AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SECURE COMPUTING CORPORATION
NITRO ACQUISITION CORP.
AND
N2H2, INC.
DATED AS OF JULY 28, 2003
TABLE OF CONTENTS
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ARTICLE I THE MERGER............................................................................................... 1
1.1 THE MERGER....................................................................................... 1
1.2 CLOSING; EFFECTIVE TIME.......................................................................... 1
1.3 EFFECTS OF THE MERGER............................................................................ 2
1.4 ARTICLES OF INCORPORATION; BYLAWS................................................................ 2
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.............................................. 2
ARTICLE II CONVERSION OF SHARES.................................................................................... 3
2.1 CONVERSION OF STOCK.............................................................................. 3
2.2 SELLER OPTIONS, SELLER STOCK PURCHASE PLAN....................................................... 4
2.3 EXCHANGE OF STOCK CERTIFICATES................................................................... 5
2.4 LOST, STOLEN OR DESTROYED CERTIFICATES........................................................... 7
2.5 TAX CONSEQUENCES................................................................................. 7
2.6 DISSENTING SHARES................................................................................ 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER............................................................... 8
3.1 ORGANIZATION, ETC................................................................................ 8
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT............................................................. 9
3.3 NO VIOLATIONS, ETC............................................................................... 9
3.4 BOARD RECOMMENDATION............................................................................. 10
3.5 FAIRNESS OPINION................................................................................. 11
3.6 CAPITALIZATION................................................................................... 11
3.7 SEC FILINGS...................................................................................... 12
3.8 COMPLIANCE WITH LAWS............................................................................. 12
3.9 FINANCIAL STATEMENTS............................................................................. 12
3.10 ABSENCE OF UNDISCLOSED LIABILITIES............................................................... 13
3.11 ABSENCE OF CHANGES OR EVENTS..................................................................... 13
3.12 CAPITAL STOCK OF SUBSIDIARIES.................................................................... 15
3.13 LITIGATION....................................................................................... 15
3.14 INSURANCE........................................................................................ 15
3.15 CONTRACTS AND COMMITMENTS........................................................................ 16
3.16 LABOR MATTERS; EMPLOYMENT AND LABOR CONTRACTS.................................................... 17
3.17 INTELLECTUAL PROPERTY RIGHTS..................................................................... 18
3.18 TAXES............................................................................................ 20
3.19 EMPLOYEE BENEFIT PLANS; ERISA.................................................................... 21
3.20 ENVIRONMENTAL MATTERS............................................................................ 24
3.21 OFFICER'S CERTIFICATE AS TO TAX MATTERS.......................................................... 25
3.22 AFFILIATES....................................................................................... 25
3.23 FINDERS OR BROKERS............................................................................... 25
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3.24 REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS......................................... 25
3.25 TITLE TO PROPERTY................................................................................ 26
3.26 NO EXISTING DISCUSSIONS.......................................................................... 26
3.27 MATERIAL MISSTATEMENTS OR OMISSIONS.............................................................. 26
3.28 SUBSCRIPTION RENEWAL............................................................................. 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB.................................................. 27
4.1 ORGANIZATION, ETC................................................................................ 27
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT............................................................. 28
4.3 NO VIOLATIONS, ETC............................................................................... 29
4.4 BOARD APPROVAL; NO STOCKHOLDER APPROVAL REQUIRED................................................. 29
4.5 CAPITALIZATION................................................................................... 29
4.6 SEC FILINGS...................................................................................... 30
4.7 COMPLIANCE WITH LAWS............................................................................. 30
4.8 FINANCIAL STATEMENTS............................................................................. 31
4.9 ABSENCE OF UNDISCLOSED LIABILITIES............................................................... 31
4.10 ABSENCE OF CHANGES OR EVENTS..................................................................... 31
4.11 LITIGATION....................................................................................... 32
4.12 CONTRACTS AND COMMITMENTS........................................................................ 32
4.13 INTELLECTUAL PROPERTY RIGHTS..................................................................... 33
4.14 OFFICER'S CERTIFICATE AS TO TAX MATTERS.......................................................... 33
4.15 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS............................................... 33
ARTICLE V COVENANTS................................................................................................ 34
5.1 CONDUCT OF SELLER BUSINESS DURING INTERIM PERIOD................................................. 34
5.2 CONDUCT OF BUYER BUSINESS DURING INTERIM PERIOD.................................................. 36
5.3 NO SOLICITATION.................................................................................. 37
5.4 ACCESS TO INFORMATION............................................................................ 39
5.5 SPECIAL MEETING; REGISTRATION STATEMENT; BOARD RECOMMENDATIONS................................... 39
5.6 COMMERCIALLY REASONABLE EFFORTS.................................................................. 41
5.7 PUBLIC ANNOUNCEMENTS............................................................................. 42
5.8 NOTIFICATION OF CERTAIN MATTERS.................................................................. 42
5.9 INDEMNIFICATION.................................................................................. 42
5.10 AFFILIATE AGREEMENTS............................................................................. 43
5.11 STOCK EXCHANGE LISTING........................................................................... 43
5.12 RESIGNATION OF DIRECTORS AND OFFICERS............................................................ 43
5.13 CONSENTS OF BUYER' AND SELLER'S ACCOUNTANTS...................................................... 43
5.14 VOTING AGREEMENTS................................................................................ 44
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(CONTINUED)
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5.15 FORM S-8......................................................................................... 44
5.16 TAX TREATMENT.................................................................................... 44
5.17 SEC FILINGS...................................................................................... 44
5.18 EMPLOYEE BENEFIT MATTERS......................................................................... 45
5.19 SELLER RIGHTS PLAN............................................................................... 46
5.20 STOCK AWARD MATTERS.............................................................................. 47
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF EACH PARTY............................................................. 47
6.1 REGISTRATION STATEMENT........................................................................... 47
6.2 SELLER SHAREHOLDER APPROVAL...................................................................... 47
6.3 GOVERNMENTAL CLEARANCES.......................................................................... 47
6.4 TAX MATTERS...................................................................................... 47
6.5 STATUTE OR DECREE................................................................................ 48
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF SELLER AND BUYER...................................................... 48
7.1 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SELLER............................................... 48
7.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER AND MERGER SUB................................. 49
ARTICLE VIII TERMINATION........................................................................................... 49
8.1 TERMINATION...................................................................................... 49
8.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION..................................................... 51
8.3 FEES AND EXPENSES................................................................................ 51
ARTICLE IX MISCELLANEOUS........................................................................................... 53
9.1 AMENDMENT AND MODIFICATION....................................................................... 53
9.2 WAIVER OF COMPLIANCE; CONSENTS................................................................... 53
9.3 SURVIVAL; INVESTIGATIONS......................................................................... 54
9.4 NOTICES.......................................................................................... 54
9.5 ASSIGNMENT; THIRD PARTY BENEFICIARIES............................................................ 55
9.6 GOVERNING LAW.................................................................................... 55
9.7 COUNTERPARTS..................................................................................... 55
9.8 SEVERABILITY..................................................................................... 55
9.9 INTERPRETATION................................................................................... 55
9.10 ENTIRE AGREEMENT................................................................................. 55
9.11 DEFINITION OF "LAW".............................................................................. 56
9.12 RULES OF CONSTRUCTION............................................................................ 56
Exhibits
Exhibit A - Form of Seller Voting Agreement
Exhibit B - Articles of Merger
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TABLE OF CONTENTS
(CONTINUED)
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Exhibit C - Form of Seller Affiliate Agreement
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INDEX OF DEFINED TERMS
"Acquisition Proposal".................................. Section 5.3
"Acquisition Transaction"............................... Section 5.3
"Action"................................................ Section 3.13(a)
"Affiliates"............................................ Section 3.22
"Agreement"............................................. Preamble
"Aggrieved Party" Section 8.3(b)(vi)
"Articles of Merger".................................... Section 1.2
"Breaching Party" Section 8.3(b)(vi)
"Buyer"................................................. Preamble
"Buyer Balance Sheet"................................... Section 4.8
"Buyer Certificates".................................... Section 2.1(b)
"Buyer Closing Value"................................... Section 2.1(f)
"Buyer Common Stock".................................... Recitals
"Buyer Contract"........................................ Section 4.12(a)
"Buyer Disclosure Statement"............................ Article IV
"Buyer Exchange Options"................................ Section 2.2(a)
"Buyer Financial Statements"............................ Section 4.8
"Buyer Interim Financial Statements".................... Section 4.8
"Buyer IP Rights"....................................... Section 4.13(a)
"Buyer Material Adverse Effect"......................... Section 4.1(a)
"Buyer Options"......................................... Section 4.5(b)
"Buyer Preferred Stock"................................. Section 4.5(a)
"Buyer Purchase Plan"................................... Section 2.2(b)
"Buyer SEC Reports"..................................... Section 4.6
"Buyer Stock Plans"..................................... Section 4.5(b)
"Buyer Subsidiaries".................................... Section 4.1(a)
"Closing"............................................... Section 1.2
"Closing Date".......................................... Section 1.2
"COBRA"................................................. Section 3.16(b)
"Code".................................................. Recitals
"Confidentiality Agreement"............................. Section 5.4
"Continuing Employees" Section 5.18(a)
"Determined Severance" Section 5.18(c)
"Dissenting Shares"..................................... Section 2.6
"Effective Time"........................................ Section 1.2
"ERISA"................................................. Section 3.19(a)
"Exchange Act".......................................... Section 3.3
"Exchange Agent"........................................ Section 2.3(a)
"Exchange Multiple"..................................... Section 2.1(g)
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INDEX OF DEFINED TERMS
(CONTINUED)
"Exchange Quotient"..................................... Section 2.1(g)
"Exchange Ratio"........................................ Section 2.1(a)
"GAAP".................................................. Section 3.9
"Government Entity"..................................... Section 3.3
"group health plan"..................................... Section 3.19(k)
"Hazardous Material".................................... Section 3.20(a)
"Hazardous Materials Activities"........................ Section 3.20(b)
"Holder"................................................ Section 2.3(c)
"IRS"................................................... Section 3.19(j)
"law"................................................... Section 9.11
"Merger"................................................ Recitals
"Merger Sub"............................................ Preamble
"Merger Sub Common Stock"............................... Section 2.1(d)
"Nasdaq"................................................ Section 2.1(f)
"Pension Plans"......................................... Section 3.19(a)
"Person"................................................ Section 2.1(g)
"Potential Acquiror".................................... Section 5.3
"Proxy Statement/Prospectus"............................ Section 3.24
"Qualified Position" Section 5.18(h)
"Reference Date"........................................ Section 3.9
"Registration Statement"................................ Section 3.24
"SEC"................................................... Section 3.7
"Securities Act"........................................ Section 3.7
"Seller"................................................ Preamble
"Seller Acquisition".................................... Section 8.3(b)
"Seller Affiliate Agreement"............................ Section 5.10
"Seller Balance Sheet".................................. Section 3.9
"Seller Certificate".................................... Section 2.3(c)
"Seller Common Stock"................................... Recitals
"Seller Contract"....................................... Section 3.15(a)
"Seller Disclosure Statement"........................... Article III
"Seller Employee Benefit Plans"......................... Section 3.19(a)
"Seller Environmental Permits".......................... Section 3.20(c)
"Seller ERISA Affiliate"................................ Section 3.19(a)
"Seller Financial Statements"........................... Section 3.9
"Seller Foreign Plan"................................... Section 3.19(n)
"Seller Interim Financial Statements"................... Section 3.9
"Seller IP Rights"...................................... Section 3.17(a)
"Seller Material Adverse Effect"........................ Section 3.1(a)
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INDEX OF DEFINED TERMS
(CONTINUED)
"Seller Notice of Superior Offer"....................... Section 5.5(c)
"Seller Options"........................................ Section 2.2(a)
"Seller Preferred Stock"................................ Section 3.6(a)
"Seller Purchase Plan".................................. Section 2.2(b)
"Seller Rights"......................................... Section 2.1(a)
"Seller Rights Plan".................................... Section 2.1(a)
"Seller SEC Reports".................................... Section 3.7
"Seller Special Meeting"................................ Section 5.5(a)
"Seller Stock Plans".................................... Section 2.2(a)
"Seller Subsidiaries"................................... Section 3.1(a)
"Seller Superior Offer"................................. Section 5.5(c)
"Seller Triggering Event"............................... Section 8.1(h)
"Seller Voting Agreements".............................. Recitals
"Seller Warrants"....................................... Section 3.6(b)
"Subsidiary"............................................ Section 2.1(g)
"Surviving Corporation"................................. Section 1.1
"Tax Return" or "Tax Returns"........................... Section 3.18(a)
"Tax" or "Taxes"........................................ Section 3.18(a)
"to the knowledge of Buyer"............................. Section 4.5(b)
"to the knowledge of Seller"............................ Section 3.6(b)
"Washington Law"........................................ Section 1.1
"Washington Secretary".................................. Section 1.2
"Welfare Plans"......................................... Section 3.19(a)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of July 28, 2003 by and among Secure Computing Corporation, a
Delaware corporation ("BUYER"), Nitro Acquisition Corp., a Washington
corporation and wholly-owned subsidiary of Buyer ("MERGER SUB"), and N2H2, Inc.,
a Washington corporation ("SELLER"), with respect to the following facts:
A. The respective boards of directors of Buyer, Merger Sub and
Seller have approved and declared advisable the merger of Merger Sub with and
into Seller (the "MERGER"), upon the terms and subject to the conditions set
forth herein, and have determined that the Merger and the other transactions
contemplated by this Agreement are fair to, and in the best interests of, their
respective stockholders.
B. Pursuant to the Merger, among other things, the outstanding
shares of Seller Common Stock ("SELLER COMMON STOCK"), will be converted into
shares of Buyer Common Stock, $0.01 par value ("BUYER COMMON STOCK"), at the
rate set forth herein.
C. Simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to Buyer's and Merger Sub's
willingness to enter into this Agreement, each of the members of the Board of
Directors and each executive officer of Seller (in their respective capacities
as shareholders of Seller) is entering into Voting Agreements with Buyer in the
form of Exhibit A attached hereto (the "SELLER VOTING AGREEMENTS").
D. For United States federal income tax purposes, it is intended
that the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE").
The parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Washington Business Corporation Act ("WASHINGTON LAW"),
(i) Merger Sub shall be merged with and into Seller, (ii) the separate corporate
existence of Merger Sub shall cease, and (iii) Seller shall be the surviving
corporation and a wholly owned subsidiary of Buyer. Seller, as the surviving
corporation after the Merger, is hereinafter sometimes referred to as the
"SURVIVING CORPORATION."
1.2 CLOSING; EFFECTIVE TIME. The closing of the Merger and the
other transactions contemplated hereby (the "CLOSING") will take place at 10:00
a.m., local
time, on a date to be specified by the parties (the "CLOSING DATE"), which shall
be no later than the second business day after satisfaction or waiver of the
conditions set forth in Articles VI and VII, unless another time or date is
agreed to by the parties hereto. The Closing shall take place at the offices of
Xxxxxx Xxxxxx White & XxXxxxxxx LLP, 000 Xxxxxxxxxxx Xxxx, Xxxxx Xxxx,
Xxxxxxxxxx, or at such other location as the parties hereto shall mutually
agree. At the Closing, the parties hereto shall cause the Merger to be
consummated by filing the articles of merger substantially in the form of
Exhibit B (the "ARTICLES OF MERGER") with the Secretary of State of the State of
Washington (the "WASHINGTON SECRETARY"), in accordance with the relevant
provisions of Washington Law (the time of such filing, or such later time as may
be agreed in writing by the parties and specified in the Articles of Merger,
being the "EFFECTIVE TIME"). If the Washington Secretary requires any changes in
the Articles of Merger as a condition to filing or issuing a certificate to the
effect that the Merger is effective, Merger Sub and the Company shall execute
any necessary document incorporating such changes, provided such changes are not
inconsistent with and do not result in any material change in the terms of this
Agreement.
1.3 EFFECTS OF THE MERGER. The effects of the Merger shall be as
provided in this Agreement, the Articles of Merger and the applicable provisions
of Washington Law. Without limiting the foregoing, at the Effective Time all the
property, rights, privileges, powers and franchises of Seller and Merger Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of Seller and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Subject to Section 5.9, from and after the Effective
Time, the articles of incorporation of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the articles of incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
articles of incorporation of Merger Sub shall be amended so that the name of the
Surviving Corporation shall be "N2H2, INC.".
