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EXHIBIT 2.5
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CRITICAL PATH, INC.
D.V. ACQUISITION CORP.
AND
REMARQ COMMUNITIES, INC.
DATED AS OF JANUARY 28, 2000
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of January 28, 2000, among Critical Path, Inc., a California
corporation ("Parent"), D.V. Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Remarq Communities, a
Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Merger 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 shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
options and other rights to acquire or receive shares of Company Capital Stock
shall be converted into the shares of or right to receive shares of Common Stock
of Parent ("Parent Common Stock").
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of the Company are entering into Voting Agreements in substantially
the form attached hereto as Exhibit A (the "Voting Agreement").
D. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
F. The parties intend for the Merger to be accounted for financial
accounting purposes as a purchase.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law (the "DGCL"),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation and as a wholly owned subsidiary of Parent. The Company,
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation".
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than two (2) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx,
unless another place or time is agreed to by Parent and the Company. The date
upon which the Closing actually occurs is herein referred to as the "Closing
Date". On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing an Agreement of Merger with the California Secretary of
State (the "Agreement of Merger"), a form of which is attached hereto, in
accordance with the relevant provisions of applicable law. The date and time the
Merger becomes effective in accordance with the provisions of the DGCL is 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 the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of Merger Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
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Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Shares to Be Issued; Effect on Capital Stock. The aggregate number
of shares of Parent Common Stock to be issued (including Parent Common Stock to
be reserved for issuance upon exercise of any of the Company's options to be
assumed by Parent) in exchange for the acquisition by Parent of all outstanding
Company Capital Stock and all unexpired and unexercised options to acquire
Company Capital Stock shall be 3,982,930 (the "Stock Consideration"). No
adjustment shall be made in the number of shares of Parent Common Stock issued
in the Merger as a result of any cash proceeds received by the Company from the
date hereof to the Closing Date pursuant to the exercise of options to acquire
Company Capital Stock. Subject to the terms and conditions of this Agreement, as
of the Effective Time, by virtue of the Merger and without any action on the
part of Merger Sub, the Company or the holder of any shares of the Company
Capital Stock, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common
Stock of the Company ("Company Common Stock") issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to
the extent provided in Section 1.7(a)) will be canceled and extinguished and be
converted automatically into that number of shares of Parent Common Stock as is
equal to the Exchange Ratio (as defined in paragraph (h) below).
(b) Conversion of Company Preferred Stock. Each share of Series A
Preferred Stock of the Company ("Series A Preferred") and Series B Preferred
Stock of the Company ("Series B Preferred", and together with the Series A
Preferred, the "Company Preferred") issued and outstanding immediately prior to
the Effective Time (other than any shares of Company Preferred that are
converted into shares of Company Common Stock immediately prior to the Effective
Time, any shares of Company Preferred to be canceled pursuant to Section 1.6(c)
and any Dissenting Shares (as defined and to the extent provided in Section
1.7(a)) will be canceled and extinguished and be converted automatically into
that number of shares of Parent Common Stock as is equal to the Exchange Ratio
(as defined in paragraph (h) below) multiplied by the number of shares of
Company Common Stock into which such share of Company Preferred would convert
pursuant to an automatic conversion as described in the Company's Certificate of
Incorporation.
(c) Cancellation of Parent-Owned and Company-Owned Stock. Each
share of Company Capital Stock owned by Merger Sub, Parent, the Company or any
direct or indirect wholly-owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(d) Stock Options. At the Effective Time, all options to purchase
Company Common Stock then outstanding under the Company's 1998 Stock Plan (the
"Option Plan"), or otherwise, shall be assumed by Parent in accordance with
provisions described below.
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(i) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (each a "Company Option") under the
Option Plan or otherwise, whether vested or unvested, shall be, in connection
with the Merger, assumed by Parent. Each Company Option so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio (as defined in paragraph (h) below), rounded down to the nearest
whole number of shares of Parent Common Stock and (B) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Option shall be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Option
was exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Options qualified as incentive stock options immediately prior to the Effective
Time.
(iii) Promptly following the Effective Time, Parent will
issue to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(e) Capital Stock of Merger Sub. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Capital Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Capital
Stock occurring or with a record date after the date hereof and prior to the
Effective Time.
(g) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive from Parent an amount
of cash (rounded down to the nearest whole cent) equal to the product of (i)
such fraction,
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multiplied by (ii) the average closing price of a share of Parent
Common Stock for the ten (10) consecutive trading days ending on the second
trading day immediately prior to the Closing, as reported on the Nasdaq National
Market.
(h) Definitions.
(i) Escrow Consideration. The "Escrow Consideration"
shall mean 0.2 multiplied by the Stock Consideration.
(ii) Exchange Ratio. The "Exchange Ratio" shall mean the
Stock Consideration divided by the Outstanding Aggregate Amount.
(iii) Outstanding Aggregate Amount. The "Outstanding
Aggregate Amount" shall mean the sum of the Outstanding Common Amount and the
Outstanding Option Amount.
(iv) Outstanding Common Amount. The "Outstanding Common
Amount" shall mean the aggregate number of shares of Company Common Stock
outstanding on the date hereof (treating all shares of outstanding Company
Preferred Stock and the Comdisco Rights (as defined herein) as automatically
converting into Company Common Stock as of such time).
(v) Outstanding Option Amount. The "Outstanding Option
Amount" shall mean the aggregate number of shares of Company Common Stock
issuable upon the exercise of all outstanding options to acquire shares of
Company Common Stock on the date hereof.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
the DGCL and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal or dissenters' rights ("Dissenting Shares"), shall not be
converted into or represent Parent Common Stock pursuant to Section 1.6, but the
holder thereof shall only be entitled to such rights as are granted by the DGCL.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under the DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, 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 Parent Common Stock, such holder's portion of
the Cash Consideration Amount and cash in lieu of fractional shares as provided
in Section 1.6, without interest thereon.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other
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instruments served pursuant to the DGCL and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisal of capital stock of the Company or offer to settle or
settle any such demands.
1.8 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the aggregate number of shares of Parent Common
Stock issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock; provided that on behalf of the holders of Company Capital
Stock, Parent shall deposit into an escrow account a number of shares of Parent
Common Stock equal to the Escrow Amount out of the Stock Consideration otherwise
issuable pursuant to Section 1.6. The portion of the Escrow Amount contributed
on behalf of each holder of Company Capital Stock (other than holders of
Dissenting Shares on whose behalf no shares will be deposited into the escrow
account) shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive under
Section 1.6 by virtue of ownership of outstanding shares of Company Capital
Stock.
(c) Exchange Procedures. Promptly after the Effective Time,
Parent shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock whose shares were
converted into shares of Parent Common Stock pursuant to Section 1.6, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock, if any, to be deposited in the Escrow Fund (as
defined in Section 7.5 below) on such holder's behalf pursuant to Section 7.5
hereof), plus cash in lieu of fractional shares in accordance with Section 1.6,
to which such holder is entitled pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of Article
VII hereof, Parent shall cause to be distributed to the Escrow Agent a
certificate or certificates representing that number of shares of Parent Common
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Stock equal to the Escrow Amount which shall be registered in the name of the
Escrow Agent. Notwithstanding the provisions contained in Section 1.6(g), any
fractional share that would otherwise result from the issuance of a certificate
representing the shares of Parent Common Stock to be deposited into escrow
pursuant to Article VII hereof shall be rounded down to the nearest whole share
and any fraction of a share that would otherwise result from the issuance of a
certificate representing the remaining shares of Parent Common Stock which each
such shareholder would otherwise be entitled to receive under Section 1 by
virtue of ownership of outstanding shares of Company Common Stock shall be
rounded up to the nearest whole share. Such shares shall be owned beneficially
and of record by the holders on whose behalf such shares were deposited in the
Escrow Fund and shall be available to compensate Parent as provided in Article
VII. Until so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Company Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Capital Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6. Parent shall use its
reasonable efforts to cause the Exchange Agent to issue to each Company
stockholder the Parent Common Stock pursuant to Section 1.6 within 5 business
days after the Exchange Agent receives all documents necessary to effect such
exchange, properly completed, guaranteed and presented for transfer, from each
such Stockholder.
