preceding the date of payment for such Loss ("ESCROW TRADING PRICE")) and cash
held in the Cash Escrow Fund equal, in the aggregate, to such Losses. Subject to
SECTION 7.5 hereof, claims against the Escrow Funds shall be satisfied pro rata
from the Escrow Amount deposited in the Escrow Funds on behalf of each
Stockholder, and, to the extent cash was deposited in the Cash Escrow Fund on
behalf of a Stockholder, such Stockholder's pro rata contribution to satisfy any
claims shall first be satisfied out of such Stockholder's pro rata portion of
the Cash Escrow Fund and upon depletion of such cash, or in the event that no
cash was deposited into the Cash Escrow Fund on behalf of such Stockholder, such
claims shall then be satisfied out of the Stockholder's pro rata portion of the
Stock Escrow Fund.
(ii) Failure by the Stockholder Representative to object in
writing within the 30-day period after delivery by Parent of the Officer's
Certificate shall be an irrevocable acknowledgment by the Stockholder
Representative and the Stockholders that the Indemnified Party is entitled to
the full amount of the claim for Losses set forth in such Officer's Certificate.
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(f) OBJECTIONS TO CLAIMS FOR INDEMNIFICATION. At the time of
delivery of any Officer's Certificate to the Escrow Agent, a duplicate copy of
such certificate shall be delivered to the Stockholder Representative, and for a
period of thirty (30) days after receipt by the Stockholder Representative of
such Officer's Certificate, the Escrow Agent shall make no delivery to Parent of
any Escrow Claims Amount pursuant to SECTION 7.3(e) hereof unless the Escrow
Agent shall have received written authorization from the Stockholder
Representative to make such delivery. After the expiration of such thirty (30)
day period, the Escrow Agent shall make delivery of cash or shares of Parent
Common Stock, as required by SECTION 7.3(e), from the Escrow Funds, equal to the
amount of Losses claimed in the Officer's Certificate; provided, however, that
no such payment or delivery may be made if the Stockholder Representative shall
object in a written statement to the claim made in the Officer's Certificate (an
"OBJECTION NOTICE"), and such Objection Notice shall have been delivered to the
Escrow Agent prior to the expiration of such thirty (30) day period.
(g) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Stockholder Representative delivers an
Objection Notice in accordance with SECTION 7.3(f), the Stockholder
Representative and Parent shall attempt in good faith to agree upon the rights
of the respective parties with respect to each of such claims. If the
Stockholder Representative and Parent should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and make distributions from the Escrow Funds in accordance with
the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation and prior to thirty (30) days after delivery of an Objection Notice,
either Parent or the Stockholder Representative may demand arbitration of the
matter unless the amount of the Loss is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced until such amount
is ascertained or both parties agree to arbitration, and in either such event
the matter shall be settled by arbitration conducted by one arbitrator mutually
agreeable to Parent and the Stockholder Representative. In the event that,
within thirty (30) days after submission of any dispute to arbitration, Parent
and the Stockholder Representative cannot mutually agree on one arbitrator,
then, within fifteen (15) days after the end of such thirty (30) day period,
Parent and the Stockholder Representative shall each select one arbitrator. The
two arbitrators so selected shall select a third arbitrator. If a party fails to
select an arbitrator during this fifteen (15) day period, then the parties agree
that the arbitration will be conducted by the arbitrator selected by the other
party.
(iii) Any such arbitration shall be held in Wilmington,
Delaware, under the rules then in effect of the American Arbitration
Association. The arbitrator(s) shall determine how all expenses relating to the
arbitration shall be paid, including without limitation, the respective expenses
of each party, the fees of each arbitrator and the administrative fee of the
American Arbitration Association. The arbitrator or arbitrators, as the case may
be, shall set a limited time period and establish procedures designed to reduce
the cost and time for discovery while allowing the parties an opportunity,
adequate in the sole judgment of the arbitrator or majority of the three
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arbitrators, as the case may be, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrator, or a
majority of the three arbitrators, as the case may be, shall rule upon motions
to compel or limit discovery and shall have the authority to impose sanctions,
including attorneys' fees and costs, to the same extent as a competent court of
law or equity, should the arbitrators or a majority of the three arbitrators, as
the case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the arbitrator or a majority of the three
arbitrators, as the case may be, as to the validity and amount of any claim in
such Officer's Certificate shall be final, binding, and conclusive upon the
parties to this Agreement. Such decision shall be written and shall be supported
by written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrator(s), and the Escrow Agent
shall be entitled to rely on, and make distributions from the Escrow Funds in
accordance with, the terms of such award, judgment, decree or order as
applicable. Within thirty (30) days of a decision of the arbitrator(s) requiring
payment by one party to another, such party shall make the payment to such other
party.
