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AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 6, 2000
AMONG
DIGITALTHINK, INC.,
XX XXXXXX SUB, INC.
AND
ARISTA KNOWLEDGE SYSTEMS, INC.
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER ........................................................................... 1
SECTION 1.1 The Merger................................................................ 1
SECTION 1.2 Closing................................................................... 2
SECTION 1.3 Effective Time............................................................ 2
SECTION 1.4 Effects of the Merger..................................................... 2
SECTION 1.5 Certificate of Incorporation and Bylaws................................... 2
SECTION 1.6 Directors................................................................. 2
SECTION 1.7 Officers.................................................................. 2
SECTION 1.8 Effect on Capital Stock................................................... 2
SECTION 1.9 Exchange of Certificates.................................................. 4
SECTION 1.10 Escrow ................................................................... 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................ 7
SECTION 2.1 Organization, Standing and Corporate Power................................ 7
SECTION 2.2 Subsidiaries.............................................................. 8
SECTION 2.3 Capital Structure......................................................... 8
SECTION 2.4 Authority; Noncontravention............................................... 8
SECTION 2.5 Financial Information..................................................... 9
SECTION 2.6 Absence of Certain Changes or Events...................................... 10
SECTION 2.7 Litigation................................................................ 11
SECTION 2.8 Contracts................................................................. 11
SECTION 2.9 Compliance with Laws...................................................... 11
SECTION 2.10 Environmental Matters..................................................... 12
SECTION 2.11 Labor Matters............................................................. 12
SECTION 2.12 Absence of Changes in Benefit Plans....................................... 12
SECTION 2.13 ERISA Compliance.......................................................... 12
SECTION 2.14 Software Development...................................................... 14
SECTION 2.15 Taxes .................................................................... 15
SECTION 2.16 Title to Properties....................................................... 16
SECTION 2.17 Intellectual Property..................................................... 16
SECTION 2.18 Voting Requirements....................................................... 17
SECTION 2.19 Brokers; Schedule of Fees and Expense..................................... 17
SECTION 2.20 Equipment and Other Personal Property Leases.............................. 18
SECTION 2.21 Product and Service Warranties............................................ 18
SECTION 2.22 Disclosure................................................................ 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.................................... 18
SECTION 3.1 Organization, Standing and Corporate Power................................ 18
SECTION 3.2 Capital Structure......................................................... 19
SECTION 3.3 Authority; Noncontravention............................................... 20
SECTION 3.4 SEC Documents............................................................. 20
SECTION 3.5 Absence of Certain Changes or Events...................................... 21
SECTION 3.6 Litigation................................................................ 22
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SECTION 3.7 Compliance with Laws...................................................... 22
SECTION 3.8 Taxes .................................................................... 22
SECTION 3.9 Title to Properties....................................................... 22
SECTION 3.10 Voting Requirements....................................................... 23
SECTION 3.11 Brokers; Schedule of Fees and Expense..................................... 23
SECTION 3.12 Interim Operations of Sub................................................. 23
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.................................................. 23
SECTION 4.1 Conduct of Business by the Company........................................ 23
ARTICLE V ADDITIONAL AGREEMENTS................................................................. 25
SECTION 5.1 Registration of Parent Common Stock....................................... 25
SECTION 5.2 Access to Information; Confidentiality.................................... 26
SECTION 5.3 Public Announcements...................................................... 26
SECTION 5.4 Tax Treatment............................................................. 26
SECTION 5.5 NMS Listing............................................................... 26
SECTION 5.6 Certain Tax Matters....................................................... 26
SECTION 5.7 Reasonable Efforts; Notification.......................................... 26
SECTION 5.8 Fees and Expenses......................................................... 27
SECTION 5.9 S-8 Registration Statement; Company Employee Options...................... 27
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER................................................... 28
SECTION 6.1 Conditions to Obligations of Each Party to Effect the Merger.............. 28
SECTION 6.2 Additional Conditions to Obligation of the Company........................ 28
SECTION 6.3 Additional Conditions to Obligations of Parent and Sub.................... 29
ARTICLE VII SURVIVAL, ESCROW AND INDEMNIFICATION................................................ 30
SECTION 7.1 Survival of Representations and Warranties................................ 30
SECTION 7.2 Escrow Arrangements....................................................... 30
SECTION 7.3 Limitation of Remedies.................................................... 34
SECTION 7.4 Indemnification........................................................... 34
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.................................................. 35
SECTION 8.1 Termination............................................................... 35
SECTION 8.2 Effect of Termination..................................................... 36
SECTION 8.3 Amendment................................................................. 37
SECTION 8.4 Extension; Waiver......................................................... 37
ARTICLE IX GENERAL PROVISIONS................................................................... 37
SECTION 9.1 Notices................................................................... 37
SECTION 9.2 Definitions............................................................... 38
SECTION 9.3 Interpretation............................................................ 38
SECTION 9.4 Counterparts.............................................................. 39
SECTION 9.5 Entire Agreement.......................................................... 39
SECTION 9.6 Governing Law............................................................. 39
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SECTION 9.7 Assignment................................................................ 39
SECTION 9.8 Enforcement............................................................... 39
SECTION 9.9 Severability.............................................................. 40
SECTION 9.10 Attorneys' Fees........................................................... 40
Exhibit A: Escrow Agreement
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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 6, 2000, among DigitalThink, Inc., a Delaware corporation
("Parent"), XX Xxxxxx Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and Arista Knowledge Systems, Inc., a Delaware
corporation (the "Company").