(b) Subject to Section 5.9, from and after the Effective
Time the bylaws of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the bylaws of the Surviving Corporation.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of Merger Sub immediately prior to the Effective Time
shall serve as the initial directors and officers of the Surviving Corporation,
until their respective successors are duly elected or appointed and qualified.
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ARTICLE II
CONVERSION OF SHARES
2.1 CONVERSION OF STOCK. Pursuant to the Merger, and without any
action on the part of the holders of any outstanding shares of capital stock or
securities of Seller or Merger Sub:
(a) As of the Effective Time, each share of Seller Common
Stock, together with the rights (the "SELLER RIGHTS"), if any, associated with
each such share issued in connection with the Seller Rights Agreement (the
"SELLER RIGHTS PLAN") dated May 24, 2002 between Seller and Mellon Investor
Services LLC, issued and outstanding immediately prior to the Effective Time
(other than shares of Seller Common Stock to be canceled pursuant to Section
2.1(c)), shall be automatically converted into 0.0841 (the "EXCHANGE RATIO") of
a fully paid and nonassessable share of Buyer Common Stock.
(b) As of the Effective Time, each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Seller Common Stock shall cease to have any
rights with respect thereto, except the right to receive (i) a certificate (or
direct registration) representing the number of whole shares of Buyer Common
Stock into which such shares have been converted (the "BUYER CERTIFICATES"), and
(ii) cash in lieu of fractional shares of Buyer Common Stock in accordance with
Section 2.1(f), without interest.
(c) As of the Effective Time, each share of Seller Common
Stock held of record immediately prior to the Effective Time by Seller, Merger
Sub, Buyer or any Subsidiary (as defined in Section 2.1(g)) of Seller or of
Buyer shall be canceled and extinguished without any conversion thereof.
(d) As of the Effective Time, each share of Common Stock,
$0.01 par value, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be canceled,
extinguished and automatically converted into one validly issued, fully paid and
nonassessable share of Common Stock, $0.01 par value, of the Surviving
Corporation. Each certificate evidencing ownership of a number of shares of
Merger Sub Common Stock shall be deemed to evidence ownership of the same number
of shares of Common Stock, $0.01, of the Surviving Corporation.
(e) Without limiting any other provision of this
Agreement, the Exchange Ratio shall be adjusted to reflect fully the effect of
any stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Buyer Common Stock or Seller Common
Stock), extraordinary dividend or distribution, reorganization,
reclassification, recapitalization or other like change with
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respect to Buyer Common Stock or Seller Common Stock occurring or having a
record date or an effective date on or after the date hereof and prior to the
Effective Time.
(f) No fraction of a share of Buyer Common Stock will be
issued by virtue of the Merger. Instead, each holder of shares of Seller Common
Stock who would otherwise be entitled to a fraction of a share of Buyer Common
Stock (after aggregating all fractional shares of Buyer Common Stock to be
received by such holder) shall receive from Buyer an amount of cash (rounded to
the nearest whole cent, with .5 being rounded up) equal to the product of (i)
such fraction, multiplied by (ii) the Buyer Closing Value. For the purposes of
this Agreement, "BUYER CLOSING VALUE" shall mean the average of the closing sale
prices per share of Buyer Common Stock as reported on the Nasdaq National Market
("NASDAQ") for each of the five trading days immediately preceding the Effective
Time.
(g) For the purposes of this Agreement, the "EXCHANGE
MULTIPLE" of any quantity means the product obtained from multiplying such
quantity by the Exchange Ratio, and the "EXCHANGE QUOTIENT" of any quantity
means the quotient obtained from dividing such quantity by the Exchange Ratio.
For purposes of this Agreement, the term "SUBSIDIARY", when used with respect to
any Person, means any corporation or other organization, whether incorporated or
unincorporated, of which (A) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person (through ownership of securities, by contract or otherwise) or
(B) such Person or any Subsidiary of such Person is a general partner of any
general partnership or a manager of any limited liability company. For the
purposes of this Agreement, the term "PERSON" means any individual, group,
organization, corporation, partnership, joint venture, limited liability
company, trust or entity of any kind.
2.2 SELLER OPTIONS, SELLER STOCK PURCHASE PLAN
(a) As of the Effective Time, Buyer shall, to the full
extent permitted by applicable law, assume all of the stock options of Seller
outstanding immediately prior to the Effective Time under the Seller Stock Plans
(as defined below) (the "SELLER OPTIONS"). For purposes of this Agreement,
"SELLER STOCK PLANS" means the 1997 Stock Option Plan, as amended, 1999 Stock
Option Plan, 1999 Nonemployee Director Stock Option Plan, 1999/2000 Transition
Stock Option Plan, 2000 Stock Option Plan and the Nonqualified Stock Option
Agreement dated August 2, 2002 between the Company and Xxxxxx Xxxxxx Welt. Each
Seller Option, whether or not exercisable at the Effective Time, shall, to the
full extent permitted by applicable law, be assumed by Buyer in such a manner
that it shall be exercisable upon the same terms and conditions as under the
Seller Stock Plan pursuant to which it was granted and the
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applicable option agreement issued thereunder (after giving effect to any
acceleration of vesting resulting from the Merger on the terms provided under
the Seller Stock Plan pursuant to which it was granted and the applicable option
agreement issued thereunder); provided that (i) each such option thereafter
shall be exercisable for a number of shares of Buyer Common Stock (rounded down
to the nearest whole share) equal to the Exchange Multiple of the number of
shares of Seller Common Stock subject to such option, and (ii) the option price
per share of Buyer Common Stock thereafter shall equal the Exchange Quotient
(rounded up to the nearest whole cent, (except that, in the case of Seller
Options granted under the 1999 Nonemployee Director Stock Option Plan, the
option price per share of Buyer Common Stock shall be carried to at three
decimal places, with the last decimal place rounded upwards to the nearest whole
number)) of the option price per share of Seller Common Stock subject to such
option in effect immediately prior to the Effective Time (the "BUYER EXCHANGE
OPTIONS").
(b) Seller shall take all necessary action to amend the
Seller Employee Stock Purchase Plan (the "SELLER PURCHASE PLAN") so that (i) the
Seller Purchase Plan shall be suspended so that no additional purchase rights
shall be issued under it after September 30, 2003, and (ii) each purchase right
granted under Seller Purchase Plan shall terminate, if it has not previously
terminated by its terms, on the date that the holder thereof enrolls in Secure
Computing Corporation Employee Stock Purchase Plan (the "BUYER PURCHASE PLAN");
provided that if the purchase date under the Seller Purchase Plan coincides with
the enrollment date under the Buyer Purchase Plan, the purchase rights under the
Seller Purchase Plan shall not terminate prior to the purchase on such date; and
(iii) such other modifications to the Seller Purchase Plan shall be made so as
to permit the implementation of this Section 2.2(b). As of the Effective Time,
each then-outstanding purchase right granted under the Seller Purchase Plan
shall be assumed by Buyer in such a manner that it shall be exercisable upon the
same terms and conditions (as amended as described above) as under the Seller
Purchase Plan immediately before the Effective Time; provided that each such
purchase right shall thereafter be exercisable for whole shares of Buyer Common
Stock (rounded down to the nearest whole share) equal to the Exchange Multiple
of the number of shares of Seller Common Stock for which such purchase right
would otherwise have been exercisable determined as of the relevant grant date
under the Seller Purchase Plan at a purchase price per share equal to 85% of the
lower of: (i) the Exchange Quotient (rounded up to the nearest whole cent) of
the fair market value of a share of Seller Common Stock on the relevant grant
date under the Seller Purchase Plan or (ii) the fair market value of a share of
a Buyer Common Stock on the relevant purchase date.
2.3 EXCHANGE OF STOCK CERTIFICATES.
(a) At or prior to the Effective Time, Buyer shall enter
into an agreement with a bank or trust company selected by Buyer and reasonably
acceptable to Seller to act as the exchange agent for the Merger (the "EXCHANGE
AGENT").
(b) At or prior to the Effective Time, Buyer shall supply
or cause to be supplied to or for the account of the Exchange Agent in trust for
the benefit of the holders
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of Seller Common Stock, for exchange pursuant to this Section 2.3 (i) the Buyer
Certificates (or direct registration) evidencing the shares of Buyer Common
Stock issuable pursuant to Section 2.1 to be exchanged for outstanding shares of
Seller Common Stock, and (ii) cash in an aggregate amount sufficient to make the
payments in lieu of fractional shares provided for in Section 2.1(f).
(c) Promptly after the Effective Time, Buyer shall mail
or shall cause to be mailed to each Holder (as defined below) a letter of
transmittal in customary form and reasonably acceptable to the Seller (which
shall specify that delivery shall be effected, and risk of loss and title to the
Seller Certificates shall pass, only upon proper delivery of the Seller
Certificates to the Exchange Agent) and instructions for surrender of the Seller
Certificates. Upon surrender to the Exchange Agent of a Seller Certificate,
together with such letter of transmittal duly executed, the Holder shall be
entitled to receive in exchange therefor: (i) certificates evidencing that
number of shares of Buyer Common Stock issuable to such Holder in accordance
with this Article II; (ii) any dividends or other distributions that such Holder
has the right to receive pursuant to Section 2.3(d); and (iii) cash in respect
of fractional shares as provided in Section 2.1(f), and such Seller Certificate
so surrendered shall forthwith be canceled. No certificate representing shares
of Buyer Common Stock will be issued to a Person who is not the registered owner
of a surrendered Seller Certificate unless (i) the Seller Certificate so
surrendered has been properly endorsed or otherwise is in proper form for
transfer, and (ii) such Person shall either (A) pay any transfer or other tax
required by reason of such issuance or (B) establish to the reasonable
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
2.3, from and after the Effective Time, each Seller Certificate shall be deemed
to represent, for all purposes other than payment of dividends, the right to
receive a certificate representing the number of full shares of Buyer Common
Stock as determined in accordance with this Article II and cash in lieu of
fractional shares as provided in Section 2.1(f). For purposes of this Agreement,
"SELLER CERTIFICATE" means a certificate which immediately prior to the
Effective Time represented shares of Seller Common Stock, and "HOLDER" means a
person who holds one or more Seller Certificates as of the Effective Time.
(d) No dividend or other distribution declared with
respect to Buyer Common Stock with a record date after the Effective Time will
be paid to Holders of unsurrendered Seller Certificates until such Holders
surrender their Seller Certificates. Upon the surrender of such Seller
Certificates, there shall be paid to such Holders, promptly after such
surrender, the amount of dividends or other distributions, excluding interest,
declared with a record date after the Effective Time and not paid because of the
failure to surrender Seller Certificates for exchange.
(e) Notwithstanding anything to the contrary in this
Agreement, neither the Exchange Agent, Buyer, the Surviving Corporation nor any
party hereto shall be
6
liable to any holder of shares of Seller Common Stock for shares of Buyer Common
Stock or cash in lieu of fractional shares delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.4 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Seller Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue and pay in respect of such lost, stolen or destroyed Seller
Certificates, upon the making of an affidavit of that fact by the holder
thereof, certificates representing the shares of Buyer Common Stock as may be
required pursuant to Section 2.1 and cash in lieu of fractional shares, if any,
as may be required pursuant to Section 2.1(f) and any dividends or distributions
payable pursuant to Section 2.3(d); provided, however, that Buyer may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Seller Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Buyer or the Exchange Agent with respect to the Seller Certificates
alleged to have been lost, stolen or destroyed.
2.5 TAX CONSEQUENCES. For United States federal income tax
purposes, it is intended by the parties hereto that the Merger qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and that this
Agreement constitutes a "plan of reorganization" within the meaning of Treasury
Regulations Sections 1.368-2(g) and 1.368-3.
2.6 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, with respect to each share of Seller Common Stock as to which
the holder thereof shall have properly complied with the provisions of Chapter
23B.13 of Washington Law as to dissenters' rights (each, a "DISSENTING SHARE"),
if any, such holder shall be entitled to payment, solely from the Surviving
Corporation, of the appraisal value of the Dissenting Shares to the extent
permitted by and in accordance with the provisions of Chapter 23B. 13 of
Washington Law; provided, however, that (i) if any holder of Dissenting Shares,
under the circumstances permitted by and in accordance with Washington Law,
affirmatively withdraws such holder's demand for appraisal of such Dissenting
Shares, (ii) if any holder of Dissenting Shares fails to establish such holder's
entitlement to dissenters' rights as provided in Washington Law or (iii) if any
holder of Dissenting Shares takes or fails to take any action the consequence of
which is that such holder is not entitled to payment for such holder's shares
under Washington Law, such holder or holders (as the case may be) shall forfeit
the right to appraisal of such shares of Seller Common Stock and such shares of
Seller Common Stock shall thereupon be deemed to have been converted, as of the
Effective Time, into and represent the right to receive the Merger Consideration
payable in respect of such shares of Seller Common Stock. The Seller shall give
Buyer prompt notice of any demands received by the Seller for appraisal of
shares of Seller Common Stock, and Buyer shall have the right to participate in
all negotiations and proceedings with respect to such demands. The Seller
7
shall not settle, make any payments with respect to, or offer to settle, any
claim with respect to Dissenting Shares without the written consent of Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes to Buyer and Merger Sub the representations and warranties
contained in this Article III, in each case subject to the exceptions set forth
in the disclosure statement, dated as of the date hereof and delivered by Seller
to Buyer at least forty-eight (48) hours prior to the execution of this
Agreement (the "SELLER DISCLOSURE STATEMENT"). The Seller Disclosure Statement
shall be arranged in schedules corresponding to the numbered and lettered
Sections of this Article III, and the disclosure in any Schedule of the Seller
Disclosure Statement shall qualify only the corresponding Section of this
Article III.
3.1 ORGANIZATION, ETC.
(a) Each of Seller and its Subsidiaries, all of which are
listed on Schedule 3.1(b) of the Seller Disclosure Statement (the "SELLER
SUBSIDIARIES"), is a corporation duly organized, validly existing and in good
standing (with respect to jurisdictions that recognize such concept) under the
laws of the jurisdiction of its incorporation, and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing or
in good standing or to have such power, authority or qualification has not had,
or could not reasonably be expected to have, individually or in the aggregate, a
Seller Material Adverse Effect. Each of Seller and the Seller Subsidiaries is
duly qualified as a foreign Person to do business, and is in good standing (with
respect to jurisdictions that recognize such concept), in each jurisdiction
where the character of its owned or leased properties or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified or in good standing has not had, or could not reasonably be expected
to have, individually or in the aggregate, a Seller Material Adverse Effect.
For the purposes of this Agreement, "SELLER MATERIAL ADVERSE EFFECT"
means any material adverse effect on (i) the business, financial condition,
results of operations or assets and liabilities, taken as a whole, of Seller,
including the Seller Subsidiaries, (ii) the ability of Seller to consummate the
Merger or any of the material transactions contemplated by the Agreement or to
perform any of its material obligations under the Agreement before the Effective
Time, or (iii) Buyer' ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation. Notwithstanding the foregoing, with respect to item (i) above, none
of the following shall be deemed (either alone or in combination) to constitute,
and none of the following shall be taken into account in determining whether
there has been
8
or will be, a Seller Material Adverse Effect: (A) any adverse change, event or
effect arising from or relating to general business or economic conditions; (B)
any adverse change, event or effect relating to or affecting the Internet
filtering and monitoring industry generally, which does not disproportionately
affect Seller; and (C) any adverse change, event or effect arising from or
relating to the announcement or pendency of the Merger and the other
transactions contemplated by this Agreement.