(iv) Judgment upon any award rendered by the arbitrator(s) may
be entered in any court having jurisdiction. The forgoing arbitration provision
shall apply to any dispute among the Stockholders and the Indemnified Party
under this ARTICLE VII hereof, whether relating to claims upon the Escrow Funds
or to the other indemnification obligations set forth in this ARTICLE VII.
(h) THIRD PARTY CLAIMS. In the event Parent becomes aware of a third
party claim (a "THIRD PARTY CLAIM") which Parent reasonably believes may result
in a demand against the Escrow Funds or for other indemnification pursuant to
this ARTICLE VII, Parent shall notify the Stockholder Representative of such
claim, and the Stockholder Representative shall be entitled on behalf of the
Stockholders, at its expense, to participate in, but not to determine or
conduct, the defense of such Third Party Claim. Parent shall have the right in
its sole discretion, in close consultation with the Stockholder Representative,
to conduct the defense of, and to settle, any such claim; provided, however,
that except with the consent of the Stockholder Representative, no settlement of
any such Third Party Claim with third party claimants shall be determinative of
the amount of Losses relating to such matter. In the event that the Stockholder
Representative has consented to any such settlement, the Stockholders shall have
no power or authority to object under any provision of this ARTICLE VII to the
amount of any Third Party Claim by Parent against the Escrow Funds or against
the Stockholders directly, as the case may be, with respect to such settlement.
(i) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an executive
officer of Parent and the Stockholder Representative, and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed to be genuine and to have been signed or presented by the proper party
or parties. The Escrow Agent shall not be
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liable for any act done or omitted hereunder as Escrow Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of legal counsel shall be conclusive evidence of
such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration
of any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under this Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses, except
for negligence or willful misconduct on the part of the Escrow Agent. The Escrow
Agent shall not incur any such liability for (A) any act or failure to act made
or omitted in good faith, or (B) any action taken or omitted in reliance upon
any instrument, including any written statement or affidavit provided for in
this Agreement that the Escrow Agent shall in good faith believe to be genuine,
nor will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel in connection with
performing the Escrow Agent's duties under this Agreement and shall be fully
protected in any act taken, suffered, or permitted by him/her in good faith in
accordance with the advice of counsel. The Escrow Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and the Escrow Amount and may wait for settlement of any
such controversy by final appropriate legal proceedings or other means as, in
the Escrow Agent's discretion, may be required, despite what may be set forth
elsewhere in this Agreement. In such event, the Escrow Agent will not be liable
for damages. Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and rights
among themselves. The Escrow Agent is authorized to deposit with the clerk of
the court all documents and the Escrow Amounts held in escrow, except all costs,
expenses, charges and
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reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action (the "AGENT INTERPLEADER EXPENSES") and which the parties agree to pay as
follows: fifty percent (50%) to be paid by Parent and fifty percent (50%) to be
paid by the Stockholders on the basis of the Stockholders' respective pro rata
portions; provided, however, that in the event any Stockholder fails to timely
pay his or her pro rata portion of the Agent Interpleader Expenses, the parties
agree that Parent may at its option pay such Stockholder's pro rata portion of
the Agent Interpleader Expenses and recover an equal amount (which shall be
deemed a Loss) from such Stockholder's pro rata portion of the Escrow Funds.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold Escrow Agent harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, including allocated costs of
in-house counsel and disbursements that may be imposed on Escrow Agent or
incurred by Escrow Agent in connection with the performance of his/her duties
under this Agreement, including but not limited to any litigation arising from
this Agreement or involving its subject matter, other than those arising out of
the negligence or willful misconduct of the Escrow Agent (the "AGENT
INDEMNIFICATION EXPENSES") as follows: fifty percent (50%) to be paid by Parent
and fifty percent (50%) to be paid by the Stockholders on the basis of the
Stockholders' pro rata portions; provided, however, that in the event any
Stockholder fails to timely pay his or her pro rata portion of the Agent
Indemnification Expenses, the parties agree that Parent may at its option pay
such Stockholder's pro rata portion of the Agent Indemnification Expenses and
recover an equal amount (which shall be deemed a Loss) from such Stockholder's
pro rata portion of the Escrow Funds.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to Parent and the Stockholder
Representative; provided, however, that no such resignation shall become
effective until the appointment of a successor escrow agent which shall be
accomplished as follows: Parent and the Stockholder Representative shall use
their commercially reasonable efforts to mutually agree on a successor escrow
agent within thirty (30) days after receiving such notice. If the parties fail
to agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the State of California. The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
(j) FEES. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent in accordance with the standard fee schedule
of the Escrow Agent. It is understood that the fees and usual charges agreed
upon for services of the Escrow Agent shall be considered compensation for
ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any
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service not provided for in this Agreement but that has been requested by an
officer of Parent, or if the parties request a substantial modification of the
terms of the Agreement, or if any controversy arises, or if the Escrow Agent is
made a party to, or intervenes in, any litigation pertaining to the Escrow Funds
or their subject matter, the Escrow Agent shall be reasonably compensated for
such extraordinary services and reimbursed for all costs, attorney's fees,
including allocated costs of in-house counsel, and expenses occasioned by such
default, delay, controversy or litigation.