(d) 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 Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such 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.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance 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.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
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1.9 No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, 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 owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may reasonably direct as
indemnity 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 and Accounting Consequences. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) be accounted for financial reporting purposes as a purchase. The parties to
this Agreement hereby adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations. No party to this Agreement shall take any action inconsistent with
such treatment.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such 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 and Merger Sub, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to
Parent and Merger Sub, subject to such exceptions as are specifically disclosed
in the disclosure schedules (referencing the appropriate section number)
supplied by the Company to Parent (the "Company Schedules") and dated as of the
date hereof. Any information disclosed on the Company Schedules under any
section number set forth therein shall be deemed to be disclosed and
incorporated into any
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other section under the Company Schedules where such disclosure would on its
face reasonably be deemed to apply.
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a material adverse effect on the
business, prospects, assets (including intangible assets), financial condition
or results of operations of the Company; provided, however, that in no event
shall any of the following constitute a Material Adverse Effect: (i) any
effects, changes, events, circumstances or conditions (including, without
limitation, litigation, delays in customer orders, a reduction in sales, a
disruption in business relationships or a loss of employees) resulting from the
announcement or pendency of the transactions contemplated by this Agreement;
(ii) any effects, changes, events, circumstances or conditions taken by the
Company that were necessary for the Company to comply with the terms of this
Agreement, or (iii) the occurrence of a short term service outage or other short
term inability to provide services that, in any case, does not impair, but for
such short term outage or inability to provide services, the Company's ability
to provide its services to its customers (hereinafter a material adverse effect
on the business, prospects, assets (including intangible assets), financial
condition or results of operations of the Company, as modified by the proviso
contained in this sentence is referred to as a "Material Adverse Effect"). The
Company has delivered a true, correct and complete copy of its Certificate of
Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
15,000,000 shares of Common Stock, of which 11,268,147 shares are issued and
outstanding, and 5,631,354 shares of Preferred Stock, of which 3,131,354 shares
are designated Series A Preferred Stock, all of which are issued and
outstanding, and 2,500,000 shares are designated Series B Preferred Stock,
2,352,941 of which are issued and outstanding as of the date of this Agreement.
The Company Capital Stock is held by the persons, with the domicile addresses
and in the amounts set forth on Schedule 2.2(a). All outstanding shares of
Company Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound.
(b) The Company has reserved 3,268,646 shares of Common Stock
for issuance to employees and consultants pursuant to the Option Plan, of which
343,375 shares are subject to outstanding, unexercised options as of the date of
this Agreement and 741,419 shares remain available for future grant as of the
date of this Agreement. The Company has reserved 147,058 shares of Series B
Preferred Stock for issuance to Comdisco Inc. pursuant to Section 8 of that
certain Subordinated Loan and Security Agreement between the Company and
Comdisco Inc (the
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"Comdisco Rights"). The Comdisco Rights terminate upon the consummation of the
Merger. Schedule 2.2(b) sets forth for each Company Option outstanding as of the
date of this Agreement the name of the holder of such option, the domicile
address of such holder, the number of shares of Common Stock subject to such
option, the exercise price of such option and the vesting schedule for such
option, including the extent vested to date and whether the exercisability of
such option will be accelerated and become exercisable by the transactions
contemplated by this Agreement. Except for the Company Options described in
Schedule 2.2(b), as of the date of this Agreement there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company. Except for the Company Options described in Schedule 2.2(b), as of the
date of this Agreement, there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The holders
of Company Options have been or will be given, or shall have properly waived,
any required notice prior to the Merger and all such rights will be terminated
at or prior to the Effective Time. As a result of the Merger, Parent will be the
record and sole beneficial owner of all Company Capital Stock and rights to
acquire or receive Company Capital Stock.
2.3 Subsidiaries. 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, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the approval of the Merger and this
Agreement by the Company's stockholders, the Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
stockholders to duly approve the Merger and this Agreement is a majority of the
outstanding shares of Company Common Stock and a majority of the outstanding
shares of Company Preferred Stock. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the approval of this Agreement and the Merger by the Company's
stockholders. The Company's Board of Directors has unanimously approved the
Merger and this Agreement. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. Except as set
forth on Schedule 2.4, subject only to the approval of the Merger and this
Agreement by the Company's stockholders, the execution and delivery of this
Agreement by the Company does not, and, as of the Effective Time, the
performance by the Company of its obligations under this Agreement 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 or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict") (i) any provision of the Articles of Incorporation or
Bylaws of the Company or
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(ii) any material mortgage, indenture, lease, contract or other material
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party (so as not to trigger any Conflict),
is required at or prior to the Effective Time by or with respect to the Company
in connection with the Company's execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Agreement of Merger with the Delaware Secretary of State, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iii) expiration or early termination of the applicable waiting
period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (iv) such other consents, waivers, authorizations,
filings, approvals and registrations which are set forth on Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
unaudited balance sheet as of December 31, 1999 (the "Balance Sheet") and the
related unaudited statements of operations and cash flows for the twelve-month
period then ended and the Company's unaudited balance sheet dated as of December
31, 1998 and the unaudited statements of operations and cash flows for the
twelve-month period ended December 31, 1998 (collectively, the "Company
Financials"). The Company Financials have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other. The Company
Financials present fairly the financial condition and operating results of the
Company as of the dates and during the periods indicated therein, subject, in
the case of the unaudited financial statements, to the absence of footnotes and
normal year-end adjustments, which will not be material in amount or
significance.
2.6 No Undisclosed Liabilities. The Company does not have 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 generally accepted accounting principles), which individually or in the
aggregate, (i) has not been reflected in the Balance Sheet or other Company
Financials, or (ii) has not arisen in the ordinary course of the Company's
business since December 31, 1999, consistent with past practices and in the
aggregate do not exceed $100,000.
2.7 No Changes. From December 31, 1999 to the date of this Agreement,
there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
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(c) capital expenditure or commitment by the Company of $100,000
in any individual case or $250,000 in the aggregate;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees,
independent contractors or consultants, or the declaration, payment or
commitment or obligation of any kind for the payment, by the Company, of a bonus
or other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company, except in the ordinary course of business
and consistent with past practices;
(k) amendment or termination of any material contract, agreement
or license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices and except for advances under the Company's existing revolving credit
agreement (which agreement has not been amended since December 31, 1999);
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(n) commencement or notice or to the Company's knowledge threat
of commencement of any lawsuit or proceeding against or investigation of the
Company or its affairs;
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(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;
(p) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable therefor,
or of any other of its securities, except for options granted in the ordinary
course of business and Company Common Stock issued upon the exercise of options;
(q) change in pricing or royalties charged by the Company to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property to the Company;
(r) event or condition of any character that has or would be
reasonably expected to have a Material Adverse Effect on the Company; or
(s) agreement by the Company or any officer or employees thereof
to do any of the things described in the preceding clauses (a) through (r)
(other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes", means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties and
impositions, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company as of the Effective Time will have
prepared and filed 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 its operations and such
Returns were when so filed true and correct and have been completed in
accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will
have paid or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
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(iii) To the Company's knowledge, there is no Tax
deficiency outstanding, proposed or assessed against the Company, nor has the
Company executed any waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.
(iv) To the Company's knowledge, no audit or other
examination of any Return of the Company is in progress as of the date of this
Agreement, nor has the Company been notified as of or prior to the date of this
Agreement of any request for such an audit or other examination.
(v) The Company has no knowledge of any basis for the
assertion of any liabilities for unpaid federal, state, local or foreign Taxes
which have not been accrued or reserved against on the Balance Sheet whether
asserted or unasserted, contingent or otherwise attributable to the Company, its
assets or operations.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Tax Returns for all periods
since the date of Company's incorporation.