(b) Neither Seller nor any of the Seller Subsidiaries is
in violation of any provision of its articles of incorporation or bylaws or, in
the case of any Seller Subsidiary that is not a corporation, any equivalent
charter document. Schedule 3.1(b) of the Seller Disclosure Statement sets forth
(i) the full name of each Seller Subsidiary and any other entity in which Seller
has a significant equity interest, its capitalization and the ownership interest
of Seller and each other Person (if any) therein, (ii) the jurisdiction in which
each such Seller Subsidiary is organized, (iii) each jurisdiction in which
Seller and each of the Seller Subsidiaries is qualified to do business as a
foreign Person, and (iv) the names of the current directors and officers of
Seller and of each Seller Subsidiary. Seller has made available to Buyer
accurate and complete copies of the articles of incorporation and bylaws and, in
the case of any Seller Subsidiary that is not a corporation, any other
equivalent charter documents, as currently in effect, of Seller and each of the
Seller Subsidiaries.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full
corporate power and authority to (i) execute and deliver this Agreement, and
(ii) assuming the approval of the Merger by at least two-thirds of the
outstanding shares of Seller Common Stock at the Seller Special Meeting or any
adjournment or postponement thereof in accordance with Washington Law,
consummate the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement, and the consummation of the Merger and
the other transactions contemplated hereby, have been duly and validly
authorized by the vote of the board of directors of Seller, and no other
corporate proceedings on the part of Seller are necessary to authorize this
Agreement or to consummate the Merger and the other transactions contemplated
hereby (other than, with respect to the Merger, the approval of the adoption of
the Agreement and approval of the Merger by at least two-thirds of the
outstanding shares of Seller Common Stock at the Seller Special Meeting or any
adjournment or postponement thereof in accordance with Washington Law). The
Agreement has been duly and validly executed and delivered by Seller and,
assuming due authorization, execution and delivery by Buyer and Merger Sub,
constitutes a valid and binding agreement of Seller, enforceable against Seller
in accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
3.3 NO VIOLATIONS, ETC. No filing with or notification to, and no
permit, authorization, consent or approval of, any court, administrative agency,
commission, or
9
other governmental or regulatory body, authority or instrumentality ("GOVERNMENT
ENTITY") is necessary on the part of Seller for the consummation by Seller of
the Merger and the other transactions contemplated hereby, or for the exercise
by Buyer and the Surviving Corporation of full rights to own and operate the
business of Seller and the Seller Subsidiaries as presently being conducted,
except (i) for the filing of the Articles of Merger as required by Washington
Law, (ii) for compliance with the applicable requirements of the Securities and
Exchange Act of 1934, as amended (together with the Rules and Regulations
promulgated thereunder, the "EXCHANGE ACT"), state securities or "blue sky" laws
and state takeover laws, and (iii) where the failure to make such filing or
notification or to obtain such permit, authorization, consent or approval has
not had, or could not reasonably be expected to have, individually or in the
aggregate, a Seller Material Adverse Effect. Neither the execution and delivery
of the Agreement, nor the consummation of the Merger and the other transactions
contemplated hereby, nor compliance by Seller with all of the provisions hereof
and thereof, nor the exercise by Buyer and the Surviving Corporation of full
rights to own and operate the business of Seller and the Seller Subsidiaries as
presently being conducted will, subject to obtaining the approval of this
Agreement by the holders of at least two-thirds of the outstanding shares of
Seller Common Stock at the Seller Special Meeting or any adjournment thereof in
accordance with Washington Law, (i) conflict with or result in any breach of any
provision of the articles of incorporation or bylaws of Seller or any Seller
Subsidiary (or, in the case of any Seller Subsidiary that is not a corporation,
the equivalent charter documents of such Seller Subsidiary), (ii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Seller or any Seller Subsidiary, or by which any of their properties or assets
may be bound, or (iii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default under, or result in
any material change in, or give rise to any right of termination, cancellation,
acceleration, redemption or repurchase under, any of the terms, conditions or
provisions of any Seller Contract (as defined below), except in the case of
clauses (ii) or (iii) for any violation, breach or default that has not had, or
could not reasonably be expected to have, a Seller Material Adverse Effect.
Schedule 3.3 of the Seller Disclosure Statement lists all consents, notices,
waivers and approvals required to be obtained in connection with the
consummation of the transactions contemplated hereby under any Seller Contracts,
or any of Seller's or any Seller Subsidiaries' notes, bonds, mortgages,
indentures, deeds of trust, licenses or leases, contracts, agreements or other
instruments or obligations the failure to obtain which has had, or could
reasonably be expected to have, a Seller Material Adverse Effect.
3.4 BOARD RECOMMENDATION. The board of directors of Seller has, at
a meeting of such board duly held on July 28, 2003, (i) approved and adopted the
Agreement, (ii) determined that this Agreement is fair to and in the best
interests of the shareholders of Seller, (iii) resolved to recommend this
Agreement to the shareholders of Seller, (iv) resolved that Seller take all
action necessary to exempt the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and
10
thereby from the provisions of all applicable state anti-takeover statutes or
regulations including but not limited to Section 23B.19.040 of Washington Law,
and (v) resolved to render the Seller Rights issued under the Seller Rights Plan
inapplicable to the Merger, this Agreement and the other transactions
contemplated hereby.
3.5 FAIRNESS OPINION. Seller has received the opinion of Updata
Capital, Inc. dated the date of the approval of this Agreement by the board of
directors of Seller to the effect that the Exchange Ratio is fair to Seller's
shareholders from a financial point of view, and has provided a copy of such
opinion to Buyer.
3.6 CAPITALIZATION.
(a) The authorized capital stock of Seller consists of
250,000,000 shares of Seller Common Stock and 50,000,000 shares of Preferred
Stock ("SELLER PREFERRED STOCK"). As of July 24, 2003, there were (i) 22,131,253
shares of Seller Common Stock outstanding, none of which are held by Seller and
(ii) no shares of Seller Preferred Stock outstanding.
(b) Except for the Seller Options, rights under the
Seller Purchase Plan, warrants to purchase an aggregate of 539,280 shares of
Seller Common Stock (the "SELLER WARRANTS") and the Seller Rights, there are no
warrants, options, convertible securities, calls, rights, stock appreciation
rights, preemptive rights, rights of first refusal, or agreements or commitments
of any nature obligating Seller to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests of Seller, or obligating Seller to grant, issue, extend, accelerate
the vesting of, or enter into, any such warrant, option, convertible security,
call, right, stock appreciation right, preemptive right, right of first refusal,
agreement or commitment. To the knowledge of Seller, except for the Seller
Voting Agreements, there are no voting trusts, proxies or other agreements or
understandings with respect to the capital stock of Seller. For purposes of this
Agreement, "TO THE KNOWLEDGE OF SELLER," or words of similar import, shall mean
the actual knowledge of executive officers and directors of the Seller and such
other persons set forth on Schedule 3.6(b) of the Seller Disclosure Statement.
(c) True and complete copies of each Seller Stock Plan
and the Seller Rights Plan, and of the forms of all agreements and instruments
relating to or issued under each thereof, and the forms of all Seller Warrants
have been made available to Buyer. Such agreements, instruments, and forms have
not been amended, modified or supplemented, and there are no agreements to
amend, modify or supplement any such agreements, instruments or forms.
(d) Schedule 3.6(d) of the Seller Disclosure Statement
sets forth the following information with respect to each Seller Option and
Seller Warrant: the aggregate number of shares issuable thereunder, the type of
option, the grant date, the expiration date, the exercise price and the vesting
schedule. Each Seller Option was
11
granted in accordance with the terms of the Seller Stock Plan applicable
thereto. The terms of each of the Seller Stock Plans do not prohibit the
assumption of the Seller Options as provided in Section 2.2(a). Consummation of
the Merger will not accelerate vesting of any Seller Option.
3.7 SEC FILINGS. Seller has filed with the Securities and Exchange
Commission (the "SEC") all required forms, reports, registration statements and
documents required to be filed by it with the SEC (collectively, all such forms,
reports, registration statements and documents filed since January 1, 2000 are
referred to herein as the "SELLER SEC REPORTS"). All of the Seller SEC Reports
complied as to form, when filed, in all material respects with the applicable
provisions of the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder, the "SECURITIES ACT") and the Exchange
Act. Accurate and complete copies of the Seller SEC Reports have been made
available (including via XXXXX) to Buyer. As of their respective dates, the
Seller SEC Reports (including all exhibits and schedules thereto and documents
incorporated by reference therein) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. To the knowledge of Seller and except as
disclosed in Seller SEC Reports, since October 1, 2000, each director and
executive officer of Seller and each such persons' affiliates have complied with
all filing requirements under Section 13 and Section 16(a) of the Exchange Act.
3.8 COMPLIANCE WITH LAWS. Neither Seller nor any Seller Subsidiary
has violated or failed to comply with any statute, law, ordinance, rule or
regulation (including without limitation relating to the export or import of
goods or technology) of any foreign, federal, state or local government or any
other governmental department or agency, except where any such violations or
failures to comply have not had, or could not reasonably be expected to have,
individually or in the aggregate, a Seller Material Adverse Effect. Seller and
the Seller Subsidiaries have all permits, licenses and franchises from
governmental agencies required to conduct their businesses as now being
conducted and as proposed to be conducted, except for those, the absence of
which, has not had, or could not reasonably be expected to have, individually or
in the aggregate, a Seller Material Adverse Effect.
3.9 FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Seller SEC Reports and each of the Seller Interim Financial Statements (the
"SELLER FINANCIAL STATEMENTS"), (x) was prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (y) fairly presented the consolidated financial position of Seller and
12
the Seller Subsidiaries as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, consistent
with the books and records of Seller, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount. The
interim financial statements as of and for the quarter ended June 30, 2003 (the
"REFERENCE DATE"), provided to the Buyer prior to the date hereof, are herein
referred to as the "SELLER INTERIM FINANCIAL STATEMENTS" and the balance sheet
of Seller as of the Reference Date is herein referred to as the "SELLER BALANCE
SHEET."
3.10 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Seller, nor any of
the Seller Subsidiaries or the entities listed on Schedule 3.1(b) has any
liabilities (absolute, accrued, contingent or otherwise) other than (i)
liabilities included in the Seller's March 31, 2003 balance sheet included on
Seller's Form 10-Q for the quarter ended March 31, 2003 and the related notes to
the financial statements, (ii) normal or recurring liabilities incurred since
March 31, 2003 in the ordinary course of business consistent with past practice
which, individually or in the aggregate, would not be reasonably likely to have
a Seller Material Adverse Effect, and (iii) liabilities under this Agreement.
3.11 ABSENCE OF CHANGES OR EVENTS. Except as contemplated by this
Agreement, since March 31, 2003, no state of facts, change, event or effect that
has had or could reasonably be expected to have Seller Material Adverse Effect
has occurred and, in addition, Seller, the Seller Subsidiaries and the entities
listed on Schedule 3.1(b) have not, directly or indirectly:
(a) purchased, otherwise acquired, or agreed to purchase
or otherwise acquire, any shares of capital stock of Seller or any of the Seller
Subsidiaries, or declared, set aside or paid any dividend or otherwise made a
distribution (whether in cash, stock or property or any combination thereof) in
respect of their capital stock (other than dividends or other distributions
payable solely to Seller or a wholly-owned Subsidiary of Seller);
(b) authorized for issuance, issued, sold, delivered,
granted or issued any options, warrants, calls, subscriptions or other rights
for, or otherwise agreed or committed to issue, sell or deliver any shares of
any class of capital stock of Seller or the Seller Subsidiaries or any
securities convertible into or exchangeable or exercisable for shares of any
class of capital stock of Seller or the Seller Subsidiaries, other than pursuant
to and in accordance with the Seller Stock Plans;
(c) (i) created or incurred any indebtedness for borrowed
money exceeding $200,000 in the aggregate, (ii) assumed, guaranteed, endorsed or
otherwise as an accommodation become responsible for the obligations of any
other individual, firm or corporation, made any loans or advances to any other
individual, firm or corporation exceeding $200,000 in the aggregate, (iii)
entered into any oral or written material
13
agreement or any material commitment or transaction or incurred any liabilities
material to Seller and the Seller Subsidiaries taken as a whole, or involving in
excess of $500,000;
(d) instituted any change in accounting methods,
principles or practices other than as required by GAAP or the rules and
regulations promulgated by the SEC and disclosed in the notes to the Seller
Financial Statements;
(e) revalued any assets, including without limitation,
writing down the value of inventory or writing off notes or accounts receivable
in excess in each case of an amount equal to $100,000 plus amounts previously
reserved as reflected in the Seller Balance Sheet;
(f) suffered any damage, destruction or loss, whether
covered by insurance or not, except for such as would not, individually and in
the aggregate exceed $200,000;
(g) (i) increased in any manner the compensation of any
of its directors, officers or, other than in the ordinary course of business and
consistent with past practice, non-officer employees, (ii) granted any severance
or termination pay to any Person other than in the ordinary course of business
and consistent with past practice; (iii) entered into any oral or written
employment, consulting, indemnification or severance agreement with any Person;
(iv) other than as required by law, adopted, become obligated under, or amended
any employee benefit plan, program or arrangement; or (v) repriced any Seller
Options;
(h) sold, transferred, leased, licensed, pledged,
mortgaged, encumbered, or otherwise disposed of, or agreed to sell, transfer,
lease, license, pledge, mortgage, encumber, or otherwise dispose of, any
material properties (including intangibles, real, personal or mixed);
(i) amended its articles of incorporation, bylaws, or any
other charter document, or effected or been a party to any merger,
consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(j) made any capital expenditure in any calendar month
which, when added to all other capital expenditures made by or on behalf of
Seller and the Seller Subsidiaries in such calendar month resulted in such
capital expenditures exceeding $200,000 in the aggregate;
(k) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction of liabilities (including accounts
payable) in the ordinary course of business and consistent with past practice,
or collected, or accelerated the collection of,
14
any amounts owed (including accounts receivable) other than their collection in
the ordinary course of business;
(l) waived, released, assigned, settled or compromised
any material claim or litigation, or commenced a lawsuit other than for the
routine collection of bills;
(m) agreed or proposed to do any of the things described
in the preceding clauses (a) through (l) other than as expressly contemplated or
provided for in this Agreement.
3.12 CAPITAL STOCK OF SUBSIDIARIES. Seller is directly or
indirectly the record and beneficial owner of all of the outstanding shares of
capital stock or other equity interests of each of the Seller Subsidiaries. All
of such shares have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights with respect thereto and are owned
by Seller free and clear of any claim, lien or encumbrance of any kind with
respect thereto. There are no proxies or voting agreements with respect to such
shares, and there are not any existing options, warrants, calls, subscriptions,
or other rights or other agreements or commitments obligating Seller or any of
the Seller Subsidiaries to issue, transfer or sell any shares of capital stock
of any Subsidiary or any other securities convertible into, exercisable for, or
evidencing the right to subscribe for any such shares. Seller does not directly
or indirectly own any interest in any Person except the Seller Subsidiaries.
3.13 LITIGATION.
(a) There is no private or governmental claim, action,
suit (whether in law or in equity), or proceeding of any nature ("ACTION")
pending and, to the knowledge of Seller, there is not any private or
governmental investigation, or any of the foregoing threatened against Seller,
any of the Seller Subsidiaries or any of their respective officers and directors
(in their capacities as such), or involving any of their assets, before any
court, governmental or regulatory authority or body, or arbitration tribunal,
except for those Actions which have not had, or could not reasonably be expected
to have, individually or in the aggregate, a Seller Material Adverse Effect.
There is no Action pending or, to the knowledge of Seller, threatened which in
any manner challenges, seeks to, or is reasonably likely to prevent, enjoin,
alter or delay the transactions contemplated by this Agreement.
(b) There is no outstanding judgment, order, writ,
injunction or decree of any court, governmental or regulatory authority, body or
agency, or arbitration tribunal in a proceeding to which Seller, any Subsidiary
of Seller, or any of their assets is or was a party or by which Seller, any
Subsidiary of Seller, or any of their assets is bound.
3.14 INSURANCE. Schedule 3.14 of the Seller Disclosure Statement
lists all insurance policies (including without limitation workers' compensation
insurance
15
policies) covering the business, properties or assets of Seller and the Seller
Subsidiaries, the premiums and coverages of such policies, and all claims in
excess of $100,000 made against any such policies since January 1, 2000. All
such policies are in effect, and true and complete copies of all such policies
have been made available to Buyer. Seller has not received notice of the
cancellation or threat of cancellation of any of such policy.