(k) SUCCESSOR ESCROW AGENTS. Any corporation into which the Escrow
Agent in its individual capacity may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
7.4 STOCKHOLDER REPRESENTATIVE.
(a) By virtue of the approval of the Merger and this Agreement by
the requisite vote of the Stockholders, each of the Stockholders shall be deemed
to have agreed to appoint Xxxxxxx X. Xxxx as its agent and attorney-in-act, as
the Stockholder Representative for and on behalf of the Stockholders to give and
receive notices and communications, to authorize payment to any Indemnified
Party from the Escrow Funds in satisfaction of claims by any Indemnified Party,
to object to such payments, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, to assert, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to, any other claim by
any Indemnified Party against any Stockholder or by any such Stockholder against
any Indemnified Party or any dispute between any Indemnified Party and any such
Stockholder, in each case relating to this Agreement or the transactions
contemplated hereby, and to take all other actions that are either (i) necessary
or appropriate in the judgment of the Stockholder Representative for the
accomplishment of the foregoing or (ii) specifically mandated by the terms of
this Agreement. Such agency may be changed by the Stockholders from time to time
upon not less than thirty (30) days prior written notice to Parent; provided,
however, that the Stockholder Representative may not be removed unless during
the Escrow Period (and any extension thereof) holders of a two-thirds interest
of the Escrow Funds agree to such removal and to the identity of the substituted
agent. A vacancy in the position of Stockholder Representative may be filled by
the holders of a majority in interest of the Escrow Funds. No bond shall be
required of the Stockholder Representative, and the Stockholder Representative
shall not receive any compensation for its services. Notices or communications
to or from the Stockholder Representative shall constitute notice to or from the
Stockholders.
(b) The Stockholder Representative shall not be liable for any act
done or omitted hereunder as Stockholder Representative while acting in good
faith and in the exercise of reasonable judgment. The Stockholders on whose
behalf the Escrow Amounts were contributed to the Escrow
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Funds shall indemnify the Stockholder Representative and hold the Stockholder
Representative harmless against any loss, liability or expense incurred without
gross negligence or bad faith on the part of the Stockholder Representative and
arising out of or in connection with the acceptance or administration of the
Stockholder Representative's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Stockholder Representative
("STOCKHOLDER REPRESENTATIVE EXPENSES"). A decision, act, consent or instruction
of the Stockholder Representative, including but not limited to an amendment,
extension or waiver of this Agreement pursuant to SECTION 8.3 and SECTION 8.4
hereof, shall constitute a decision of the Stockholders and shall be final,
binding and conclusive upon the Stockholders; and the Escrow Agent and Parent
may rely upon any such decision, act, consent or instruction of the Stockholder
Representative as being the decision, act, consent or instruction of the
Stockholders. The Escrow Agent and Parent are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Stockholder Representative.
(c) By their approval of this Agreement, the Stockholders shall be
deemed to have waived any claims they may have or assert, including those that
may arise in the future, against the Stockholder Representative, and any of its
affiliates, for any action or inaction taken or not taken by the Stockholder
Representative in connection herewith, except to the extent that any such claims
arise out of the Stockholder Representative's gross negligence or bad faith.
7.5 MAXIMUM PAYMENTS; REMEDY.
(a) The provisions of this ARTICLE VII shall be the sole and
exclusive remedy of (and corresponding liability of the Stockholders to) Parent,
Sub and the Surviving Corporation for any damage, claim, cause of action or
right of any nature arising out of or relating to this Agreement, the
certificates or other documents executed or delivered herewith, or the
transactions covered hereby. The maximum amount an Indemnified Party may recover
from a Stockholder (including the officers signing the certificates required by
SECTIONS 5.26 and 6.2(l) hereof) individually pursuant to the indemnity set
forth in SECTION 7.2 hereof for Losses shall be limited to such Stockholder's
pro rata portion of the Escrow Funds; provided, however, that nothing in this
Agreement will be deemed to limit any right or remedy for fraud or for willful
breaches of any representation, warranty or covenant set forth in this
Agreement, any Related Agreement or any certificate or instrument delivered
pursuant to this Agreement, except that in no event shall any liability under
this Agreement exceed a Stockholder's pro rata portion of the Total
Consideration.