(vii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("Liens") on the assets of the Company relating
to or attributable to Taxes, other than for statutory liens for Taxes not yet
due.
(viii) The Company has no knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement to which the Company is a party,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
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(xiii) The Company is not, and has not been at any
time, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
2.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has had
or reasonably could be expected to have the effect of prohibiting or impairing
any business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor and the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect and
enforceable by the Company and there is not, under any of such leases, any
existing default by the Company (or to the Company's knowledge, by the other
party to such lease) or event of default (or event which with notice or lapse of
time, or both, would constitute such a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials and except for liens for Taxes not
yet due and payable, municipal and zoning ordinances, easements for public
utilities and such imperfections of title and encumbrances, if any, which are
not material in character, amount or extent, and which do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
2.11 Intellectual Property.
(a) For the purposes of this Section 2.11, the following terms
have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and utility models and applications therefor
and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries
("Patents"); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know
how, technology, technical data and customer lists, and all
documentation embodying or
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evidencing any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor and all other rights
corresponding thereto throughout the world ("Copyrights"); (iv) all mask
works, mask work registrations and applications therefor, and any
equivalent or similar rights in semiconductor masks, layouts,
architectures or topology ("Maskworks"); (v) all industrial designs and
any registrations and applications therefor throughout the world; (vi)
all trade names, logos, common law trademarks and service marks,
trademark and service xxxx registrations and applications therefor and
all goodwill associated therewith throughout the world ("Trademarks");
(vii) all databases and data collections and all rights therein
throughout the world; and (viii) all computer software including all
source code, object code, firmware, development tools, files, records
and data, all media on which any of the foregoing is recorded; (ix) all
World Wide Web addresses, sites and domain names; and (x) any similar,
corresponding or equivalent rights to any of the foregoing anywhere in
the world.
"Business" means the business of the Company, including the manufacture,
use, licensing, distribution and sale of any products or technology or
the provision of any services by the Company, as currently conducted or
as conducted since the inception of the Company.
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by or licensed to the Company.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) Patents, including applications therefor;
(ii) registered Trademarks, applications to register Trademarks,
including intent-to-use applications, or other registrations or
applications related to Trademarks; (iii) Copyrights registrations and
applications to register Copyrights; (iv) Mask Work registrations and
applications to register Mask Works; and (v) any other Company
Intellectual Property owned by the Company that is the subject of an
application, certificate, filing, registration or other document issued
by, filed with, or recorded by, any state, government or other public
legal authority at any time.
(b) Schedule 2.11(b) lists all Registered Intellectual Property
in whole or in part owned by or filed in the name of the Company (the "Company
Registered Intellectual Property").
(c) Each item of Company Intellectual Property owned by the
Company, including all Company Registered Intellectual Property listed on
Schedule 2.11(b), is free and clear of any encumbrance, including any lien or
security interest other than (i) Liens for Taxes not yet due and payable and
(ii) end-user licenses granted by the Company pursuant to its standard form of
end-user license, a copy of which is attached to Schedule 2.11(c).
(d) The Company owns exclusively, and has good title to, all
copyrighted works that are software products of the Company or other works of
authorship that the Company otherwise purports to own.
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(e) Except for end-user licenses granted by the Company pursuant
to its standard form of end-user license, the Company has not transferred
ownership of, or granted any license of or right to use or authorized the
retention of any rights to use, any Intellectual Property that is, or was,
Company Intellectual Property, to any other person.
(f) The Company Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the Business
including (i) the making, using, selling, marketing, or importing of any product
or device, (ii) the practice of any process, (iii) the offering or performance
of any service, or (iv) the copying, display, performance, distribution,
creation of derivative works of, or the exploitation of any device or work,
including any of the foregoing with respect to products, technology or services
currently under development by Company.
(g) The contracts, licenses and agreements listed on Schedule
2.11(g) include all material contracts, licenses and agreements (other than
end-user licenses granted by the Company pursuant to its standard form of
end-user license) pursuant to which any Person, including any Affiliate of
Company, has licensed any Intellectual Property to the Company.
(h) The contracts, licenses and agreements listed on Schedule
2.11(h) include all contracts and agreements pursuant to which any Person,
including any third party developer or consultant, has developed any device or
technology, authored any work, or otherwise created any Intellectual Property
rights, either separately or jointly with the Company or any other Person, that
the Company uses or possess or which the Company believes it owns.
(i) The contracts, licenses and agreements listed on Schedule
2.11(i) include all material contracts, licenses and agreements pursuant to
which the Company has licensed to or transferred to any third person or any
Affiliate of the Company any material Company Intellectual Property other than
end-user licenses granted by the Company pursuant to its standard form of
end-user license.
(j) Neither the consummation of the transaction contemplated by
this Agreement nor the transfer to the Buyer of any contracts, licenses,
agreements or Company Intellectual Property will cause or obligate Buyer (i) to
grant to any third party any rights or licenses with respect to any Intellectual
Property of Buyer; or (ii) pay any royalties or other amounts in excess of those
being paid by Company prior to the Closing.
(k) Schedule 2.11(k) lists all agreements, licenses and contracts
pursuant to which Company has agreed to indemnify, hold harmless, or otherwise
agree to be liable for any losses cost or damages of, a third party with respect
to any Intellectual Property or product or service of Company.
(l) Except as set forth on Schedule 2.11(l), all material Company
Intellectual Property, including any item thereof, will be fully, transferable,
alienable or licensable by, Company without restriction and without payment of
any kind to any third party.
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(m) Except as set forth on Schedule 2.11(m), the consummation of
the transactions contemplated by this Agreement will not result in the loss of,
or otherwise adversely affect, any ownership rights of Company in any Company
Intellectual Property or result in the breach or termination of any license,
contract or agreement to which Company is a party respecting any material
Company Intellectual Property.
(n) The operation of the Business, including (i) the making,
using, selling, marketing, or importing of any product or device, (ii) the
practice of any process, (iii) the offering or performance of any service, or
(iv) the copying, distribution, performance, display, creation of derivative
works of, or the exploitation of any device or work, including any of the
foregoing with respect to products, technology or services currently under
development by Company, does not, and will not when conducted in substantially
the same manner following the Closing by Buyer, infringe or misappropriate the
Intellectual Property of any person, violate the rights of any person, or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Company has not received written notice from any person
claiming that such operation or any act, product, technology or service of the
Business infringes or misappropriates the Intellectual Property of any person or
constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor is the Company aware of any basis therefor). Without limiting
the foregoing, The Company has not misappropriated the trade secrets of, or
infringed the Copyright or Mask work of any third party.
(o) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property under
which there is any litigation or other legal proceeding known to the Company
regarding the scope of such agreement, or performance under such contract,
license or agreement including with respect to any payments to be made or
received by the Company thereunder.
(p) To the knowledge of the Company, no person is infringing or
misappropriating any Company Intellectual Property owned by the Company.
(q) No Company Intellectual Property owned by the Company or
product, technology or service of the Business is subject to any proceeding or
outstanding decree, order, judgment, agreement or stipulation that restricts in
any manner the use, transfer or licensing thereof by the Company or may affect
the validity, use or enforceability of such Company Intellectual Property.
(r) Schedule 2.11(r) lists all action, including the payment of
any fees, that must, or should be performed by, or on behalf of, the Company in
the ninety-day period following the Closing Date, with respect to any
application for, perfection of, preservation of, or continuation of any rights
of Company with respect to any Company Intellectual Property, including the
filing of any patent applications, response to Patent Office actions or payment
of fees, including renewal fees.
(s) The Company has not claimed small business status, or other
particular status in the application for any Registered Company Intellectual
Property which claim of status was not at
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the time made, or which has since become inaccurate or false or that will no
longer be true and accurate as a result of the Closing.