3.15 CONTRACTS AND COMMITMENTS.
(a) Except as filed as an exhibit to Seller's SEC
Reports, and except as contemplated by this Agreement, neither Seller, nor the
Seller Subsidiaries, nor the entities listed on Schedule 3.1(b) is a party to or
bound by any oral or written contract, obligation or commitment of any type in
any of the following categories:
(i) agreements or arrangements that contain
severance pay, understandings with respect to tax arrangements, understandings
with respect to expatriate benefits, or post-employment liabilities or
obligations;
(ii) agreements or plans under which benefits
will be increased or accelerated by the occurrence of any of the transactions
contemplated by this Agreement, or under which the value of the benefits will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(iii) agreements, contracts or commitments
currently in force relating to the disposition or acquisition of assets other
than in the ordinary course of business, or relating to an ownership interest in
any corporation, partnership, joint venture or other business enterprise;
(iv) agreements, contracts or commitments for the
purchase of materials, supplies or equipment, under which the aggregate payments
for the past 12 months exceeded $100,000, which are with sole or single source
suppliers;
(v) guarantees or other agreements, contracts or
commitments under which Seller or any of the Seller Subsidiaries is absolutely
or contingently liable for (A) the performance of any other person, firm or
corporation (other than Seller or the Seller Subsidiaries), or (B) the whole or
any part of the indebtedness or liabilities of any other person, firm or
corporation (other than Seller or the Seller Subsidiaries);
(vi) powers of attorney authorizing the
incurrence of a material obligation on the part of Seller or the Seller
Subsidiaries;
(vii) agreements, contracts or commitments which
limit or restrict (A) where Seller or any of the Seller Subsidiaries may conduct
business, (B) the type or lines of business (current or future) in which they
may engage, or (C) any acquisition of assets or stock (tangible or intangible)
by Seller or any of the Seller Subsidiaries;
16
(viii) agreements, contracts or commitments, under
which the aggregate payments or receipts for the past 12 months exceeded
$100,000, containing any agreement with respect to a change of control of Seller
or any of the Seller Subsidiaries;
(ix) agreements, contracts or commitments for the
borrowing or lending of money, or the availability of credit (except credit
extended by Seller or any of the Seller Subsidiaries to customers in the
ordinary course of business and consistent with past practice);
(x) any hedging, option, derivative or other
similar transaction and any foreign exchange position or contract for the
exchange of currency; or
(xi) any agreement, contract or commitment
otherwise required to be filed as an exhibit to a periodic report under the
Exchange Act, as provided by Rule 601 of Regulation S-K promulgated under the
Exchange Act.
Each contract, agreement or commitment of the type described in this Section
3.15 is referred to herein as a "SELLER CONTRACT."
(b) Neither Seller nor any of the Seller Subsidiaries,
nor to the knowledge of Seller any other party to a Seller Contract, has
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, (nor does there exist any condition under which,
with the passage of time or the giving of notice or both, could reasonably be
expected to cause such a breach, violation or default under), any Seller
Contract, other than any breaches, violations or defaults which have not had, or
could not reasonably be expected to have, individually or in the aggregate, a
Seller Material Adverse Effect.
(c) Each Seller Contract is a valid, binding and
enforceable obligation of Seller and to the knowledge of Seller, of the other
party or parties thereto, in accordance with its terms, and in full force and
effect, except where the failure to be valid, binding, enforceable and in full
force and effect has not had, or could not reasonably be expected to have,
individually or in the aggregate, a Seller Material Adverse Effect and to the
extent enforcement may be limited by applicable bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditors' rights
governing or by general principles of equity.
(d) An accurate and complete copy of each Seller Contract
has been made available (including via XXXXX) to Buyer.
3.16 LABOR MATTERS; EMPLOYMENT AND LABOR CONTRACTS.
(a) None of Seller or any of the Seller Subsidiaries is a
party to any union contract or other collective bargaining agreement, nor to the
knowledge of Seller or any of the Seller Subsidiaries are there any activities
or proceedings of any labor union to
17
organize any of its employees. Each of Seller and the Seller Subsidiaries is in
compliance with all applicable (i) laws, regulations and agreements respecting
employment and employment practices and (ii) occupational health and safety
requirements, except in each case for those failures to comply which,
individually or in the aggregate, have not had, or could reasonably be expected
to have, a Seller Material Adverse Effect.
(b) There is no labor strike, slowdown or stoppage
pending (or any labor strike or stoppage threatened) against Seller or any of
the Seller Subsidiaries. No petition for certification has been filed and is
pending before the National Labor Relations Board with respect to any employees
of Seller or any of the Seller Subsidiaries who are not currently organized.
Neither Seller nor any of the Seller Subsidiaries has any obligations under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
with respect to any former employees or qualifying beneficiaries thereunder,
except for obligations that have not had, or could not reasonably be expected to
have, individually or in the aggregate, a Seller Material Adverse Effect. There
are no controversies pending or, to the knowledge of Seller or any of the Seller
Subsidiaries, threatened, between Seller or any of the Seller Subsidiaries and
any of their respective employees, which controversies have had, or could
reasonably be expected to have, individually or in the aggregate, a Seller
Material Adverse Effect.
3.17 INTELLECTUAL PROPERTY RIGHTS.
(a) To the knowledge of Seller, Seller and the Seller
Subsidiaries own or have the right to use all intellectual property used to
conduct their respective businesses (such intellectual property and the rights
thereto are collectively referred to herein as the "SELLER IP RIGHTS"), except
where the failure so to own or have the right to use has not had, or could not
reasonably be expected to have, a Seller Material Adverse Effect. No royalties
or other payments are payable to any Person with respect to commercialization of
any products presently sold or under development by Seller or the Seller
Subsidiaries.
(b) Except as has not had, or could not reasonably be
expected to have, a Seller Material Adverse Effect, the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not (i) constitute a breach of any instrument or
agreement governing any Seller IP Rights, (ii) cause the modification of any
term of any license or agreement relating to any Seller IP Rights including but
not limited to the modification of the effective rate of any royalties or other
payments provided for in any such license or agreement, (iii) cause the
forfeiture or termination of any Seller IP Rights, (iv) give rise to a right of
forfeiture or termination of any Seller IP Rights or (v) impair the right of
Seller or the Surviving Corporation to use, sell or license any Seller IP Rights
or portion thereof.
(c) Neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or under
development by Seller or
18
any of the Seller Subsidiaries (i) violates in any material respect any license
or agreement between Seller or any of the Seller Subsidiaries and any third
party or (ii) to the knowledge of Seller, infringes in any material respect any
patents or other intellectual property rights of any other party; and there is
no pending or, to the knowledge of Seller, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any Seller IP Rights, or asserting that any Seller IP Rights or the proposed
use, sale, license or disposition thereof, or the manufacture, use or sale of
any Seller products, conflicts or will conflict with the rights of any other
party.
(d) Schedule 3.17(d) of the Seller Disclosure Statement
lists all patents, trade names, registered trademarks and service marks, and
applications for any of the foregoing owned or possessed by Seller or any of the
Seller Subsidiaries and true and complete copies of such materials have been
made available to Buyer.
(e) Seller has provided to Buyer a true and complete copy
of its standard form of employee confidentiality agreement and has taken all
commercially reasonably necessary steps to ensure that all employees of Seller
and the Seller Subsidiaries have executed such an agreement. Seller has taken
all commercially reasonably necessary steps to ensure that all consultants or
third parties with access to material proprietary information of Seller have
executed appropriate non-disclosure agreements that adequately protect the
Seller IP Rights.
(f) Seller has taken all commercially reasonably
necessary steps to ensure that Seller's and the Seller Subsidiaries' material
source codes and material trade secrets have not been used, distributed or
otherwise commercially exploited under circumstances which would cause the loss
of copyright prior to the statutory expiration date or the loss of trade secret
status.
(g) To the knowledge of Seller, none of the employees or
consultants of Seller or any of the Seller Subsidiaries is obligated under any
contract, covenant or other agreement or commitment of any nature, or subject to
any judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's or consultant's best efforts to
promote the interests of Seller and the Seller Subsidiaries or that would
conflict with the business of Seller as presently conducted or proposed to be
conducted. Neither Seller nor any of the Seller Subsidiaries has entered into
any agreement to indemnify any other person, including but not limited to any
employee or consultant of Seller or any of the Seller Subsidiaries, against any
charge of infringement, misappropriation or misuse of any intellectual property,
other than indemnification provisions contained in purchase orders, customer
agreements, reseller agreements or distribution agreements, arising in the
ordinary course of business. All current employees and consultants and, to the
knowledge of Seller, all former employees and consultants whose employment with
Seller was terminated after July 1, 2002, of any of Seller or any of the Seller
Subsidiaries have signed valid and enforceable written assignments to Seller or
the Seller Subsidiaries of any and all rights or claims in any intellectual
property that
19
any such employee or consultant has or may have by reason of any contribution,
participation or other role in the development, conception, creation, reduction
to practice or authorship of any invention, innovation, development or work of
authorship or any other intellectual property that is used in the business of
Seller, and Seller and the Seller Subsidiaries possess signed copies of all such
written assignments by such employees and consultants. With respect to
assignments of patents or application for patents, Seller and the Seller
Subsidiaries possess signed copies of assignments from the inventors of the
intellectual property covered by the patents and applications.
3.18 TAXES.
(a) For the purposes of this Agreement, "TAX" or "TAXES"
refers to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating to
taxes, 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 imposed by law for the Taxes of another
person, including under Treasury Regulations Section 1.1502-6 and analogous
provisions of foreign, state and local law, and including any liability for
taxes of a predecessor entity. For purposes of this Agreement, "TAX RETURN" or
"TAX RETURNS" refers to all federal, state and local and foreign returns,
schedules, estimates, information statements and reports relating to Taxes.
(b) Seller and each of the Seller Subsidiaries have filed
all material Tax Returns required to be filed by them, and all such Tax Returns
are true, correct, and complete except with respect to immaterial items. Seller
and each of the Seller Subsidiaries have paid (or Seller has paid on behalf of
each of the Seller Subsidiaries) all Taxes due and payable as shown on such Tax
Returns. True and correct copies of all Tax Returns filed by Seller and the
Seller Subsidiaries for the period beginning October 1, 1998 through the date
hereof have been provided to Buyer. The most recent financial statements
contained in the Seller SEC Reports reflect an adequate reserve (which reserves
were established in accordance with GAAP) for the payment of all Taxes of Seller
and the Seller Subsidiaries, accrued through the date of such financial
statements. No deficiencies for any Taxes have been proposed, asserted or
assessed against Seller or any of the Seller Subsidiaries, other than
deficiencies that are reflected by reserves maintained in accordance with GAAP
and are being contested in good faith and by appropriate procedures.
(c) None of Seller and the Seller Subsidiaries (i) has
received any notice that it is being audited by any taxing authority; (ii) has
granted any presently operative waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax; (iii)
has granted to any person a power of attorney with respect to Taxes, which power
of attorney will be in effect as of or following the Closing; (iv) has
20
received an inquiry regarding the filing of Tax Returns from a jurisdiction
where it is not presently filing Tax Returns; or (v) has availed itself of any
Tax amnesty or similar relief in any taxing jurisdiction.
(d) None of Seller and the Seller Subsidiaries has
assumed liability for the Taxes of another Person under any contract, agreement
or arrangement.
(e) There is no lien for Taxes on any of the assets of
Seller or any of the Seller Subsidiaries, except for inchoate liens for Taxes
not yet due and payable.
(f) There is no agreement, plan, arrangement or other
contract covering any employee or independent contractor or former employee or
independent contractor of Seller or any Seller Subsidiary that, considered
individually or collectively with any other such agreement, plan, arrangement,
or contract, will, or could reasonably be expected to, give rise to the payment
of any amount that would not be deductible under Section 280G or 162(m) of the
Code (or any comparable provision of state or local law).
(g) Seller and each of the Seller Subsidiaries have
properly withheld on all amounts paid to consultants or employees, or to persons
located outside the United States.
(h) Seller has not been a party to a transaction intended
to qualify under Section 355 of the Code (whether as distributing or distributed
company) within the last five years and has paid over all such amounts to the
appropriate tax authorities.
(i) Neither Seller nor any of its Subsidiaries is or has
been a member of an affiliated group of corporations filing a consolidated
federal income tax return (or a group of corporations filing a consolidated,
combined or unitary income tax return under comparable provisions of state,
local or foreign tax law) other than a group the common parent of which is or
was Seller.
3.19 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Schedule 3.19(a) of the Seller Disclosure Statement
lists all "employee pension benefit plans" as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("PENSION
PLANS"), "welfare benefit plans" as defined in Section 3(1) of ERISA ("WELFARE
PLANS"), or stock bonus, stock option, restricted stock, stock appreciation
right, stock purchase, bonus, incentive, deferred compensation, severance,
holiday, or vacation plans, or any other employee benefit plan, program, policy
or arrangement covering employees (or former employees) employed in the United
States that either is maintained or contributed to by Seller or any of the
Seller Subsidiaries or any of their Seller ERISA Affiliates (as hereinafter
defined) or to which Seller or any of the Seller Subsidiaries or any of their
Seller ERISA Affiliates is obligated to make payments or otherwise may have any
liability (collectively, the
21
"SELLER EMPLOYEE BENEFIT PLANS") with respect to employees or former employees
of Seller, the Seller Subsidiaries, or any of their ERISA Affiliates. For
purposes of this Agreement, "SELLER ERISA AFFILIATE" shall mean any person (as
defined in Section 3(9) of ERISA) that is or has been a member of any group of
persons described in Section 414(b), (c), (m) or (o) of the Code, including
without limitation Seller or any of the Seller Subsidiaries.
(b) Seller and each of the Seller Subsidiaries, and each
of the Seller Employee Benefit Plans, are in compliance with the applicable
provisions of ERISA, the Code and other applicable laws, except where the
failure to comply has not had, or could not reasonably be expected to have,
individually or in the aggregate a Seller Material Adverse Effect.
(c) All contributions to, and payments from, the Pension
Plans which are required to have been made in accordance with the Pension Plans
have been timely made, except where the failure to make such contributions or
payments on a timely basis has not had, or could not reasonably be expected to
have, individually or in the aggregate, a Seller Material Adverse Effect.
(d) To the knowledge of Seller, all of Seller's Pension
Plans and Seller's Subsidiaries' Pension Plans intended to qualify under Section
401 of the Code so qualify, and no event has occurred and no condition exists
with respect to the form or operation of such Pension Plans which would cause
the loss of such qualification or the imposition of any material liability,
penalty or tax under ERISA or the Code, except for such operational failures as
have not had, or could not reasonably be expected to have, individually or in
the aggregate, a Seller Material Adverse Effect.
(e) To the knowledge of Seller, there are no (i)
investigations pending by any governmental entity involving the Seller Employee
Benefit Plans, nor (ii) pending or threatened claims (other than routine claims
for benefits), suits or proceedings against any Seller Employee Benefit Plans,
against the assets of any of the trusts under any Seller Employee Benefit Plans
or against any fiduciary of any Seller Employee Benefit Plans with respect to
the operation of such plan or asserting any rights or claims to benefits under
any Seller Employee Benefit Plans or against the assets of any trust under such
plan, except for those which would not, individually or in the aggregate, give
rise to any liability which has had, or could reasonably be expected to have, a
Seller Material Adverse Effect. To the knowledge of Seller, there are no facts
which would give rise to any liability under this Section 3.19(e) except for
those which would not, individually or in the aggregate, reasonably be expected
to have a Seller Material Adverse Effect in the event of any such investigation,
claim, suit or proceeding.
(f) None of Seller, any of the Seller Subsidiaries nor
any employee of the foregoing, nor any trustee, administrator, other fiduciary
or any other "party in interest" or "disqualified person" with respect to the
Pension Plans or Welfare Plans, has
22
engaged in a "prohibited transaction" (as such term is defined in Section 4975
of the Code or Section 406 of ERISA) other than such transactions that would
not, individually or in the aggregate, reasonably be expected to have a Seller
Material Adverse Effect.
(g) None of Seller, any of the Seller Subsidiaries, or
any of their Seller ERISA Affiliates maintain or contribute to, nor have they
ever maintained or contributed to, any pension plan subject to Title IV of ERISA
or Section 412 of the Code or Section 302 of ERISA.
(h) Neither Seller nor any Subsidiary of Seller nor any
Seller ERISA Affiliate has incurred any material liability under Title IV of
ERISA that has not been satisfied in full.
(i) Neither Seller, any of the Seller Subsidiaries nor
any of their Buyer ERISA Affiliates has any material liability (including any
contingent liability under Section 4204 of ERISA) with respect to any
multiemployer plan, within the meaning of Section 3(37) of ERISA.
(j) With respect to each of the Seller Employee Benefit
Plans, true, correct and complete copies of the following documents have been
made available to Buyer: (i) the plan document and any related trust agreement,
including amendments thereto, (ii) any current summary plan descriptions and
other material communications to participants relating to the Seller Employee
Benefit Plans, (iii) the three most recent Forms 5500, if applicable, and (iv)
the most recent United States Internal Revenue Service ("IRS") determination
letter, if applicable.
(k) None of the Welfare Plans maintained by Seller or any
of the Seller Subsidiaries provides for continuing benefits or coverage for any
participant or any beneficiary of a participant following termination of
employment, except as may be required under COBRA, or except at the expense of
the participant or the participant's beneficiary. Seller and each of the Seller
Subsidiaries which maintain a "GROUP HEALTH PLAN" within the meaning of Section
5000(b)(1) of the Code have complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder except where the failure to comply
would not, individually or in the aggregate, reasonably be expected to have a
Seller Material Adverse Effect.