(b) Nothing herein shall limit the liability of the Company in the
event the Merger does not close.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in SECTION 8.2 hereof, this Agreement
may be terminated and the Merger abandoned at any time prior to the Closing:
(a) by unanimous agreement of the Company and Parent;
(b) by Parent or the Company if the Closing Date shall not have
occurred by April 30, 2003; provided, however, that the right to terminate this
Agreement under this SECTION 8.1(b) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes breach of this Agreement;
(c) by Parent or the Company if: (i) there shall be a final
non-appealable order of a federal or state court in effect preventing
consummation of the Merger, or (ii) there shall be any statute, rule, regulation
or order enacted, promulgated or issued or deemed applicable to the Closing by
any Governmental Entity that would make consummation of the Closing illegal;
(d) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity, which would: (i) prohibit Parent's
ownership or operation of any material portion of the business of the Company or
(ii) compel Parent or the Company to dispose of or hold separate all or any
material portion of the business or assets of the Company or Parent as a result
of the Merger;
(e) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement such
that the conditions set forth in SECTION 6.2(a) hereof would not be satisfied
and such breach has not been cured within twenty (20) calendar days after
written notice thereof to the Company (if any); provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured; or
(f) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement of Parent contained in this
Agreement such that the conditions set forth in SECTION 6.3(a) hereof would not
be satisfied and such breach has not been cured within ten (10) calendar days
after written notice thereof to Parent (if any); provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in SECTION 8.1 hereof, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, the
Company, or their respective officers, directors or stockholders, if applicable;
provided, however, that each party hereto shall remain liable for any breaches
of this
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Agreement prior to its termination; and provided further, however, that,
the provisions of SECTIONS 5.3, 5.4 and 5.5 hereof, ARTICLE IX hereof and this
SECTION 8.2 shall remain in full force and effect and survive any termination of
this Agreement pursuant to the terms of this ARTICLE VIII.
8.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of the party
against whom enforcement is sought. For purposes of this SECTION 8.3, the
Stockholders agree that any amendment of this Agreement signed by the
Stockholder Representative shall be binding upon and effective against the
Stockholders whether or not they have signed such amendment.
8.4 EXTENSION; WAIVER. At any time prior to the Closing, Parent, on the
one hand, and the Company and the Stockholder Representative, on the other hand,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations of the other party hereto, (ii) waive any inaccuracies in
the representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
covenants, agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. For purposes of this SECTION 8.4, the Stockholders agree
that any extension or waiver signed by the Stockholder Representative shall be
binding upon and effective against all Stockholders whether or not they have
signed such extension or waiver.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given on the date of delivery if delivered
personally or by commercial messenger or courier service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice); provided, however, that notices sent by mail will not be deemed given
until received:
(a) if to Parent or Sub, to:
Documentum, Inc.
0000 Xxxx Xxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Vice President, General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy (which shall not be required for requests for
consent pursuant to SECTION 4.1 hereof) to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company to:
eRoom Technology, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(c) if to the Stockholder Representative, to the address set forth
in SCHEDULE 9.1 of this Agreement.
(d) If to the Escrow Agent, to:
U.S. Bank, N.A.
Corporate Trust Services
Xxx Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxx
Facsimile No.: (000) 000-0000
9.2 INTERPRETATION. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Exhibits hereto, the
Disclosure Schedule, the Confidential Disclosure Agreement, and the documents
and instruments and other agreements among the parties hereto referenced herein:
(i) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings both
written and oral, among the parties with respect to the subject matter hereof,
(ii) are not intended to confer upon any other person any rights or remedies
hereunder, and (iii) shall not be assigned by operation of law or otherwise,
except that Parent may assign its rights and delegate its obligations hereunder
to its affiliates as long as Parent remains ultimately liable for all of
Parent's obligations hereunder.
9.5 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.6 OTHER REMEDIES. Any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any court within Wilmington, Delaware, in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized by
the laws of the State of Delaware for such persons and waives and covenants not
to assert or plead any objection which they might otherwise have to such
jurisdiction, venue and such process.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
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9.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, Parent, Sub and the Company, the Escrow Agent and the
Stockholder Representative have caused this Agreement to be signed, all as of
the date first written above.
DOCUMENTUM, INC.
By:
Name:
Title:
eROOM TECHNOLOGY, INC.
By:
Name:
Title:
COPPER TOP ACQUISITION CORP.
By:
Name:
Title:
U.S. BANK, N.A.
By:
Name:
Title:
STOCKHOLDERS' REPRESENTATIVE
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Xxxxxxx X. Xxxx
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