(t) All software products of the Company were written and created
solely by either (i) employees of the Company acting within the scope of their
employment or (ii) by third parties who have validly assigned all of their
rights, including Intellectual Property rights in such products to the Company,
and no third party owns or has any rights to the software products or any
Intellectual Property rights therein.
(u) The Company has no knowledge of any facts or circumstances
that would render any Company Intellectual Property owned by the Company invalid
or unenforceable. Without limiting the foregoing, Company knows of no
information, materials, facts, or circumstances, including any information or
fact that would constitute prior art, that would render any of the Company
Registered Intellectual Property invalid or unenforceable, or would adversely
effect any pending application for any Company Registered Intellectual Property
and the Company has not misrepresented, or failed to disclose, and is not aware
of any misrepresentation or failure to disclose, any fact or circumstances in
any application for any Company Register Intellectual Property that would
constitute fraud or a material misrepresentation with respect to such
application or that would otherwise effect the validity or enforceability of any
Company Registered Intellectual Property.
(v) The Company has taken all steps reasonable and customary
under the circumstances to protect the confidentiality and trade secret status
of any material confidential information of the Company and knows of no basis on
which it could be claimed that the Company has failed to protect the
confidentiality of any material Confidential Information of the Company.
(w) All employees of the Company who have contributed to the
development of the Company Intellectual Property owned by the Company have
entered into valid and binding agreements with the company sufficient to vest
title in the Company of all Intellectual Property created by such employee in
the scope of his or her employment with the Company.
2.12 Agreements, Contracts and Commitments. As of the date of this
Agreement, the Company is not a party to nor is it bound by:
(a) any collective bargaining agreements,
(b) any agreements or arrangements that contain any severance pay
or similar post-employment liabilities or obligations,
(c) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
(d) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement with a
firm or other organization, other
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than employment offer letters that provide for employment "at will" and do not
provide for severance benefits upon termination of employment,
(e) 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,
(f) any fidelity or surety bond or completion bond,
(g) any lease of personal property involving annual payments by
the Company in any individual case in excess of $100,000, or in the aggregate in
excess of $250,000,
(h) any agreement of indemnification or guaranty other than
pursuant to the Company's standard end-user license agreement, which is attached
to the disclosure schedule,
(i) any agreement containing any covenant limiting the freedom of
the Company to engage in any line of business or to compete with any person,
(j) any agreement relating to capital expenditures and involving
payments required to be made by the Company after the date of this Agreement in
excess of $250,000,
(k) any agreement relating to the disposition or acquisition by
the Company after the date of this Agreement of assets or any interest in any
business enterprise outside the ordinary course of the Company's business,
(l) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money by or extension of credit by or to the Company, including guaranties
referred to in clause (viii) hereof,
(m) any purchase order or contract for the purchase of raw
materials (not including in-license of technology) involving $5,000 or more,
(n) any construction contracts,
(o) any distribution, joint marketing or development agreement
which cannot be canceled without penalty upon notice of sixty (60) days or less,
(p) any agreement pursuant to which the Company has granted or is
required to grant in the future, to any party a source-code license or option or
other right to use or acquire source-code, or
(q) any other agreement that involves payments by the Company of
$100,000 or more or is not cancelable without penalty within thirty (30) days.
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The Company is not in breach, violation or default under, and the
Company has not between December 31, 1998 and the date of this Agreement
received any written notice that it has breached, violated or defaulted under,
any of the terms or conditions of any agreement, contract or commitment required
to be set forth on Schedule 2.12 or Schedule 2.11 (any such agreement, contract
or commitment, a "Contract") (except for notices relating to breaches,
violations or defaults that have been cured or corrected in all material
respects). Each Contract is in full force and effect and is not subject to any
default thereunder of which the Company has knowledge by any party obligated to
the Company pursuant thereto. Schedule 2.12(c) identifies each Contract that
requires a consent, waiver or approval to preserve all rights of, and benefits
to, the Surviving Corporation under such Contract as a result of entering into
this Agreement or effecting the Merger or the other transactions contemplated by
this Agreement (each a "Required Consent").
2.13 Interested Party Transactions. To the Company's knowledge, no
officer or director of the Company (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 economic interest), has or has had,
directly or indirectly, (i) an economic interest in any entity which furnished
or sold, or furnishes or sells, services or products that the Company furnishes
or sells, or proposes to furnish or sell, (ii) an economic interest in any
entity that purchases from, or sells or furnishes to, the Company, any goods or
services or (iii) a beneficial interest in any contract or agreement set forth
in Schedule 2.12(a) or Schedule 2.11; provided, that (x) ownership of no more
than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13.
2.14 Compliance with Laws. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
2.15 Litigation. There is no action, suit or proceeding of any nature
pending or to the Company's knowledge threatened against the Company, its
properties or any of its officers or directors, in their respective capacities
as such. To the Company's knowledge, there is no investigation pending or
threatened against the Company, its properties or any of its officers or
directors by or before any governmental entity. No governmental entity has at
any time challenged or questioned the legal right of the Company to manufacture,
offer or sell any of its products in the present manner or style thereof.
2.16 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no
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knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.17 Minute Books. The minute books of the Company provided to counsel
for Parent are the only minute books of the Company and contain a reasonably
accurate summary of all meetings of directors (or committees thereof) and
stockholders or actions by written consent since the time of incorporation of
the Company.
2.18 Environmental Matters.
(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks, and has no knowledge of the existence, at any time,
of any underground storage tank (or related piping or pumps), at any property
that the Company 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 or the
environment, including, without limitation, PCBs, asbestos, petroleum,
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, the Federal Water
Pollution Control Act, as amended, the Clean Air Act, as amended, and the
regulations promulgated pursuant to said laws, (a "Hazardous Material"). No
Hazardous Materials are present, as a result of the deliberate actions or
omissions of the Company, or, to the Company's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that the
Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company disposed of, transported, sold,
or manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activities of the Company. The Company is
not aware of any fact or circumstance which would
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reasonably be likely to involve the Company in any environmental litigation or
impose upon the Company any environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. The Company has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby. Schedule
2.19 sets forth the principal terms and conditions of any agreement, written or
oral, with respect to such fees. Schedule 2.19 sets forth the Company's
reasonable estimate as of the date of this Agreement of all Third Party Expenses
(as defined in Section 5.4) expected to be incurred by the Company in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (such definition shall only
apply to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, 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 or any
Affiliate for the benefit of any "Employee" (as defined below), and pursuant to
which the Company or any Affiliate has or would reasonably be expected to have
any material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visa, work permit or similar agreement or contract between the
Company or any Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
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(vii) "Multiemployer Plan" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan", as defined in Section
3(37) of ERISA; and
(viii) "Pension Plan" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the meaning of
Section 3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete
list of each Company Employee Plan and each Employee Agreement in existence on
or prior to the date of this Agreement, together with a schedule of all
liabilities, whether or not accrued, under each such Company Employee Plan or
Employee Agreement. The Company does not have any plan or commitment, whether
legally binding or not, to establish any new Company Employee Plan or Employee
Agreement, 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 Company Employee Plan or Employee Agreement, nor does it have
any intention or commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent (i) correct and
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination letters and rulings relating to Company Employee Plans and
copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Company Employee Plan; (vii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company; and (viii) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed in
all material respects all obligations required to be performed by it under each
Company Employee Plan and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) no "prohibited
transaction", within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Employee Plan; (iii) there are
no actions, suits or claims pending, or, to the knowledge of the Company,
threatened or anticipated (other than routine claims for benefits) against any
Company
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Employee Plan or against the assets of any Company Employee Plan; and (iv) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to the
Company, Parent or any of its Affiliates (other than ordinary administration
expenses and other liabilities typically incurred in a termination event); (v)
there are no inquiries or proceedings pending or, to the knowledge of the
Company, threatened by the IRS or DOL with respect to any Company Employee Plan;
and (vi) neither the Company nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 402(i) of ERISA or
Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed
to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment, except to
the extent required by statute.
(h) Effect of Transaction.