(l) No liability under any Pension Benefit Plan or
Welfare Plan has been funded nor has any such obligation been satisfied with the
purchase of a contract from an insurance company as to which Seller or any of
the Seller Subsidiaries has received notice that such insurance company is in
rehabilitation or a comparable proceeding.
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(m) The consummation of the transactions contemplated by
this Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable to or in respect of any employee of Seller or any of the
Seller Subsidiaries.
(n) Schedule 3.19(n) of the Seller Disclosure Statement
lists each Seller Foreign Plan (as hereinafter defined). For purposes hereof,
the term "SELLER FOREIGN PLAN" shall mean any material plan, program, policy,
arrangement or agreement maintained or contributed to by, or entered into with,
Seller or any Subsidiary with respect to employees (or former employees)
employed outside the United States to the extent the benefits provided
thereunder are not mandated by the laws of the applicable foreign jurisdiction.
3.20 ENVIRONMENTAL MATTERS.
(a) Except for such cases that, individually or in the
aggregate, have not and would not reasonably be expected to have a Seller
Material Adverse Effect, no underground storage tanks and no amount of any
substance that has been designated by any Government 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,
and the regulations promulgated pursuant to said laws which term shall not
include office and janitorial supplies (insofar as they are stored or used in
the ordinary course of business) (a "HAZARDOUS MATERIAL"), are present, as a
result of the actions of Seller or any of the Seller Subsidiaries or, to the
knowledge of Seller, 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 Seller or any of the Seller Subsidiaries
has at any time owned, operated, occupied or leased.
(b) Except for such cases that, individually or in the
aggregate, have not and would not reasonably be expected to have a Seller
Material Adverse Effect, neither Seller nor any of the Seller Subsidiaries has
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 Seller or any of the Seller Subsidiaries
disposed of, transported, sold, used, released, exposed its employees or others
to or manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Government Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
24
(c) Seller and the Seller Subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the "SELLER
ENVIRONMENTAL PERMITS") necessary for the conduct of Seller's and the Seller
Subsidiaries' Hazardous Material Activities and other businesses of Seller and
the Seller Subsidiaries as such activities and businesses are currently being
conducted. To the knowledge of Seller, there are no facts or circumstances
indicating that any Seller Environmental Permit will or may be revoked,
suspended, canceled or not renewed. All appropriate action in connection with
the renewal or extension of any Seller Environmental Permit has been taken.
(d) No material action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of Seller, threatened concerning any Seller Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of Seller or any of the
Seller Subsidiaries. Seller does not have knowledge of any fact or circumstance
which could involve Seller or any of the Seller Subsidiaries in any
environmental litigation reasonably expected to have a Seller Material Adverse
Effect. Seller and the Seller Subsidiaries have not received notice, nor to the
knowledge of Seller is there a threatened notice, that Seller or the Seller
Subsidiaries are responsible, or potentially responsible, for the investigation,
remediation, clean-up, or similar action at property presently or formerly used
by Seller or any of the Seller Subsidiaries for recycling, disposal, or handling
of waste.
3.21 OFFICER'S CERTIFICATE AS TO TAX MATTERS. Seller does not have
knowledge of any reason why the Merger will fail to qualify as a reorganization
under the provisions of Section 368(a) of the Code. Seller knows of no reason
why it will be unable to deliver to Xxxxxx Xxxxxx White & XxXxxxxxx LLP and
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP prior to (i) the filing of the Registration
Statement (as hereinafter defined) and (ii) the Closing, an Officer's
Certificate in form sufficient to enable each such counsel to render the
opinions required by Section 6.5.
3.22 AFFILIATES. Schedule 3.22 to the Seller Disclosure Statement
identifies all persons who to the knowledge of Seller may be deemed to be
"affiliates" of Seller for purposes of Rule 145 under the Securities Act
("AFFILIATES").
3.23 FINDERS OR BROKERS. Except for Updata Capital, Inc., whose
fees are listed on Schedule 3.23 of Seller Disclosure Statement, neither Seller
nor any of the Seller Subsidiaries has employed any investment banker, broker,
finder or intermediary in connection with the transactions contemplated hereby
who might be entitled to a fee or any commission the receipt of which is
conditioned upon consummation of the Merger.
3.24 REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS. The
information supplied by Seller for inclusion or incorporation by reference in
the Registration Statement on Form S-4 registering the Buyer Common Stock to be
issued in the Merger (the "REGISTRATION STATEMENT") as it relates to Seller, at
the time the
25
Registration Statement is declared effective by the SEC, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. The information supplied by Seller for inclusion in the proxy
statement/prospectus to be sent to the shareholders of Seller in connection with
the Seller Special Meeting (such proxy statement/prospectus, as amended and
supplemented, is referred to herein as the "PROXY STATEMENT/PROSPECTUS"), at the
date the Proxy Statement/Prospectus is first mailed to shareholders, at the time
of the Seller Special Meeting and at the Effective Time will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If at any
time prior to the Effective Time any event with respect to Seller or any of the
Seller Subsidiaries shall occur which is required to be described in the Proxy
Statement/Prospectus, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of Seller.
3.25 TITLE TO PROPERTY. Seller and the Seller Subsidiaries have
good and valid title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the Seller Balance Sheet
or acquired after the Reference Date, and have valid leasehold interests in all
leased properties and assets, in each case free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except (i)
liens for current taxes not yet due and payable, (ii) such imperfections of
title, liens and easements as do not and will not materially detract from or
interfere with the use of the properties subject thereto or affected thereby, or
otherwise materially impair business operations involving such properties, (iii)
liens securing debt reflected on the Seller Balance Sheet, (iv) liens recorded
pursuant to any Environmental Law or (v) liens or failures to have good and
valid title which have not had, or could not reasonably be expected to have,
individually or in the aggregate a Seller Material Adverse Effect. Schedule 3.25
of the Seller Disclosure Statement identifies each parcel of real property owned
or leased by Seller or any of the Seller Subsidiaries.
3.26 NO EXISTING DISCUSSIONS. As of the date hereof, neither Seller
nor any of its representatives is engaged, directly or indirectly, in any
discussions or negotiations with any other Person relating to any Acquisition
Proposal (as defined in Section 5.2).
3.27 MATERIAL MISSTATEMENTS OR OMISSIONS. Except as disclosed in
Seller's risk factors contained in Seller's Form 10-K for the fiscal year ended
September 30, 2002, no representations or warranties by the Seller in this
Agreement (including all schedules, certificates and exhibits hereto) contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit to state any material fact necessary to make the
statements or facts contained therein not misleading. In addition, the other
document, written information, statement, certificate or schedule heretofore or
hereinafter furnished by the Seller to Buyer or Merger Sub in connection with
the transactions
26
contemplated by this Agreement, or mailed or delivered to shareholders of the
Seller in connection with soliciting the approval of the adoption of this
Agreement by the shareholders of the Seller, taken as a whole do not contain or
will not contain any untrue statement of a material fact, or do not omit or will
not at the Effective Time omit to state any material fact necessary to make the
statements or facts contained therein not misleading.
3.28 SUBSCRIPTION RENEWAL.
For the quarter ended June 30, 2003, the rate at which subscribers
renewed their subscriptions (on a dollar basis) exceeded 90% of expiring
contract amounts.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUB
Buyer and Merger Sub make to Seller the representations and warranties
contained in this Article IV, in each case subject to the exceptions set forth
in the disclosure statement, dated as of the date hereof, delivered by Buyer to
Seller at least forty-eight (48) hours prior to the execution of this Agreement
(the "BUYER DISCLOSURE STATEMENT"). The Buyer Disclosure Statement shall be
arranged in schedules corresponding to the numbered and lettered Sections of
this Article IV, and the disclosure in any schedule of the Buyer Disclosure
Statement shall qualify only the corresponding Section of this Article IV.
4.1 ORGANIZATION, ETC.
(a) Each of Buyer and its Subsidiaries, all of which are
listed on Schedule 4.1(b) of the Buyer Disclosure Statement (the "BUYER
SUBSIDIARIES"), and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power, authority
or qualification has not had, or could not reasonably be expected to have,
individually or in the aggregate, a Buyer Material Adverse Effect. Buyer and
each Buyer Subsidiary are duly qualified as a foreign Person to do business, and
are each in good standing, in each jurisdiction where the character of its owned
or leased properties or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or in good standing has
not had, or could not reasonably be expected to have, individually and in the
aggregate, a Buyer Material Adverse Effect.
27
For the purposes of this Agreement, "BUYER MATERIAL ADVERSE EFFECT"
means a material adverse effect on (i) the business, financial condition,
results of operations or assets and liabilities, taken as a whole, of Buyer,
including the Buyer Subsidiaries, or (ii) the ability of Buyer to consummate the
Merger or any of the material transactions contemplated by the Agreement or to
perform any of its material obligations under the Agreement before the Effective
Time. Notwithstanding the foregoing, with respect to item (i) above, none of the
following shall be deemed (either alone or in combination) to constitute, and
none of the following shall be taken into account in determining whether there
has been or will be, a Buyer Material Adverse Effect: (A) any adverse change,
event or effect arising from or relating to general business or economic
conditions; (B) any adverse change, event or effect relating to or affecting the
computer security industry generally, which does not disproportionately affect
Buyer; and (C) any adverse change, event or effect arising from or relating to
the announcement or pendency of the Merger.
(b) Neither Buyer, the Buyer Subsidiaries or Merger Sub
is in violation of any provision of its certificate of incorporation, bylaws or
other charter documents. Schedule 4.1(b) of the Buyer Disclosure Statement sets
forth (i) the full name of each Buyer Subsidiary and any other entity in which
Buyer has a significant equity interest, its capitalization and the ownership
interest of Buyer and each other Person (if any) therein, (ii) the jurisdiction
in which each such Buyer Subsidiary is organized, (iii) each jurisdiction in
which Buyer and each of the Buyer Subsidiaries is qualified to do business as a
foreign Person, and (iv) the names of the current directors and officers of
Buyer and of each Buyer Subsidiary. Buyer has made available to Seller accurate
and complete copies of the certificate of incorporation, bylaws and any other
charter documents, as currently in effect, of Buyer and each of the Buyer
Subsidiaries.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Buyer and Merger
Sub has full corporate power and authority to execute and deliver this Agreement
and to consummate the Merger and the other transactions contemplated hereby and
thereby. The execution and delivery of the Agreement, and the consummation of
the Merger and the other transactions contemplated hereby have been duly and
validly authorized by the board of directors of each of Buyer and Merger Sub and
no other corporate proceedings on the part of either Buyer or Merger Sub are
necessary to authorize this Agreement or to consummate the Merger and the other
transactions contemplated hereby and thereby. The Agreement has been duly and
validly executed and delivered by each of Buyer and Merger Sub and, assuming due
authorization, execution and delivery by Seller, constitutes a valid and binding
agreement of each of Buyer and Merger Sub, enforceable against each of them in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
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4.3 NO VIOLATIONS, ETC. No filing with or notification to, and no
permit, authorization, consent or approval of, any Government Entity is
necessary on the part of either Buyer or Merger Sub for the consummation by
Buyer or Merger Sub of the Merger or the other transactions contemplated hereby,
except (i) for the filing of the Articles of Merger as required by Washington
Law, (ii) for the filing with the SEC of, and the effectiveness of, the
Registration Statement, (iii) for compliance with the applicable requirements of
the Exchange Act, state securities or "blue sky" laws, state takeover laws and
the listing requirements of Nasdaq, or (iv) where the failure to make such
filing or notification or to obtain such permit, authorization, consent or
approval has not had, or could not reasonably be expected to have, individually
or in the aggregate, a Buyer Material Adverse Effect. Neither the execution and
delivery of the Agreement, nor the consummation of the Merger or the other
transactions contemplated hereby, nor compliance by Buyer and Merger Sub with
all of the provisions hereof and thereof will, (i) conflict with or result in
any breach of any provision of the certificate of incorporation, bylaws or other
charter documents of Buyer or any Buyer Subsidiary, (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer or any
Buyer Subsidiary, or by which any of their properties or assets may be bound, or
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, or result in any material
change in, or give rise to any right of termination, cancellation, acceleration,
redemption or repurchase under, any of the terms, conditions or provisions of
any Buyer Contract (as defined below), except in the case of clauses (ii) or
(iii), for any violation, breach or default that has not had, or could not
reasonably be expected to have, a Buyer Material Adverse Effect.
4.4 BOARD APPROVAL; NO STOCKHOLDER APPROVAL REQUIRED. The boards
of directors of Buyer and Merger Sub have approved this Agreement and the
Merger. The stockholders of Buyer are not required to adopt this Agreement.
Buyer, as the sole shareholder of Merger Sub, shall adopt this Agreement
immediately after the execution and delivery of this Agreement by the parties
hereto.
4.5 CAPITALIZATION.
(a) The authorized capital stock of Buyer consists of
50,000,000 shares of Buyer Common Stock and 2,000,000 shares of Preferred Stock,
$0.01 par value ("BUYER PREFERRED STOCK"). As of July 24, 2003, there were (i)
32,135,963 shares of Buyer Common Stock outstanding, (ii) no shares of Buyer
Series Preferred Stock, outstanding, and (iii) no treasury shares. The
authorized capital stock of Merger Sub consists of 1000 shares of Merger Sub
Common Stock, $0.01 par value. As of the date hereof, there were (i) 1000 shares
of Merger Sub Common Stock outstanding, all of which are held of record and
beneficially by Buyer and (ii) no treasury shares. Merger Sub was formed for the
purpose of consummating the Merger and has no material assets or liabilities,
except as necessary for such purpose.
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(b) Except for the stock options of Buyer outstanding
immediately prior to the Effective Time under the Buyer Stock Plans (as defined
below) (the "BUYER OPTIONS"), there are no warrants, options, convertible
securities, calls, rights, stock appreciation rights, preemptive rights, rights
of first refusal, or agreements or commitments of any nature obligating Buyer to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity interests of Buyer, or obligating Buyer
to grant, issue, extend, accelerate the vesting of, or enter into, any such
warrant, option, convertible security, call, right, stock appreciation right,
preemptive right, right of first refusal, agreement or commitment. For purposes
of this Agreement, "BUYER STOCK PLANS" means the Amended and Restated 1995
Omnibus Stock Plan, 2002 Stock Option Plan and Buyer Purchase Plan. For purposes
of this Agreement, "TO THE KNOWLEDGE OF BUYER," or words of similar import,
shall mean the actual knowledge of executive officers and directors of Buyer and
such other persons set forth on Schedule 4.5(b) of the Buyer Disclosure
Statement.
4.6 SEC FILINGS. Buyer has filed with the SEC all required forms,
reports, registration statements and documents required to be filed by it with
the SEC (collectively, all such forms, reports, registration statements and
documents filed after January 1, 2000 are referred to herein as the "BUYER SEC
REPORTS"). All of the Buyer SEC Reports complied as to form, when filed, in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act. Accurate and complete copies of the Buyer SEC reports have been
made available (including via XXXXX) to Seller. As of their respective dates the
Buyer SEC Reports (including all exhibits and schedules thereto and documents
incorporated by reference therein) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. To the knowledge of Buyer and except as
disclosed in Buyer SEC Reports, since October 1, 2000, each director and
executive officer of Buyer and each such persons' affiliates have complied with
all filing requirements under Section 13 and Section 16(a) of the Exchange Act.
4.7 COMPLIANCE WITH LAWS. Neither Buyer nor any Buyer Subsidiary
has violated or failed to comply with any statute, law, ordinance, rule or
regulation (including, without limitation, relating to the export or import of
goods or technology) of any foreign, federal, state or local government or any
other governmental department or agency, except where any such violations or
failures to comply have not had, or could not reasonably be expected to have,
individually or in the aggregate, a Buyer Material Adverse Effect. Buyer, the
Buyer Subsidiaries and Merger Sub have all permits, licenses and franchises from
governmental agencies required to conduct their businesses as now being
conducted and as proposed to be conducted, except for those the absence of which
has not had, or could not reasonably be expected to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
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4.8 FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Buyer SEC Reports and each of the Buyer Interim Financial Statements (the "BUYER
FINANCIAL STATEMENTS"), (x) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (y) fairly
presented the consolidated financial position of Buyer and the Buyer
Subsidiaries as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, consistent with the
books and records of Buyer, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not, or are not expected to be, material in amount. The interim
financial statements as of and for the quarter ended March 31, 2003, provided to
the Seller prior to the date hereof, are herein referred to as the "BUYER
INTERIM FINANCIAL STATEMENTS" and the balance sheet of Buyer as of the Reference
Date is herein referred to as the "BUYER BALANCE SHEET."