(i) 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 as in effect
prior to the Closing that will or could reasonably be expected to result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made
by the Company or Parent or any of their respective affiliates in connection
with the Merger with respect to any Employee will be characterized as an "excess
parachute payment", within the meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and
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(iv) is not liable for any payment to any trust or other fund or
to any governmental or administrative 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).
(j) Labor. No work stoppage or labor strike against the Company
is pending or, to the knowledge of the Company, threatened. The Company is not
involved in or, to the knowledge of the Company, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in liability to the Company. The
Company has not engaged in any unfair labor practices within the meaning of the
National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a liability to the Company. The Company is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by the Company.
2.21 Year 2000 Compliance. All of the Company's internal computer
systems and each Constituent Component (as defined below) of those systems and
all computer-related products and services and each Constituent Component of
those products and services of the Company and each of its subsidiaries fully
comply with the Year 2000 Qualification Requirements. "Year 2000 Qualification
Requirements" means that the internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
of each Constituent Component (as defined below) of those products of the
Company and each of its subsidiaries (i) have been reviewed to confirm that they
store, process (including sorting and performing mathematical operations,
calculations and computations), input and output data containing date and
information correctly regardless of whether the date contains dates and times
before, on or after January 1, 2000, (ii) have been designed to ensure date and
time entry recognition, calculations that accommodate same century and
multi-century formulas and date values, leap year recognition and calculations,
and date data interface values that reflect the century, (iii) accurately manage
and manipulate data involving dates and times, including single century formulas
and multi-century formulas, and will not cause an abnormal ending scenario
within the application or generate incorrect values or invalid results involving
such dates, (iv) accurately process any date rollover, and (v) accept and
respond to two-digit year date input in a manner that resolves any ambiguities
as to the century. "Constituent Component" means all software (including
operating systems, programs, packages and utilities), firmware, hardware,
networking components, and peripherals provided as part of the configuration.
2.22 Representations Complete. To the Company's knowledge, none of the
representations or warranties made by the Company (as modified by the Company
Schedules), nor any statement made in any Schedule or certificate furnished by
the Company pursuant to this Agreement, or furnished in or in connection with
documents mailed or delivered to the stockholders of the Company in connection
with soliciting their consent to this Agreement and the Merger,
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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 they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company 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
California. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of Parent and Merger Sub to
consummate the transactions contemplated hereby.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Parent and Merger Sub does not, and, as of the Effective Time, the
performance by Parent and Merger Sub of their obligations under this Agreement
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 or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
of Incorporation or Bylaws of Parent or Merger Sub or (ii) any material
mortgage, indenture, lease, contract or other material agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Merger Sub or their
properties or assets. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
third party (so as not to trigger any Conflict), is required at or prior to the
Effective Time by or with respect to the Parent and Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger Sub or
the consummation of the transactions contemplated hereby, except for (i) the
filing of the Agreement of Merger with the California Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iii) expiration or early termination of the applicable waiting
period
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under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and (iv) receipt of the California Permit (as defined in Section 5.1
below).
3.3 Capital Structure.
(a) The authorized stock of Parent consists of 150,000,000 shares
of Common Stock, of which 46,937,236 shares were issued and outstanding as of
December 31, 1999 and 5,000,000 shares of Preferred Stock, none of which is
issued or outstanding as of the date hereof. Please note that the Parent issued
an additional 4,946,351 shares of its Common Stock to shareholders of ISOCOR, a
California corporation, on January 19, 2000. The authorized capital stock of
Merger Sub consists of 1,000 shares of Common Stock, 1,000 shares of which, as
of the date hereof, are issued and outstanding and are held by Parent. All such
shares have been duly authorized, and all such issued and outstanding shares
have been validly issued, are fully paid and nonassessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof.
(b) Parent has reserved 14,368,057 shares of Common Stock for
issuance to employees and consultants pursuant to the 1998 Stock Option Plan
("Parent Option Plan"), of which 13,793,031 shares are subject to outstanding,
unexercised options as of December 31, 1999. Parent has issued warrants that may
be exercised for 3,233,103 shares of Parent Common Stock as of January 31, 2000.
Except for the Parent Options and warrants described in Schedule 3.3(b), as of
January 31, 2000, there were no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Parent is a party or by
which it is bound obligating the Parent 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.
(c) The shares of Parent Common Stock to be issued pursuant to
the Merger will, when issued in accordance with the terms of this Agreement, be
duly authorized, validly issued, fully paid and nonassessable.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the U.S. Securities and Exchange
Commission (the "SEC") for all periods subsequent to March 31, 1999, all in the
form so filed (all of the foregoing being collectively referred to as the "SEC
Documents"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act, and none of the
SEC Documents contained 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 made therein not misleading, except to the extent corrected by a
subsequently filed document with the SEC. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto) and present fairly the consolidated financial position of
Parent at the dates thereof and of its
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operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal audit adjustments).
3.5 Merger Sub. Merger Sub has been formed solely for the purpose of
executing and delivering this Agreement and consummating the transactions
contemplated hereby. Since the date of its incorporation, Merger Sub has neither
engaged in or transacted any business or activity of any nature whatsoever other
than activities related to its corporate organization and the execution and
delivery of this Agreement. Merger Sub has no assets or properties or debts,
liabilities or obligations of any kind whatsoever, and other than this
Agreement, is not a party to any contract, agreement or undertaking of any
nature. The authorized capital stock of Merger Sub consists of 1,000 shares of
Merger Sub Common Stock, of which 1,000 shares are issued and outstanding. All
of the issued and outstanding shares of Merger Sub Common Stock are owned of
record and beneficially by Parent, free and clear of any encumbrance.
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 (i) the termination of
this Agreement and (ii) the Effective Time, the Company agrees (except to the
extent that Parent shall otherwise consent in writing, which consent shall not
be unreasonably withheld or delayed, except as contemplated by this Agreement)
to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay its debts and
Taxes when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, to use all reasonable efforts consistent with
past practice and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve their relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent of any event or occurrence or emergency
not in the ordinary course of its business, and any material event involving the
Company or its business. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, except as expressly contemplated by this Agreement or disclosed
in Schedule 4.1, the Company shall not, without the prior written consent of
Parent during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement and the Effective Time (which
consent shall not be unreasonably withheld or delayed):
(a) Transfer to any person or entity any rights to the Company
Intellectual Property Rights (other than pursuant to End-User Licenses in the
ordinary course of business);
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(b) Enter into or amend any agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of the Company;
(c) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
(d) Commence any litigation;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor) other than
repurchases made in accordance with agreements referred to on the Company
Schedules;
(f) Other than (1) repurchases made in accordance with agreements
referred to on the Company Schedules, (2) the granting of stock options in the
ordinary course of business, consistent with past practice not to exceed in the
aggregate 100,000 in any two month period, provided, however, that that Company
shall be entitled to grant such additional options only to non-officer, new
employees and that such optionees are not granted any change of control benefits
or other acceleration provisions in connection with such grants, or (3) the
issuance of shares of Company Capital Stock upon exercise or conversion of
presently outstanding Company Options, Company Options granted in the future in
accordance with this Section 4.1, the Comdisco Rights, or currently outstanding
shares of Company Preferred Stock, issue, grant, deliver or sell or authorize or
propose the issuance, grant, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(g) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(h) 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;
(i) Acquire or agree to acquire any assets in an amount in excess
of $100,000 in the case of a single transaction or in excess of $250,000 in the
aggregate in any 60-day period;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
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(k) Incur any indebtedness for borrowed money or guarantee any
such indebtedness outside the ordinary course of business or issue or sell any
debt securities of the Company or guarantee any debt securities of others;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee, except payments made pursuant to standard
written agreements previously disclosed to Parent on the Company Disclosure
Schedules;
(m) Adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees or, except in the ordinary course of business consistent with
past practices, extend employment offers;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(o) Pay, discharge or satisfy, in an amount in excess of $250,000
(in the aggregate; provided, that in the event that such amount exceeds
$100,000, the Company shall have satisfied its obligations identified in
Schedule 4.1(o)), any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the Company Financial Statements (or the notes
thereto) or expenses consistent with the provisions of this Agreement incurred
in connection with any transaction contemplated and permitted hereby;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(q) Enter into any strategic alliance, development or joint
marketing agreement; provided, that the foregoing is not intended to prevent the
Company from entering into transactions that are in the ordinary course of
business and consistent with its past practices; or
(r) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (q) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 No Solicitation. Until the earlier of (i) the Effective Time and
(ii) the date of termination of this Agreement pursuant to the provisions of
Section 8.1 hereof, the Company will not (nor will the Company permit any of the
Company's officers, directors, 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, conduct discussions with or engage
in negotiations with any person, relating to the possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise) or any material portion of its capital stock or assets,
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(b) provide information with respect to it to any person, other than Parent,
relating to the possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets, (c) enter into an agreement with any
person, other than Parent, providing for the acquisition of the Company (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise) or
any material portion of its capital stock or assets or (d) make or authorize any
statement, recommendation or solicitation in support of any possible acquisition
of the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its capital stock or assets by
any person, other than by Parent. In addition to the foregoing, if the Company
receives prior to the Effective Time or the termination of this Agreement any
offer or proposal relating to any of the above, the Company shall immediately
notify Parent thereof, including information as to the identity of the offeror
or the party making any such offer or proposal and the specific terms of such
offer or proposal, as the case may be, and such other information related
thereto as Parent may reasonably request.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 California Permit; Stockholder Meeting.
(a) As promptly as practicable (and in any event within ten
business days) after the execution of this Agreement, Parent shall prepare the
necessary documents and Parent shall apply to obtain a permit (a "California
Permit") from the California Commissioner of Corporations (after a hearing
before such Department) pursuant to Section 25121 of the California Corporate
Securities Law of 1968, so that the issuance of the Parent Common Stock in the
Merger shall be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), by virtue of the exemption from registration
contained in Section 3(a)(10) thereof. The Company shall cooperate with, and
provide information to, Parent in connection with Parent's application for the
California Permit and shall prepare an information statement to be mailed to the
Company's stockholders concurrently with the notice of any hearing. The Company
and Parent will respond to any comments from the California Commissioner of
Corporations and use their reasonable best efforts to have the California Permit
granted as soon as practicable after such filing. As promptly as practicable
after the date of this Agreement, Parent shall prepare and make such filings as
are required under applicable Blue Sky laws relating to the transactions
contemplated by this Agreement.
(b) As promptly as practicable after the receipt of a California
Permit, the Company shall submit this Agreement and the transactions
contemplated hereby, including without limitation the Merger, to the Company
stockholders for approval and adoption as provided by the DGCL and the Company's
Certificate of Incorporation and Bylaws. The information submitted to the
Company's stockholders shall be subject to review and approval by Parent and
shall include
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information regarding the Company, the terms of the Merger and this Agreement
and, subject to Section 5.2 (c) hereof, the unanimous recommendation of the
Board of Directors of the Company in favor of the Merger, this Agreement and the
transactions contemplated hereby.
(c) Nothing in this Agreement shall prevent the Board of
Directors of the Company from withholding, withdrawing, amending or modifying
its recommendation in favor of the Merger if (i) a Superior Offer (as defined
below) is made to the Company and is not withdrawn, (ii) neither the Company nor
any of its representatives shall have violated any of the restrictions set forth
in Section 4.2, and (iii) the Board of Directors of the Company concludes in
good faith, after consultation with its outside counsel, that, in light of such
Superior Offer, the withholding, withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of the Company to
comply with its fiduciary obligations to the Company and the Company's
shareholders under applicable law. Nothing contained in this Section 5.1 shall
limit the Company's obligation to hold and convene the Company Stockholders'
Meeting (regardless of whether the recommendation of the Board of Directors of
the Company shall have been withdrawn, amended or modified). For purposes of
this Agreement, "Superior Offer" shall mean an unsolicited, bona fide written
offer made by a third party to consummate any of the following transactions: (i)
a merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company pursuant to which the
shareholders of the Company immediately preceding such transaction hold less
than 51% of the equity interest in the surviving or resulting entity of such
transaction; (ii) a sale or other disposition by the Company of assets
(excluding inventory and used equipment sold in the ordinary course of business)
representing in excess of 50% of the fair market value of the Company's business
immediately prior to such sale, or (iii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or issuance by the
Company), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of 50% of the voting power
of the then outstanding shares of capital stock of the Company, in each case on
terms that the Board of Directors of the Company determines, in its reasonable
judgment (based on a written opinion of an investment bank of nationally
recognized reputation) to be more favorable to the Company shareholders from a
financial point of view than the terms of the Merger and the consideration of
which reasonably likely exceeds the value of the consideration in the Merger
(after taking into account all relevant factors, including any conditions to the
Superior Offer, the timing of the consummation of the transaction pursuant to
the Superior Offer, the risk of nonconsummation thereof and the need for any
required governmental or other consents, filings and approvals); provided,
however, that any such offer shall not be deemed to be a "Superior Offer" if any
financing required to consummate the transaction contemplated by such offer is
not committed.
(d) If for any reason the California Permit is not issued or if
the exemption provided by Section 3(a)(10) of the Securities Act is not
available with respect to the issuance of the Parent Common Stock in connection
with the Merger, then Parent shall as soon as practicable (and in any event
within five (5) business days of receiving all necessary financial statements
and accountant consents), prepare and file with the SEC a Form S-4 Registration
Statement (the "Form S-4 Registration Statement") with respect to the issuance
of the Parent Common Stock in connection
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with the Merger. Each of the Company and Parent shall use all reasonable efforts
to have the Form S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. The Company will
use its reasonable efforts to cause the proxy statement included in the Form S-4
Registration Statement to be mailed to the Company's stockholders as promptly as
practicable after the Form S-4 Registration Statement is declared effective
under the Securities Act, and to call and hold a meeting of the Company's
stockholders to vote on a proposal to adopt and approve this Agreement and the
transactions contemplated hereby, including without limitation the Merger.
(e) If for any reason the California Permit is issued, but is not
available for a limited number of stockholders of the Company, the Parent shall
grant registration rights to such effected stockholders on a pari passu basis
(as to rights and timely filing) with the shareholders of the Parent's Common
Stock who were issued such shares in a transaction contemplated under Rule 145
promulgated under the Securities Act of 1933, as amended.
5.2 Access to Information. Subject to any applicable contractual
confidentiality obligations (which the Company shall use its reasonable efforts
to cause to be waived) each party shall afford the others and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (a) all of its
properties, books, contracts, agreements and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.2 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.
5.3 Confidentiality. Each of the parties hereto hereby agrees to and
reaffirms the terms and provisions of the Mutual Nondisclosure Agreement between
Parent and the Company dated as of December 9, 2000.
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, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses (it being understood
that (a) Third Party Expenses of the Company will include, without limitation,
all fees and expenses payable to Pillsbury Madison & Sutro LLP in connection
with their representation of the Company with respect to the Merger, and (b) if
the Closing occurs, the reasonable Third Party Expenses referred to in paragraph
(a) of this sentence will be paid by Parent or the Surviving Corporation, and
not by the Stockholders).
5.5 Public Disclosure. Upon execution and delivery of this Agreement by
the parties hereto, Parent and the Company shall release a jointly prepared
announcement describing the Merger. Except as aforesaid, unless otherwise
required by law (including, without limitation, securities laws) or, as to
Parent, by the rules and regulations of the National Association of Securities
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Dealers, Inc., prior to the Effective Time, no disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made by
any party hereto unless approved by Parent and the Company prior to release,
provided that such approval shall not be unreasonably withheld.
5.6 Consents. The Company shall use its reasonable efforts to obtain the
consents, waivers and approvals under any of the Contracts identified on
Schedule 2.12(c) as may be required in connection with the Merger.