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Buyer, nor any of
the Buyer Subsidiaries or the entities listed on Schedule 4.1(b) has any
liabilities (absolute, accrued, contingent or otherwise) other than (i)
liabilities included in the Buyer Balance Sheet and the related notes to the
financial statements, (ii) normal or recurring liabilities incurred since March
31, 2003 in the ordinary course of business consistent with past practice,
which, individually or in the aggregate, are not or would not be reasonably
likely to have, a Buyer Material Adverse Effect, and (iii) liabilities under
this Agreement.
4.10 ABSENCE OF CHANGES OR EVENTS. Except as contemplated by this
Agreement, since March 31, 2003, no state of facts, change, event or effect that
has had or could reasonably be expected to have a Buyer Material Adverse Effect
has occurred and, in addition, Buyer, the Buyer Subsidiaries and the entities
listed on Schedule 3.1(b) have not, directly or indirectly:
(a) instituted any material change in accounting methods,
principles or practices other than as required by GAAP or the rules and
regulations promulgated by the SEC and disclosed in the notes to the Buyer
Financial Statements;
(b) sold, transferred, leased, licensed, pledged,
mortgaged, encumbered, or otherwise disposed of, or agreed to sell, transfer,
lease, license, pledge, mortgage, encumber, or otherwise dispose of, any
material properties (including intangibles, real, personal or mixed);
(c) amended its articles of incorporation, bylaws, or any
other charter document, or effected or been a party to any merger,
consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction; or
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(d) agreed to do any of the things described in the
preceding clauses (a) through (c) other than as expressly contemplated or
provided for in this Agreement.
4.11 LITIGATION.
(a) There is no Action pending and, to the knowledge of
Buyer, there is not any private or governmental investigation, or any of the
foregoing threatened against Buyer, any of the Buyer Subsidiaries, or any of
their respective officers and directors (in their capacities as such), or
involving any of their assets, before any court, or governmental or regulatory
authority or body, or arbitration tribunal, except for those Actions which,
individually or in the aggregate, have not had, or could not reasonably be
expected to have, a Buyer Material Adverse Effect. There is no Action pending
or, to the knowledge of Buyer, threatened which in any manner challenges, seeks
to, or is reasonably likely to prevent, enjoin, alter or delay the transactions
anticipated by this Agreement.
(b) There is no outstanding judgment, order, writ,
injunction or decree of any court, governmental or regulatory authority, body,
or agency or arbitration tribunal in a proceeding to which Buyer, any Buyer
Subsidiary, or any of their assets is or was a party, or by which Buyer, any
Buyer Subsidiary, or any of their assets is bound.
4.12 CONTRACTS AND COMMITMENTS.
(a) Except as filed as an exhibit to Buyer's SEC Reports,
and except as contemplated by this Agreement, neither Buyer, nor the Buyer
Subsidiaries, nor the entities listed on Schedule 3.1(b) is a party to or bound
by any oral or written contract, obligation or commitment that is required to be
filed as an exhibit to a periodic report under the Exchange Act (or will be
required to be filed with the Buyer's next quarterly report on Form 10-Q), as
provided by Rule 601 of Regulation S-K promulgated under the Exchange Act. Each
contract, agreement or commitment filed as an exhibit to the Buyer's SEC Reports
or required to be filed, as described in this Section 4.12 is referred to herein
as a "BUYER CONTRACT."
(b) Neither Buyer nor any of the Buyer Subsidiaries, nor
to the knowledge of Buyer any other party to a Buyer Contract, has breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under (nor does there exist any condition under which, with the
passage of time or the giving of notice, or both, could reasonably be expected
to cause such a breach, violation or default under) any Buyer Contract, other
than any breaches, violations or defaults which have not had, or could not
reasonably be expected to have, individually or in the aggregate, a Buyer
Material Adverse Effect.
(c) Each Buyer Contract is a valid, binding and
enforceable obligation of Buyer and to the knowledge of Buyer, of the other
party or parties thereto, in
32
accordance with its terms, and in full force and effect, except where the
failure to be valid, binding, enforceable and in full force and effect has not
had, or could not reasonably be expected to have, a Buyer Material Adverse
Effect and to the extent enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights governing or by general principles of equity.
(d) An accurate and complete copy of each Buyer Contract
has been made available (including via XXXXX) to Buyer.
4.13 INTELLECTUAL PROPERTY RIGHTS.
(a) To the knowledge of Buyer, Buyer and the Buyer
Subsidiaries own or have the right to use all intellectual property used to
conduct their respective businesses (such intellectual property and the rights
thereto are collectively referred to herein as the "BUYER IP RIGHTS"), except
where the failure so to own or have the right to use has not had, or could not
reasonably be expected to have, a Buyer Material Adverse Effect.
(b) Neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or under
development by Buyer or any of the Buyer Subsidiaries (i) violates in any
material respect any license or agreement between Buyer or any of the Buyer
Subsidiaries and any third party or (ii) to the knowledge of Buyer, infringes in
any material respect any patents or other intellectual property rights of any
other party; and there is no pending or, to the knowledge of Buyer, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any Buyer IP Rights, or asserting that any Buyer IP Rights
or the proposed use, sale, license or disposition thereof, or the manufacture,
use or sale of any Buyer products, conflicts or will conflict with the rights of
any other party.
4.14 OFFICER'S CERTIFICATE AS TO TAX MATTERS. Buyer does not have
knowledge of any reason why the Merger will fail to qualify as a reorganization
under the provisions of Section 368(a) of the Code. Buyer knows of no reason why
it will be unable to deliver to Xxxxxx Xxxxxx White & XxXxxxxxx LLP and Xxxxxx,
Xxxxxxxxxx & Xxxxxxxxx LLP prior to (i) the filing of Registration Statement and
(ii) the Closing an Officer's Certificate in form sufficient to enable each such
counsel to render the opinions required by Section 6.4.
4.15 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by Buyer for inclusion or incorporation by reference in the
Registration Statement as it relates to Buyer, at the time the Registration
Statement is declared effective by the SEC, will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The information supplied by Buyer for inclusion in the Proxy
Statement/Prospectus to be sent to the shareholders of Seller in connection with
33
the Seller Special Meeting, at the date the Proxy Statement/Prospectus is first
mailed to shareholders, at the time of the Seller Special Meeting and at the
Effective Time will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. If at any time prior to the Effective Time any event
with respect to Buyer or any of the Buyer Subsidiaries shall occur which is
required to be described in the Proxy Statement/Prospectus, such event shall be
so described, and an amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the shareholders of Seller.
ARTICLE V
COVENANTS
5.1 CONDUCT OF SELLER BUSINESS DURING INTERIM PERIOD. During the
period from the date of this Agreement to the earlier of the termination of this
Agreement or the Effective Time, each of Seller and the Seller Subsidiaries,
except as contemplated or required by this Agreement or as expressly consented
to in writing by the Buyer, will (i) conduct its operations according to its
ordinary and usual course of business and consistent with past practices, (ii)
use commercially reasonable efforts to preserve intact its business
organization, to keep available the services of its officers and employees in
each business function and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it, and (iii) not take any action which would adversely affect its ability to
consummate the Merger or the other transactions contemplated hereby. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement and except as set forth on Schedule 5.1 of the Seller
Disclosure Statement, prior to the earlier of the termination of this Agreement
or Effective Xxxx Xxxxxx will not, and will not permit its Subsidiaries, without
the prior written consent of the Buyer, directly or indirectly, do any of the
following:
(a) enter into, violate, extend, amend or otherwise
modify or waive any of the material terms of (i) any joint venture, license, or
agreement relating to the joint development or transfer of technology or Seller
IP Rights or (ii) except in the ordinary course of business and consistent with
past practice, any other Seller Contracts.
(b) except pursuant to agreements outstanding on the date
hereof, waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
(c) grant any severance or termination pay to any officer
or employee except payments in amounts consistent with policies and past
practices or pursuant to
34
written agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to the other, or adopt any new severance plan;
(d) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(e) repurchase or otherwise acquire, directly or
indirectly, any shares of capital stock except pursuant to rights of repurchase
of any such shares under any employee, consultant or director stock plan
existing on the date hereof;
(f) cause, permit or propose any amendments to the
articles of incorporation or Bylaws of Buyer (or similar governing instruments
of any Seller Subsidiaries);
(g) sell, lease, license, encumber or otherwise dispose
of any properties or assets which are material, individually or in the
aggregate, to the business of Seller, except in the ordinary course of business
consistent with past practice;
(h) incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire debt securities of Seller,
as the case may be, or guarantee any debt securities of others;
(i) adopt or amend any employee benefit or employee stock
purchase or employee option plan, or enter into any employment contract, pay any
special bonus or special remuneration to any director or employee, or increase
the salaries or wage rates of its officers or employees other than in the
ordinary course of business, consistent with past practice, or change in any
material respect any management policies or procedures;
(j) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of claims liabilities or
obligations in the ordinary course of business;
(k) split, combine or reclassify any shares of its
capital stock;
(l) except as permitted by Section 5.5(c) of this
Agreement authorize, solicit, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an agreement
with any other person with respect to, any plan of liquidation or dissolution,
any acquisition of a material amount of assets or securities, any disposition of
a material amount of assets or securities, any material change in
capitalization, or any partnership, association or joint venture;
35
(m) fail to renew any insurance policy naming it as a
beneficiary or a loss payee, or take any steps or fail to take any steps that
would permit any insurance policy naming it as a beneficiary or a loss payee to
be canceled, terminated or materially altered, except in the ordinary course of
business and consistent with past practice and following written notice to the
other party;
(n) maintain its books and records in a manner other than
in the ordinary course of business and consistent with past practice;
(o) enter into any hedging, option, derivative or other
similar transaction or any foreign exchange position or contract for the
exchange of currency other than in the ordinary course of business and
consistent with past practice;
(p) institute any change in its accounting methods,
principles or practices other than as required by GAAP, or the rules and
regulations promulgated by the SEC, or revalue any assets, including without
limitation, writing down the value of inventory or writing off notes or accounts
receivables;
(q) in respect of any Taxes, make or change any material
election, change any accounting method, enter into any closing agreement, settle
any material claim or assessment, or consent to any extension or waiver of the
limitation period applicable to any material claim or assessment except as
required by applicable law;
(r) suspend, terminate or otherwise discontinue any
planned or ongoing material research and development activities, programs or
other such activities other than in the ordinary course of business and
consistent with past practice;
(s) issue any capital stock or other options, warrants or
other rights to purchase or acquire capital stock, except for the customary
grant of stock options in accordance with past practice, the issuance of Seller
Common Stock upon exercise of stock options granted prior to the date hereof
under the Seller Stock Plans or upon exercise of the Seller Warrants, and the
issuance of Seller Common Stock pursuant to the Seller Purchase Plan;
(t) take any action to render inapplicable, or to exempt
any third party from, (i) the provisions of Chapter 23B.19 of Washington Law or
(ii) any other state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or vote shares; or
(u) take or agree to take any action which could
reasonably be expected to result in any condition contained in Section 7.2 of
this Agreement not being satisfied immediately prior to the Effective Time.
5.2 CONDUCT OF BUYER BUSINESS DURING INTERIM PERIOD. During the
period from the date of this Agreement to the earlier of the termination of this
Agreement or the
36
Effective Time, each of Buyer and the Buyer Subsidiaries, except as contemplated
or required by this Agreement or as expressly consented to in writing by the
Buyer, (i) will conduct its operations according to its ordinary and usual
course of business and consistent with past practices and (ii) not take any
action which would adversely affect its ability to consummate the Merger or the
other transactions contemplated hereby. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the earlier of the termination of this Agreement or Effective Time, Buyer
will not, and will not permit its Subsidiaries to, without the prior written
consent of the Seller, directly or indirectly, do any of the following:
(a) cause, permit or propose any amendments to the certificate
of incorporation or Bylaws of Buyer or Merger Sub (or similar governing
instruments of any Subsidiaries);
(b) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(c) sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Buyer, except in the ordinary course of business consistent with
past practice; or
(d) take or agree to take any action which could reasonably be
expected to, result in any condition contained in Section 7.1 of this Agreement
not being satisfied immediately prior to the Effective Time.
5.3 NO SOLICITATION. From and after the date of this Agreement
until the Effective Time or termination of this Agreement pursuant to Article
VIII, Seller and the Seller Subsidiaries will not, nor will they authorize or
permit any of their respective officers, directors, affiliates or employees or
any investment banker, attorney or other advisor or representative retained by
any of them to, directly or indirectly, (i) solicit, initiate or induce the
making, submission or announcement, directly or indirectly, of any proposal that
constitutes or is reasonably likely to lead to any Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information or data with respect to, or
take any other action to facilitate any inquiries or the making of any proposal
that constitutes or may reasonably be expected to lead to, any Acquisition
Proposal, (iii) engage in discussions with any Person with respect to any
Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction (as hereinafter defined); provided however, that this
Section 5.3 shall not prohibit Seller from contacting any Person that has made
an unsolicited Acquisition Proposal (that is not withdrawn) (a "POTENTIAL
ACQUIROR") for the sole
37
purpose of clarifying such proposal and any material contingencies and the
capability of consummation; provided further, however, that this Section 5.3
shall not prohibit Seller from furnishing information to, or entering into
discussions or negotiations with, any Potential Acquiror if (A) neither Seller
nor the Seller Subsidiaries nor any of their respective officers, directors,
affiliates or employees or any investment banker, attorney or other advisor or
representative retained by any of them and acting on their behalf shall have
breached or taken any action inconsistent with any of the provisions set forth
in this Section 5.3, (B) Seller's board of directors is advised by its financial
advisor that the Potential Acquiror submitting such Acquisition Proposal has the
financial wherewithal to be reasonably capable of consummating such an
Acquisition Proposal, and the board determines in good faith (x) after receiving
advice from its financial advisor, that such Acquisition Proposal is or is
reasonably likely to result in a Seller Superior Offer (as hereafter defined),
and (y) based upon advice of outside legal counsel, that the failure to
participate in such discussions or negotiations or to furnish such information
or approve an Acquisition Proposal would violate the board's fiduciary duties
under applicable law; (C) at least three (3) business days prior to furnishing
any such nonpublic information to, or entering into discussions with a Potential
Acquiror, Seller gives Buyer written notice of the identity of such Potential
Acquiror and of Seller's intention to furnish nonpublic information to, or enter
into discussions with, such Potential Acquiror; (D) Seller receives from such
Potential Acquiror an executed confidentiality, standstill and nonsolicitation
agreement containing provisions at least as favorable to Seller as the
confidentiality, standstill and nonsolicitation provisions of the
Confidentiality Agreement (as defined in Section 5.3); and (E) at least three
(3) business days prior to furnishing any such nonpublic information to such
Potential Acquiror, Seller furnishes such nonpublic information to Buyer (to the
extent such nonpublic information has not been previously furnished by Seller to
Buyer).
For purposes of this Agreement, "ACQUISITION PROPOSAL" with respect to
an entity shall mean any offer or proposal (other than an offer or proposal by
the other party) relating to any Acquisition Transaction. For purposes of this
Agreement, "ACQUISITION TRANSACTION" shall mean any transaction or series of
related transactions involving: (A) any purchase from the entity or acquisition
by any person or "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a 15% interest in the total
outstanding voting securities of the entity or of any Subsidiary or any tender
offer or exchange offer that if consummated would result in any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 15% or more of the total outstanding
voting securities of the entity or of any Subsidiary or any merger,
consolidation, business combination or similar transaction involving the entity;
(B) any sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than 15% of the assets of the entity; or (C) any
liquidation or dissolution of the entity.
38
In addition to the obligations of Seller set forth in this
Section 5.3, Seller shall promptly (and in no event later than twenty-four (24)
hours after receipt of any Acquisition Proposal, any inquiry or indication of
interest that Seller reasonably believes could lead to an Acquisition Proposal)
advise Buyer orally and in writing of any Acquisition Proposal or any request
for nonpublic information or inquiry which Seller reasonably believes would lead
to an Acquisition Proposal or to any Acquisition Transaction, the material terms
and conditions of such Acquisition Proposal, request or inquiry, and the
identity of the person or group making any such Acquisition Proposal, request or
inquiry. Seller will keep Buyer informed as promptly as practicable in all
material respects of the status and details (including material amendments or
proposed material amendments) of any such Acquisition Proposal, request or
inquiry made after the date hereof.
5.4 ACCESS TO INFORMATION. From the date of this Agreement until
the Effective Time, each of Buyer and Seller will afford to the other party and
its authorized representatives (including counsel, financial advisors,
consultants, accountants, auditors and agents) reasonable access during normal
business hours and upon reasonable notice to all of its facilities, personnel
and operations and to all of its and its Subsidiaries books and records, will
permit the other party and its authorized representatives to conduct inspections
as they may reasonably request and will instruct its officers and those of its
Subsidiaries to furnish the other party with such financial and operating data
and other information with respect to its business and properties as the other
party may from time to time reasonably request, subject to the restrictions set
forth in the Confidentiality Agreement, dated as of February 12, 2003 between
Buyer and Seller (the "CONFIDENTIALITY AGREEMENT"). Buyer and Seller agree that
each of them will treat any such information in accordance with the
Confidentiality Agreement, which shall remain in full force and effect in
accordance with its terms.
5.5 SPECIAL MEETING; REGISTRATION STATEMENT; BOARD
RECOMMENDATIONS.
(a) Promptly after the date hereof, Seller will take all
action necessary in accordance with Washington Law and its articles of
incorporation and bylaws to convene a meeting of Seller's shareholders to
consider adoption and approval of this Agreement and approval of the Merger (the
"SELLER SPECIAL MEETING") to be held as promptly as possible, and in any event
(to the extent permissible under applicable law) within 40 days after the
declaration of effectiveness of the Registration Statement. Subject to Section
5.5(e), Seller will use its commercially reasonable efforts to solicit from its
shareholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its shareholders required by Washington Law to
obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, Seller may adjourn or postpone the Seller Special Meeting to the
extent necessary to ensure that any necessary supplement or amendment to the
Proxy Statement/Prospectus is provided to
39
Seller's shareholders in advance of a vote on the Merger and this Agreement or,
if as of the time for which the Seller Special Meeting is originally scheduled
(as set forth in the Proxy Statement/Prospectus) there are insufficient shares
of Seller Common Stock represented (either in person or by proxy) to constitute
a quorum necessary to conduct the business of the Seller Special Meeting. Seller
shall ensure that the Seller Special Meeting is called, noticed, convened, held
and conducted, and that all proxies solicited by Seller in connection with the
Seller Special Meeting are solicited in compliance with the Washington Law and
the Exchange Act, Seller's articles of incorporation and bylaws and all other
applicable legal requirements.
(b) Subject to Section 5.5(c): (i) the board of directors
of Seller shall recommend that Seller's shareholders vote in favor of and adopt
and approve this Agreement and approve the Merger at the Seller Special Meeting;
(ii) the Proxy Statement/Prospectus shall include a statement to the effect that
the board of directors of Seller has recommended that Seller's shareholders vote
in favor of and adopt and approve this Agreement and the Merger at the Seller
Special Meeting; and (iii) neither the board of directors of Seller nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Buyer, the recommendation of
the board of directors of Seller that Seller's shareholders vote in favor of and
adopt and approve this Agreement and the Merger.
(c) If prior to the Effective Time the board of directors
of Seller determines in good faith, after consultation with its financial and
legal advisors, that any Acquisition Proposal constitutes a Seller Superior
Offer and the board of directors of Seller believes in its good faith judgment,
after receiving advice of its outside legal counsel that failing to take such
action with respect to the Seller Superior Offer would constitute a breach of
its fiduciary duties under applicable law, nothing in this Agreement shall
prevent the board of directors of Seller from withholding, withdrawing, amending
or modifying its recommendation in favor of the Merger; provided, that (i) a
Seller Superior Offer is made to Seller and is not withdrawn, (ii) Seller shall
have provided written notice to Buyer (a "SELLER NOTICE OF SUPERIOR OFFER")
advising Buyer that Seller has received a Seller Superior Offer, specifying the
material terms and conditions of such Seller Superior Offer and identifying the
person or entity making such Superior Offer, (iii) Buyer shall not have, within
three (3) business days of Buyer's receipt of the Seller Notice of Superior
Offer, made an offer that Seller board of directors by a majority vote
determines in its good faith judgment (after consultation with its financial
advisor) to be at least as favorable to Seller's shareholders as such Seller
Superior Offer (it being agreed that the Seller board of directors shall convene
a meeting to consider any such offer by Buyer promptly following the receipt
thereof). Seller shall provide Buyer with at least three (3) business days prior
notice of any meeting of Seller's board of directors at which Seller's board of
directors is reasonably expected to consider any Acquisition Transaction. For
purposes of this Agreement "SELLER SUPERIOR OFFER" shall mean an unsolicited,
bona fide written offer or proposal made by a third party to consummate any
40
of the following transactions: (i) a merger or consolidation involving Seller
pursuant to which the shareholders of Seller immediately preceding such
transaction hold less than a majority of the equity interest in the surviving or
resulting entity of such transaction, (ii) the acquisition by any person or
group (including by way of a tender offer or an exchange offer or a two step
transaction involving a tender offer followed with reasonable promptness by a
merger involving Seller), directly or indirectly, of ownership of 51% of the
then outstanding shares of capital stock of Seller, or (iii) any sale, transfer
or disposition of all or substantially all of the assets of Seller, on terms
that the board of directors of Seller determines, in its reasonable judgment
(after consultation with its financial advisor) to be more favorable to its
shareholders than the terms of the Merger; provided, however, that any such
offer shall not be deemed to be a "Seller Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not likely in the reasonable judgment of Seller's board of
directors (after consultation with its financial advisor) to be obtained by such
third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit
Seller or its board of directors from taking and disclosing to its shareholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act.
(e) As promptly as practicable after the execution of
this Agreement, Seller and Buyer shall mutually prepare, and Buyer shall file
the Registration Statement with the SEC. As promptly as practicable following
receipt of SEC comments on such Registration Statement, Buyer and Seller shall
mutually prepare a response to such comments. Buyer and Seller shall use all
commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable. Buyer shall also take any
action required to be taken under applicable state blue sky or securities laws
in connection with Buyer Common Stock to be issued in exchange for the shares of
Seller Common Stock. Buyer and Seller shall promptly furnish to each other all
information, and take such other actions (including without limitation using all
commercially reasonable efforts to provide any required consents of their
respective independent auditors), as may reasonably be requested in connection
with any action by any of them in connection with the preceding sentences of
this Section 5.5(e). Whenever any party learns of the occurrence of any event
which is required to be set forth in an amendment or supplement to the Proxy
Statement/Prospectus, the Registration Statement or any other filing made
pursuant to this Section 5.5(e), Buyer or Seller, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC or its staff and/or mailing to shareholders of Seller such amendment or
supplement.
5.6 COMMERCIALLY REASONABLE EFFORTS.
(a) Subject to the terms and conditions herein provided,
Buyer, Merger Sub and Seller shall use commercially reasonable efforts to take,
or cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or appropriate under this
41
Agreement, applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
using commercially reasonable efforts to obtain all necessary governmental and
private party consents, approvals or waivers and (ii) using commercially
reasonable efforts to lift any legal bar to the Merger. Buyer shall cause Merger
Sub to perform all of its obligations under this Agreement.
(b) Notwithstanding anything to the contrary in this
Agreement, neither Buyer, the Surviving Corporation, nor Seller nor any of their
Subsidiaries shall be required to (i) divest, hold separate or license any
business(es), product line(s) or asset(s), (ii) take any action or accept any
limitation that would reasonably be expected to have a Buyer Material Adverse
Effect or a Seller Material Adverse Effect, or (iii) agree to any of the
foregoing.
5.7 PUBLIC ANNOUNCEMENTS. Before issuing any press release or
otherwise making any public statement with respect to the Merger or any of the
other transactions contemplated hereby, Buyer, Merger Sub and Seller agree to
consult with each other as to its form and substance, and agree not to issue any
such press release or general communication to employees or make any public
statement prior to obtaining the consent of the other (which shall not be
unreasonably withheld or delayed), except to the extent that Buyer, Merger Sub
or Seller, as the case may be, is advised by outside counsel that such public
statement may be required by applicable law or by the rules and regulations of
or listing agreement with Nasdaq, or as may otherwise be required by Nasdaq or
the SEC.
5.8 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt
notice to Buyer and Merger Sub, and Buyer and Merger Sub shall give prompt
notice to Seller, of (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time, (ii) any material failure of
Seller, Buyer or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, (iii) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement, or (iv) any facts or
circumstances arise that could reasonably be expected to result in a Seller
Material Adverse Effect or a Buyer Material Adverse Effect, as the case may be.
5.9 INDEMNIFICATION.
(a) The Articles of Incorporation and Bylaws of the
Surviving Corporation will contain, and Buyer will cause the Surviving
Corporation to honor, the provisions with respect to indemnification set forth
in the Articles of Incorporation and Bylaws of Seller immediately prior to the
Effective Time, which provisions will not be
42
amended, repealed or otherwise modified for a period of six (6) years after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees or
agents of Seller, unless such modification is required by law.
(b) Buyer will cause the Surviving Corporation to honor
and fulfill the obligations of Seller and Buyer pursuant to any indemnification
agreements with Seller's directors and officers and Buyer' directors and
officers existing at or before the Effective Time.
(c) For a period of six (6) years after the Effective
Time, Buyer will or will cause the Surviving Corporation to maintain in effect
directors' and officers' liability insurance covering those persons who are
currently covered by the Sellers directors' and officers' liability insurance
policy (a copy of which has been made available to Buyer) on terms comparable to
those now applicable to directors and officers of Seller; provided, however,
that in no event will Buyer or the Surviving Corporation be required to expend
in excess of 200% of the current annual premium paid by Seller in the aggregate
for such coverage; and provided further, that if the premium for such coverage
exceeds such amount, Buyer or the Surviving Corporation will purchase a policy
with the greatest coverage available for such amount.
5.10 AFFILIATE AGREEMENTS. Concurrently with the execution and
delivery hereof, Seller shall deliver to Buyer a list, reasonably satisfactory
to counsel for Buyer, setting forth the names of all Persons who are expected to
be, at the Effective Time, in Seller's reasonable judgment, Affiliates of
Seller. Seller shall furnish such information and documents as Buyer may
reasonably request for the purpose of reviewing such list. Seller shall use its
best efforts to deliver a written agreement in substantially the form of Exhibit
C attached hereto (a "SELLER AFFILIATE AGREEMENT") executed by each Person
identified as an Affiliate in the list furnished pursuant to this Section 5.10
within ten (10) days after the execution of this Agreement.
5.11 STOCK EXCHANGE LISTING. Prior to the Effective Time, if
required by the rules of Nasdaq, Buyer agrees to cause the shares of Buyer
Common Stock issuable, and those required to be reserved for issuance in
connection with the Merger, to be authorized for listing on Nasdaq, subject to
official notice of issuance.
5.12 RESIGNATION OF DIRECTORS AND OFFICERS. Prior to the Effective
Time, Seller shall deliver to Buyer the resignations of such directors and
officers of Seller and its Subsidiaries as Buyer shall specify at least ten
business days prior to the Closing, effective at the Effective Time.
5.13 CONSENTS OF BUYER' AND SELLER'S ACCOUNTANTS. Each of Buyer and
Seller shall use commercially reasonable efforts to cause its independent
accountants to deliver to Buyer a consent, dated no more than three days prior
to the date on which the
43
Registration Statement shall become effective, in form reasonably satisfactory
to Buyer and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form S-4 under the Securities Act.
5.14 VOTING AGREEMENTS. Concurrently with the execution hereof,
Seller shall deliver to Buyer the Seller Voting Agreements executed by each
director and executive officer of Seller identified on Schedule 5.14 of the
Seller Disclosure Statement.
5.15 FORM S-8. No later than ten (10) business days after the
Effective Time, Buyer shall file with the SEC a Registration Statement, on Form
S-8 or other appropriate form under the Securities Act, to register Buyer Common
Stock issuable upon exercise of the Buyer Exchange Options following the
Effective Time. Buyer shall use commercially reasonable efforts to cause such
Registration Statement to remain effective until the exercise or expiration of
such options.
5.16 TAX TREATMENT. Each of Buyer and Seller shall use its
commercially reasonable efforts to cause the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code and to obtain
the opinion of counsel referred to in Section 6.5, including by executing the
Officer's Certificate referred to in Sections 3.21 and 4.14 and delivering such
Certificate prior to (i) the filing of the Registration Statement and (ii) the
Closing.
5.17 SEC FILINGS.
(a) Seller will deliver promptly to Buyer true and
complete copies of each report, registration statement or statement mailed by it
to its security holders generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports, including the consolidated financial statements
included therein, and statements (excluding any information therein provided by
Buyer or Merger Sub, as to which Seller makes no representation) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. Each of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in such reports, (x) shall 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, (y) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) shall fairly present the consolidated
financial position of Seller and the Seller Subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that
44
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount.
(b) Buyer will deliver promptly to Seller true and
complete copies of each report, registration statement or statement mailed by it
to its security holders generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports, including the consolidated financial statements
included therein, and statements (excluding any information therein provided by
Seller, as to which neither Buyer nor Merger Sub makes no representation) will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. Each of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in such reports, (x) shall 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, (y) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) shall fairly present the consolidated
financial position of Buyer and the Buyer Subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not,
or are not expected to be, material in amount.
5.18 EMPLOYEE BENEFIT MATTERS. (a) Buyer and Seller shall cooperate
to identify employees of Seller who Buyer believes in its sole discretion are
necessary or desirable for Buyer's proposed operations, and Buyer will offer
such employees of Seller employment by Buyer or the Surviving Corporation after
the Effective Time. Any such employees who are offered employment by Buyer and
who accept such employment with Buyer or the Surviving Corporation are referred
to herein as "CONTINUING EMPLOYEES." Buyer shall provide Seller with copies of
any offers of employment made by Buyer to employees of Seller prior to the
Effective Time.
(b) Buyer agrees to cause all Continuing Employees to be
eligible to participate in the Buyer Stock Plans and health and life insurance
plans consistent with the eligibility criteria applied by Buyer to other
employees of Buyer. The Continuing Employees shall receive full credit for prior
years of service with Seller and parity with Buyer employees with respect to
eligibility to participate in all Buyer employee benefit plans, programs and
policies. It is the intention of Buyer that all Continuing Employees be provided
employee benefits that are no less favorable in the aggregate than the benefits
provided to such employees under the Seller Employee Benefit Plans, as in effect
45
immediately prior to the Effective Time. Compensation provided to Continuing
Employees shall be determined by Buyer in its sole discretion.
(c) No later than one week after the Effective Time,
Buyer shall pay, or shall cause the Surviving Corporation to pay, to any
employee of Seller who is not offered by Buyer, at or prior to such time, a
Qualified Position (as defined below) with Buyer or the Surviving Corporation
commencing at the Effective Time, severance in the applicable amount set forth
on Schedule 5.18 to the Seller Disclosure Statement, as it may be adjusted from
time to time pursuant to clause (e) below (the "DETERMINED SEVERANCE").
(d) If Buyer or the Surviving Corporation, within fifteen
months after the Effective Time, terminates the employment of any Continuing
Employee or changes the position or duties of any such Continuing Employee such
that his or her position is no longer a Qualified Position, Buyer shall, no
later than one week after the date of such termination or change, pay to such
Continuing Employee the Determined Severance.
(e) Any employee of Seller who voluntarily terminates his
or her employment with Seller prior to the Effective Time and any employee of
Seller who is offered a Qualified Position with Buyer or the Surviving
Corporation no later than one week after the Effective Time but does not become
a Continuing Employee, shall not be paid any severance by Seller, Buyer or the
Surviving Corporation in connection with such termination.
(f) If any employee of Seller terminates his or her
employment with Seller prior to the Effective Time, Seller shall be entitled to
reallocate the amount of the Determined Severance allocated to such employee on
Schedule 5.18 to the Seller Disclosure Statement to such other employees of
Seller as Seller shall determine in its sole discretion.
(g) Buyer shall honor and make all bonus and severance
payments described in Section 3.15 to the Seller Disclosure Statement.
(h) For purposes of this Section 5.18, with respect to
any employee of Seller, "QUALIFIED POSITION" shall mean an employment position
with Buyer having substantially similar duties, responsibilities and
compensation as the position held by such employee with Seller prior to the
Effective Time and which position is located in Seattle, Washington.
5.19 SELLER RIGHTS PLAN. Except as expressly required by this
Agreement, or as determined by Seller's board of directors in good faith after
consultation with legal counsel to be required in order to comply with its
fiduciary duties to Seller's shareholders under applicable law, Seller shall
not, without the prior written consent of Buyer, amend the Seller Rights Plan or
take any other action with respect to, or make any determination
46
under the Seller Rights Plan, including a redemption of the rights granted under
the Rights Agreement or any action to facilitate an Acquisition Proposal;
provided, however, that Seller shall use its commercially reasonable efforts to
cause the Seller Rights Plan to be amended, in a manner reasonably satisfactory
to Buyer, to provide that the Seller Rights Plan shall terminate immediately
prior to the Effective Time.