5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided 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 the Company or its affiliates material to Parent,
in Parent's reasonable judgement, 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 capital stock.
5.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, 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 and
Parent or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time except as contemplated by this
Agreement (including the Company Schedules) and (ii) any failure of the Company
or Parent, as the case may be, to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
5.10 Additional Documents and Further Assurances. Each party hereto, at
the request of the other 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 this
Agreement and the transactions contemplated hereby.
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5.11 Form S-8. Parent shall file within 30 days after the Closing a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Options promptly after the Closing
Date, provided that the Company provides all necessary information for the
preparation of such registration statement.
5.12 NMS Listing. Parent shall cause to be listed on the Nasdaq National
Market the shares of Parent Common Stock issuable, and those required to be
reserved for issuance, in connection with the Merger, upon official notice of
issuance.
5.13 Cooperation With Financial Statements. The Company will use its
best efforts to cause the Company's management and its independent auditors to
facilitate on a timely basis (i) the preparation of historical and pro forma
financial statements as required by Parent to comply with applicable SEC
regulations, and (ii) the review of the Company's audit work papers, including
the examination of selected interim financial statements and data.
5.14 Employee Benefits.
(a) Parent shall take such reasonable actions as are necessary to
allow eligible employees of the Company to participate in the benefit programs
of Parent, or alternative benefits programs substantially comparable to those
applicable to employees of Parent on similar terms, as soon as practicable after
the Effective Time. Without limiting the generality of the foregoing, (i) to the
extent that any employee of the Company becomes eligible to participate in any
employee benefit plan of Parent after the Effective Time, Parent, the Surviving
Corporation and their subsidiaries shall credit such employee's service with the
Company, to the same extent as such service was credited under the similar
employee benefit plans of the Company immediately prior to the Effective Time,
for purposes of determining eligibility to participate in and vesting under, and
for purposes of calculating benefits under, such employee benefit plan of
Parent, and (ii) to the extent permitted by such employee benefit plan of Parent
and applicable law, Parent, the Surviving Corporation and its subsidiaries shall
waive any pre-existing condition limitations, waiting periods or similar
limitations under such employee benefit plan of Parent and shall provide each
such employee with credit for any co-payments previously made and any
deductibles previously satisfied.
(b) Parent shall reserve the sum set forth on Schedule 5.14 in
cash, which sum shall be (i) allocated among those employees of the Company as
determined by the Company (and agreed to by Parent) prior to the Closing (the
"Participating Employees"), and (ii) paid to each such Participating Employee in
accordance with the terms set forth in Schedule 5.14.
5.15 Parent shall cause the Surviving Corporation to pay severance costs
in accordance with its standard policies for employees of Parent to those
employees of the Company whose employment with the Surviving Corporation is
terminated.
5.16 From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification agreements between the Company and its directors
and officers in effect immediately prior to the
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Effective Time (the "INDEMNIFIED PARTIES") and any indemnification provisions
under the Company Certificate of Incorporation and Bylaws as in effect on the
date hereof. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Company Certificate of Incorporation and Bylaws as in
effect on the date hereof, which provisions will not be amended, repealed or
otherwise modified for a period of three (3) years from the Effective Time in
any manner that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers, employees or
agents of the Company, unless such modification is required by law. Parent will
cause the Surviving Corporation to maintain Director and Officer insurance on
the same terms as the current policies with respect to the Indemnified Parties
for the three (3) years following 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 each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the stockholders of the Company by the
requisite vote under applicable law and the Company's Articles of Incorporation.
(b) No Injunctions or Restraints; Illegality; HSR Act. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be in
effect. All waiting periods under the HSR Act shall have expired or been
terminated early.
(c) Tax Opinions. Parent and the Company shall each have received
written opinions from their respective tax counsel to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code; provided, however, that if the counsel to either Parent or the Company
does not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make reasonable
Tax representations as requested by such counsel for the purpose of rendering
such opinions.
(d) Nasdaq Listing. The shares of Parent Common Stock issuable to
stockholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the Nasdaq Stock Market upon official notice of
issuance.
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(e) California Permit. The California Commissioner of
Corporations shall have issued the California Permit and the exemption provided
by Section 3(a)(10) of the Securities Act shall be available with respect to the
issuance of the Parent Common Stock in the Merger, or the Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the Form S-4 Registration Statement.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall have been
true and correct in all material respects as of the Closing, except for (A)
changes contemplated or permitted by this agreement and (B) except for those
representations and warranties that address matters only as of a particular date
(which shall have been true and correct as of such date). The Company shall have
received a certificate with respect to the foregoing signed on behalf of Parent
by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to cure as provided in Section 8.1(e) below) in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Time, and the Company shall have received a certificate to such effect signed on
behalf of the Parent by a duly authorized officer of Parent.
(c) Legal Opinion. The Company shall have received a legal
opinion from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., legal counsel to the
Company, in form and substance reasonably acceptable to the Company.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (i) shall have been true
and correct as of the date of this Agreement and (ii) shall have been true and
correct in all material respects as of the Closing, except for (A) changes
contemplated or permitted by this agreement and (B) except for those
representations and warranties that address matters only as of a particular date
(which shall have been true and correct as of such date). Parent shall have
received a certificate with respect to the foregoing signed on behalf of the
Company by a duly authorized officer of the Company.
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(b) Agreements and Covenants. The Company shall have performed or
complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 8.1(d) below) in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and Parent and Merger Sub
shall have received a certificate to such effect signed on behalf of the Company
by a duly authorized officer of the Company.
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 2.12(c).
(d) Legal Opinion. Parent shall have received a legal opinion
from Pillsbury Madison & Sutro LLP, legal counsel to the Company, in form and
substance reasonably acceptable to Parent.
(e) Material Adverse Effect. There shall not have occurred any
Material Adverse Effect with respect to the Company since December 31, 1999.
(f) Escrow Agreement. The Stockholders' Representatives (as
defined in the Escrow Agreement) shall have entered into an Escrow Agreement
substantially in the form attached hereto as Exhibit F (the "Escrow Agreement").
(g) Dissenters' Rights. Holders of more than 10% of the
outstanding shares of Company Capital Stock shall not have exercised, nor shall
they have any continued right to exercise, appraisal, dissenters' or similar
rights under applicable law with respect to their shares by virtue of the
Merger.
(h) Resignation of Directors and Officers. All directors and
officers of the Company shall have resigned their respective offices as
directors and officers of the Company effective as of the Effective Time.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; ESCROW
7.1 Survival of Representations and Warranties. All of the Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules), and all
of Parent's and Merger Sub's representations and warranties in this Agreement
and in any instrument delivered pursuant to this Agreement, shall survive the
Merger and continue until 5:00 p.m., California time, on the first anniversary
of the Closing Date.
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7.2 Obligation of the Company to Indemnify, Reimburse, etc. Subject to
the provisions of Section 7.4 hereof, the Company, its successors and assigns,
jointly and severally, shall indemnify, reimburse, defend, protect and hold
harmless Parent and Merger Sub and each of their successors and assigns and each
of their respective directors, officers, employees, affiliates, agents, and
their respective successors and assigns (each a "Parent Indemnitee") from and
against any claims, losses, liabilities, damages, causes of action, costs and
expenses (including reasonable attorney's, accountant's, consultant's and
expert's fees and expenses) (collectively "Losses") resulting from, imposed
upon, incurred or suffered by any of them, directly or indirectly, based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation, warranty (as modified by the Company Schedules), covenant or
agreement of the Company, contained in this Agreement.