5.20 STOCK AWARD MATTERS.
Seller shall, and shall cause the administrator(s) of each of the Seller
Stock Plans and Seller Purchase Plan to take any and all actions necessary to
cause the options granted under the Seller Stock Plans and purchase rights
granted under the Seller Purchase Plan to be treated in accordance with Section
2.2 hereof.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the fulfillment on or before the Effective Time
of each of the following conditions, any one or more of which may be waived in
writing by all the parties hereto:
6.1 REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and remain in effect and no proceedings for such purpose
shall be pending before or threatened by the SEC.
6.2 SELLER SHAREHOLDER APPROVAL. The approval of at least at least
66 and 2/3 percent of the outstanding shares of Seller Common Stock for adoption
of the Merger Agreement and approval of the Merger shall have been obtained at
the Seller Special Meeting or any adjournment or postponement thereof.
6.3 GOVERNMENTAL CLEARANCES. Other than the filing of the Articles
of Merger which shall be accomplished as provided in Section 1.2, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Government Entity the
failure of which to obtain or comply with would be reasonably likely to have a
Seller Material Adverse Effect or a Buyer Material Adverse Effect shall have
been obtained or filed.
6.4 TAX MATTERS. Each of Buyer and Merger Sub shall have received
an opinion of Xxxxxx Xxxxxx White & XxXxxxxxx LLP, counsel to Buyer and Merger
Sub, and Seller shall have received an opinion of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx
LLP, counsel to Seller, each such opinion dated as of the Effective Time,
substantially to the effect that on the basis of the facts, representations and
assumptions set forth in such opinions, the
47
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code. If counsel to either Buyer or Seller 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 in the required form to
such party.
6.5 STATUTE OR DECREE. No writ, order, temporary restraining
order, preliminary injunction or injunction shall have been enacted, entered,
promulgated or enforced by any court or other tribunal or governmental body or
authority, which remains in effect, and prohibits the consummation of the Merger
or otherwise makes it illegal, nor shall any governmental agency have instituted
any action, suit or proceeding which remains pending and which seeks, and which
is reasonably likely, to enjoin, restrain or prohibit the consummation of the
Merger in accordance with the terms of this Agreement.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLER AND BUYER
7.1 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SELLER. The
obligations of Seller to effect the Merger shall be subject to the fulfillment
of each of the following additional conditions, any one or more of which may be
waived in writing by Seller:
(a) The representations and warranties of Buyer and
Merger Sub contained in this Agreement (without regard to any materiality
exceptions or provisions therein) shall be true and correct, in all material
respects, as of the Effective Time, with the same force and effect as if made at
the Effective Time, except (i) for changes specifically permitted by the terms
of this Agreement, (ii) that the accuracy of the representations and warranties
that by their terms speak as of the date of this Agreement or some other date
will be determined as of such date and (iii) where the failure of such
representations and warranties to be so true and correct does not constitute, or
could not reasonably be expected to result in, a Buyer Material Adverse Effect.
(b) Buyer and Merger Sub shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date.
(c) Buyer and Merger Sub shall have furnished a
certificate or certificates of Buyer and Merger Sub executed on behalf of one or
more of their respective officers to evidence compliance with the conditions set
forth in Sections 7.1(a) and (b) of this Agreement.
(d) The Buyer Common Stock issuable in connection with
the Merger shall have been authorized for listing on Nasdaq, subject to official
notice of issuance, if required by the rules of Nasdaq.
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7.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER AND MERGER
SUB. The obligations of Buyer and Merger Sub to effect the Merger shall be
subject to the fulfillment of each of the following additional conditions, any
one or more of which may be waived in writing by Buyer:
(a) The representations and warranties of Seller,
contained in this Agreement shall be true and correct, in all material respects,
as of the Effective Time, with the same force and effect as if made at the
Effective Time, except (i) for changes specifically permitted by the terms of
this Agreement, (ii) that the accuracy of the representations and warranties
that by their terms speak as of the date of this Agreement or some other date
will be determined as of such date and (iii) where the failure of such
representations and warranties to be so true and correct does not constitute, or
could not reasonably be expected to result in a Seller Material Adverse Effect.
(b) Seller shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
(c) Seller shall have furnished a certificate of Seller
executed by one of its officers to evidence compliance with the conditions set
forth in Sections 7.2(a) and (b) of this Agreement.
(d) Holders of no more than five percent of the Seller
Common Stock shall have not voted in favor of the Merger or not consented
thereto in writing and shall have delivered prior to the Effective Time timely
written notice of such holder's intent to demand payment as a dissenting
shareholder for such shares in accordance with Washington Law.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the requisite approval of
Seller's shareholders:
(a) by mutual written consent duly authorized by the
boards of directors of Buyer and Seller;
(b) by either Seller or Buyer if the Merger shall not
have been consummated by December 31, 2003, which date may be extended by mutual
consent of the parties hereto, for any reason; provided, however, that the right
to terminate this Agreement under this Section 8.1(b) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur
49
on or before such date and such action or failure to act constitutes a material
breach of this Agreement;
(c) by either Seller or Buyer if (i) a statute, rule,
regulation or executive order shall have been enacted, entered or promulgated
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby or (ii) a court of competent jurisdiction or other
Government Entity shall have issued an order, decree or ruling or taken any
other action, in any case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, which order, decree, ruling or
other action is final and nonappealable;
(d) by Seller or Buyer if the required approval of the
shareholders of Seller contemplated by this Agreement shall not have been
obtained; provided, however, that the right to terminate this Agreement under
this Section 8.1(d) shall not be available to Seller where the failure to obtain
Seller shareholder approval shall have been caused by (i) the action or failure
to act of Seller and such action or failure to act constitutes a material breach
by Seller of this Agreement or (ii) a breach of any Seller Voting Agreement by
any party thereto other than Buyer.
(e) by Buyer (at any time prior to the adoption and
approval of this Agreement and the Merger by the required vote of the
shareholders of Seller) if a Seller Triggering Event (as defined below) shall
have occurred;
(f) by Seller, upon a breach of any representation,
warranty, covenant or agreement on the part of Buyer set forth in this
Agreement, or if any representation or warranty of Buyer shall have become
untrue, in either case such that the conditions set forth in Section 7.1(a) or
Section 7.1(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided that
such inaccuracy in Buyer' representations and warranties or breach by Buyer
remains uncured on the date which is twenty (20) business days following written
notice of such breach or inaccuracy from Seller to Buyer (it being understood
that Seller may not terminate this Agreement pursuant to this paragraph (f) if
it shall have materially breached this Agreement and remains in breach of this
agreement as of the date of such termination); or
(g) by Buyer, upon a breach of any representation,
warranty, covenant or agreement on the part of Seller set forth in this
Agreement, or if any representation or warranty of Seller shall have become
untrue, in either case such that the conditions set forth in Section 7.2(a) or
Section 7.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided that
such inaccuracy in Seller's representations and warranties or breach by Seller
remains uncured on the date which is twenty (20) business days following written
notice of such breach or inaccuracy from Buyer to Seller (it being understood
that Buyer may not terminate this Agreement pursuant to this paragraph (g) if it
shall have materially
50
breached this Agreement and remains in breach of this agreement as of the date
of such termination).
(h) For the purposes of this Agreement, a "SELLER
TRIGGERING EVENT" shall be deemed to have occurred if: (i) the board of
directors of Seller shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Buyer its recommendation in favor of, the
adoption and approval of the Agreement or the approval of the Merger; (ii)
Seller shall have failed to include in the Proxy Statement/Prospectus the
recommendation of the board of directors of Seller in favor of the adoption and
approval of the Agreement and the approval of the Merger; (iii) the board of
directors of Seller fails to reaffirm its recommendation in favor of the
adoption and approval of the Agreement and the approval of the Merger within ten
(10) days after Buyer requests in writing that such recommendation be
reaffirmed; (iv) the board of directors of Seller or any committee thereof shall
have approved or recommended any Acquisition Proposal with respect to Seller; or
(v) a tender or exchange offer relating to securities of Seller shall have been
commenced by a Person unaffiliated with Buyer and Seller shall not have sent to
its security holders pursuant to Rule 14e-2 promulgated under the Securities
Act, within ten (10) business days after such tender or exchange offer is first
published, sent or given, a statement disclosing that Seller recommends
rejection of such tender or exchange offer.
8.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination
of this Agreement pursuant to Section 8.1 will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in Section
8.1, this Agreement shall be of no further force or effect, except (i) as set
forth in this Section 8.2, Section 8.3 and Article IX, each of which shall
survive the termination of this Agreement, and (ii) nothing herein shall relieve
any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
8.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Buyer and Seller shall
share equally all fees and expenses, other than attorneys' and accountants fees
and expenses, incurred in relation to the printing and filing (with the SEC) of
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto and the Proxy Statement/Prospectus (including
any preliminary materials related thereto).
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(b) Payments.
(i) In the event that this Agreement is
terminated by Buyer or Seller, as applicable, pursuant to Section 8.1(e), Seller
shall pay Buyer a fee equal to $800,000 (the "SELLER TERMINATION FEE") plus the
Buyer Expenses (as hereinafter defined) in immediately available funds.
(ii) In the event that (A) this Agreement is
terminated by Buyer or Seller, as applicable, pursuant to Section 8.1(b) or
8.1(d) and (B) following the date hereof and prior to the termination of this
Agreement, a third party has publicly announced an Acquisition Proposal with
respect to Seller and within 12 months following the termination of this
Agreement, a Seller Acquisition (as hereinafter defined) is consummated or
Seller enters into an agreement providing for a Seller Acquisition by such third
party, Seller shall pay Buyer the Seller Termination Fee, less any Buyer
Expenses previously paid pursuant to Section 8.3(b)(iii) below. Such payment
shall be made promptly, but in no event later than two days after the
consummation of such Seller Acquisition (regardless of when such consummation
occurs if Seller has entered into such an agreement with such third party within
such 12-month period) in immediately available funds.
(iii) In the event that this Agreement is
terminated by Buyer or Seller pursuant to Section 8.1(d) and Seller is not
required to pay Buyer the Seller Termination Fee as of the time of such
termination, Seller shall reimburse Buyer for all documented expenses incurred
by Buyer in connection with this Agreement and the transactions contemplated
hereby (the "BUYER EXPENSES"), not to exceed an amount of $350,000 in the
aggregate, in immediately available funds not later than ten (10) business days
after termination of this Agreement.
(iv) In the event that this Agreement is
terminated by Buyer pursuant to Section 8.1(g) because the condition set forth
in Section 7.2(b) is not satisfied, Seller shall not later than ten (10)
business days after the date of such termination, reimburse Buyer for the Buyer
Expenses, not to exceed an amount of $350,000 in the aggregate, in immediately
available funds.
(v) In the event that this Agreement is
terminated by Seller pursuant to Section 8.1(f) because the condition set forth
in Section 7.1(b) is not satisfied, Buyer shall not later than ten (10) days
after the date of such termination, reimburse Seller for all documented expenses
incurred by Seller in connection with this Agreement and the transactions
contemplated hereby (the "SELLER EXPENSES"), not to exceed an amount of $350,000
in the aggregate, in immediately available funds.
(vi) Each of Buyer and Seller acknowledges that
the agreements contained in this Section 8.3(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
the other party would not enter into
52
this Agreement; accordingly, if Buyer or Seller (as applicable, the "BREACHING
PARTY") fails to pay in a timely manner the amounts due pursuant to this Section
8.3(b), and, in order to obtain such payment, the other party (the "AGGRIEVED
PARTY") makes a claim that results in a judgment against the Breaching Party for
any or all of the amounts set forth in this Section 8.3(b), the Breaching Party
shall pay to the Aggrieved Party its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) incurred in connection with such suit,
together with interest on the amounts set forth in this Section 8.3(b) at the
prime rate of The Chase Manhattan Bank in effect on the date such payment was
required to be made.
For the purposes of this Agreement, "SELLER ACQUISITION" shall mean any
of the following transactions (other than the transactions contemplated by this
Agreement); (i) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Seller pursuant to
which Seller's shareholders immediately preceding such transaction hold less
than 50% of the aggregate equity interests in the surviving or resulting entity
of such transaction, (ii) a sale or other disposition by Seller of assets
representing in excess of 50% of the aggregate fair market value of Seller's
business immediately prior to such sale or (iii) the acquisition by any Person
(including by way of a tender offer or an exchange offer or issuance by Seller),
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 Seller.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
Buyer, Merger Sub and Seller at any time prior to the Effective Time; provided,
however, that after approval of this Agreement by the shareholders of Seller, no
such amendment or modification shall change the amount or form of the
consideration to be received by Seller's shareholders in the Merger.
9.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Buyer or Merger
Sub, on the one hand, or Seller, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Seller
(with respect to any failure by Buyer or Merger Sub) or Buyer or Merger Sub
(with respect to any failure by Seller), respectively, only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner
53
consistent with the requirements for a waiver of compliance as set forth
in this Section 9.2.
9.3 SURVIVAL; INVESTIGATIONS. The respective representations and
warranties of Buyer, Merger Sub and Seller contained herein or in any
certificates or other documents delivered prior to or at the Closing shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto and shall not survive the Effective Time.
9.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be delivered personally by overnight courier or similar
means or sent by facsimile with written confirmation of receipt, to the parties
at the addresses specified below (or at such other address for a party as shall
be specified by like notice. Any such notice shall be effective upon receipt, if
personally delivered or on the next business day following transmittal if sent
by confirmed facsimile. Notices, including oral notices, shall be delivered as
follows:
if to Seller, to: 000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx Xxxxxx Welt
with a copy to: Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx
LLP
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 206-839-4301
Attention: Xxxxxxx Xxxxxx
if to Buyer, or Merger Sub, 0000 Xxxxxxx Xxxx
to:
Xxx Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxx XxXxxxxx
with a copy to: 0000 Xxxx Xxxx Xxxx
Xx. Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxx
54
and
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000-0000
Telephone: 000 000-0000
Facsimile: 000 000-0000
Attention: Xxxx Xxxx, Esq.
9.5 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement
nor any right, interest or obligation hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. This Agreement is not
intended to confer any rights or remedies upon any Person other than the parties
hereto and, with respect only to Section 5.8, the Indemnified Parties.
9.6 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Delaware without reference to principles of conflicts of laws.
9.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be finally determined to be invalid, illegal
or unenforceable in any respect against a party hereto, it shall be adjusted if
possible to effect the intent of the parties. In any event, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby, and such invalidity, illegality
or unenforceability shall only apply as to such party in the specific
jurisdiction where such final determination shall have been made.
9.9 INTERPRETATION. The Article and Section headings contained in
this Agreement are solely for the purpose of reference and shall not in any way
affect the meaning or interpretation of this Agreement. The word "including"
shall be deemed to mean "including without limitation."
9.10 ENTIRE AGREEMENT. This Agreement, the Voting Agreements, and
the Confidentiality Agreement including the exhibits hereto and the documents
and instruments referred to herein (including the Seller Disclosure Statement
and the Buyer Disclosure Statement), embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no representations, promises, warranties, covenants, or
undertakings, other than those expressly set forth or referred to herein and
therein.
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9.11 DEFINITION OF "LAW". When used in this Agreement "law" refers
to any applicable law (whether civil, criminal or administrative) including,
without limitation, common law, statute, statutory instrument, treaty,
regulation, directive, decision, code, order, decree, injunction, resolution or
judgment of any government, quasi-government, supranational, federal, state or
local government, statutory or regulatory body, court, or agency.
9.12 RULES OF CONSTRUCTION. Each party to this Agreement has been
represented by counsel during the preparation and execution of this Agreement,
and therefore waives any rule of construction that would construe ambiguities
against the party drafting the agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Secure Computing Corporation, Merger Sub and N2H2,
Inc. have caused this Agreement to be signed by their respective duly authorized
officers as of the date first above written.
SECURE COMPUTING CORPORATION
By: /s/ XXX XXXXXXXX
----------------
Xxx XxXxxxxx
President and Chief Operating Officer
NITRO ACQUISITION CORP.
By: /s/ XXX XXXXXXXX
Xxx XxXxxxxx
President
N2H2, INC.
By: /s/ XXXXXX XXXXXX WELT
----------------------
Xxxxxx Xxxxxx Welt
President and Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