7.3 Obligation of Parent to Indemnify, Reimburse, etc. Subject to the
provisions of Section 7.4 hereof, Parent and Merger Sub and their respective
successors and assigns, jointly and severally, shall indemnify, reimburse,
defend, protect and hold harmless the Stockholders and their successors and
assigns and each of their directors, officers, employees, affiliates, agents,
and their respective successors and assigns (each a "Stockholder Indemnitee")
from and against any Losses resulting from, imposed upon, incurred or suffered
by any of them, directly or indirectly, based upon, arising out of or otherwise
in respect of any inaccuracy in or any breach of any representation or warranty,
but not any covenant or agreement of Parent, contained in this Agreement.
7.4 Limits on Indemnification, Reimbursement, etc..
(a) Absent fraud or willful misconduct of any party (for which
there shall be no limitation of liability of any party), no Parent Indemnitee
and no Stockholder Indemnittee shall have any right to seek or obtain
indemnification, reimbursement or defense under this Agreement or the Escrow
Agreement until Losses which would otherwise be indemnifiable hereunder, and
have been incurred by such party and other indemnitees associated with or
related to such party, exceed $1,000,000, after which such party or parties to
be indemnified hereunder shall be entitled to receive indemnification for all
Losses in excess of $1,000,000. In addition (absent fraud or willful
misconduct), neither Parent nor any Stockholder shall have any liability under
Article VII unless the Losses incurred by a Parent Indemnitee or a Stockholder
Indemnitee, as the case may be, in connection with a claim for indemnification
or reimbursement exceed $25,000, and the Losses related thereto shall be
disregarded for purposes of determining whether the $1,000,000 deductible set
forth in this Section 7.4(a) has been met.
(b) Absent fraud or willful misconduct of the Company, from and
after the Closing, recourse of the Parent Indemnitees to the Loss Escrow Account
(as defined below) in the Escrow Fund shall be the sole and exclusive remedy of
the Parent Indemnitees for Losses relating directly or indirectly, based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation, warranty (as modified by the Company Schedules), covenant or
agreement of the Company, contained in this Agreement.
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(c) Absent fraud or willful misconduct, no party hereto shall be
entitled to recover punitive damages with respect to any breach of any
representation or warranty or non-performance of any obligation under this
Agreement (or otherwise relating to the transactions contemplated hereby), and
under no circumstances shall such damages be considered Losses under this
Article VII.
(d) To the extent that any indemnifying party makes or is
required to make any indemnification or reimbursement payment to any indemnified
party, the indemnifying party shall be entitled to exercise, and shall be
subrogated to, any rights and remedies (including rights of indemnity, rights of
contribution and other rights of recovery) that the indemnified party may have
against any other person with respect to any Losses, circumstances or matters to
which such indemnification or reimbursement payment is directly or indirectly
related. Each indemnified party shall permit the indemnifying party to use the
name of the indemnified party in any transaction or in any proceeding or other
matter involving any of such rights or remedies; and the indemnified party shall
take such actions as the indemnifying party may reasonably request for the
purpose of enabling the indemnifying party to perfect or exercise the
indemnifying party's right of subrogation hereunder.
7.5 Escrow Arrangements. Concurrent with the Effective Time, the Escrow
Amount shall be placed in an escrow fund (the "Escrow Fund"), to be governed by
the terms of the Escrow Agreement. Fifty percent (50%) of the Escrow Fund (the
"Loss Escrow Fund") shall be available to compensate Parent and its affiliates
for losses for which Parent or its affiliates are entitled to indemnification
under Article VII; the remainder of the Escrow Fund shall be released, if at
all, upon the happening of the events identified in Section 3 or Section 6(c) of
the Escrow Agreement. The terms and conditions of the Escrow Fund shall be set
forth more fully in the Escrow Agreement. Subject to the terms and conditions of
the Escrow Agreement, fifty percent (50%) of the Loss Escrow Fund shall be
distributed to the Stockholders in accordance with their pro rata interest in
the Escrow Fund on the sixth month anniversary of the Effective Time and the
balance of the Loss Escrow Fund, if any, shall be distributed to the
Stockholders on the one (1) year anniversary of the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred by March 31, 2000 (provided that the right to terminate this Agreement
under this clause 8.1(b)(i) shall not be available to any party whose willful
failure to fulfill any obligation hereunder has been the
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cause of, or resulted in, the failure of the Effective Time to occur on or
before such date); provided, however, that if Parent shall file the Form S-4
Registration Statement in accordance with Section 5.1(iii), then the reference
to March 31, 2000 in this sentence shall be replaced with May 31, 2000; (ii)
there shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or (iii) there shall be any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any governmental entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent.
(d) 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 contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
6.3(a) or 6.3(b), as the case may be, would not then be satisfied; provided,
however, that if such breach is curable by the Company within thirty (30) days
through the exercise of its reasonable best efforts, then for so long as the
Company continues to exercise such reasonable best efforts Parent may not
terminate this Agreement under this Section 8.1(d) unless such breach is not
cured within thirty (30) days (but no cure period shall be required for a breach
which by its nature cannot be cured);
(e) 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 contained in this Agreement on
the part of Parent or Merger Sub and as a result of such breach the conditions
set forth in Section 6.2(a) or 6.2(b), as the case may be, would not then be
satisfied; provided, however, that if such breach is curable by Parent or Merger
Sub within thirty (30) days through the exercise of its reasonable best efforts,
then for so long as Parent or Merger Sub continues to exercise such reasonable
best efforts the Company may not terminate this Agreement under this Section
8.1(e) unless such breach is not cured within thirty (30) days (but no cure
period shall be required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and,
except as set forth in this Section 8.2, there shall be no liability or
obligation on the part of Parent, Merger Sub or the Company, or their respective
officers, directors or stockholders, provided that each party shall remain
liable for any willful breaches of this Agreement prior to its termination; and
provided further that, the provisions
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of Sections 5.3 and 5.4 and Article IX of this Agreement shall remain in full
force and effect and survive any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the stockholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, 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
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (a) on the date of delivery, if delivered
personally or (b) two business days after sent, if sent by commercial delivery
service, or mailed by registered or certified mail (return receipt requested)
or, (c) on the date of delivery, if 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):
(a) if to Parent or Merger Sub, to:
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Xxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(b) if to the Company, to:
00 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxx Xxx
Xxxxxxx X. Xxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Pillsbury Madison & Sutro LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx del Xxxxx
Xxxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. As used in this Agreement, the phrase "to the best of
[a party's] knowledge," "to [a party's] knowledge," "[a party] is not aware,"
and similar phrases shall mean the actual knowledge of the officers and
directors of such party, after careful consideration of the matters set forth in
the representation that is so qualified and a reasonably diligent review of all
files, documents, agreements and other materials in such person's possession or
subject to his or her control. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.3 Counterparts. 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 schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person (other than the Stockholder Indemnittees and those persons referred
to in Sections 5.14 and 5.15) any rights or remedies hereunder; and (c) shall
not be assigned by operation of law or otherwise except as otherwise
specifically provided, except that Parent and Merger Sub may assign their
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respective rights and delegate their respective obligations hereunder to their
respective affiliates as long as such assignment or delegation does not
adversely affect the rights of the Company stockholders.
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 No Implied Representations. Parent and the Company acknowledge that,
except as expressly provided in Articles II and II, and except as expressly
provided in any document delivered by a party hereto to any other party hereto
in connection with the transactions contemplated hereby, none of the parties
(and no other person) has made or is making any representations or warranties
whatsoever, implied or otherwise.
9.7 Other Remedies. Except as otherwise provided herein (including in
Section 7.4), 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.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, 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.
9.10 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
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9.11 Share Legends. All certificates representing any of the shares of
Parent Common Stock to be issued pursuant to this Agreement shall have endorsed
thereon any legend required by Federal or state securities laws.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
REMARQ COMMUNITIES, INC. CRITICAL PATH, INC.
By: /s/ Xxxxxx Xxxxxxx Xxx By: /s/ Xxxxx Xxxxxxxx
-------------------------------- --------------------------------
Chief Executive Officer Executive Vice President and
Chief Financial Officer
D.V. ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Executive Vice President and
Chief Financial Officer
***REORGANIZATION AGREEMENT***