RECITALS
A. The respective Boards of Directors of Parent, Sub and the Company,
and Parent, acting as the sole stockholder of Sub, have approved the merger of
Sub with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $.001 per share, of the Company ("Company
Common Stock") and each issued and outstanding share of Series A Preferred Stock
of the Company, par value $.001 per share ("Company Preferred Stock"), other
than Company Common Stock and Company Preferred Stock owned by Parent, Sub or
the Company, will be converted into the right to receive shares of common stock
of Parent, $0.001 par value ("Parent Common Stock") as specified in this
Agreement.
B. Substantially concurrently herewith and as a condition and inducement
to Parent's willingness to enter into this Agreement, certain stockholders of
the Company have executed Attachment 1, attached hereto.
C. Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
D. For Federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
E. For financial accounting purposes, it is intended that the Merger
will be accounted for under the purchase method of accounting and will not be
accounted for as a pooling of interests transaction.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the "Delaware Law"), Sub shall be merged with and into
the Company at the Effective Time (as defined in Section 1.3). Following the
Merger, the separate corporate existence of Sub shall cease and the
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Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Sub in accordance with the California Law.
SECTION 1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on July 6, 2000 (the "Closing Date"), at the offices of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx,
Xxxx Xxxx, XX 00000, unless another date or place is agreed to in writing by the
parties hereto. Any signatures required for Closing (other than signatures on
documents to be filed with a governmental authority that requires original
signatures) may be delivered by telecopy, which shall have the same force and
effect as the delivery of an originally executed document.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the Delaware Law and shall make all other filings or recordings required under
the Delaware Law. The Merger shall become effective at such time as the Articles
of Merger are duly filed with the Delaware Secretary of State, or at such other
time as Parent and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 251 of the Delaware General Corporation Law.
SECTION 1.5 Certificate of Incorporation and Bylaws.
(a) The Certificate of Incorporation of Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6 Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.8 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock and Company Preferred Stock or any shares of capital stock
of Sub:
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(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, par value $0.001 per share,
of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each
share of Company Common Stock or Company Preferred Stock that is owned by the
Company and each share of Company Common Stock or Company Preferred Stock that
is owned by Parent or Sub shall automatically be canceled and retired and shall
cease to exist, and no Parent Common Stock or other consideration shall be
delivered in exchange therefor.
(c) Conversion of Company Common Stock and Company Preferred Stock.
Subject to Section 1.9(e), each issued and outstanding share of Company Common
Stock and Company Preferred Stock (other than shares to be canceled in
accordance with Section 1.8(b)) shall be converted into the right to receive a
number of fully paid and nonassessable shares of Parent Common Stock equal to
the quotient of {(A) divided by (B)} divided by (C),
where (A) equals $30,000,000 minus the aggregate amount of Company Debt
(as defined below);
(B) equals the average last reported sale price of the Parent's Common
Stock on the Nasdaq National Market over the 10 trading days ending on the
trading day immediately prior to the execution of this Agreement; provided
however (i) that if such amount is less than $26.00, then (B) shall equal $26.00
and (ii) if such amount is greater than $38.00, then (B) shall equal $38.00; and
(C) equals the aggregate number of issued and outstanding shares of
Company Common Stock and Company Preferred Stock plus the aggregate number of
shares of Company Common Stock subject to outstanding Company Options (as
defined below) as of the Effective Time.
For purposes hereof, the "Exchange Ratio" shall equal the amount that is
equal to the quotient of {(A) divided by (B)} divided by (C).
For purposes hereof, the term "Company Debt" shall mean the principal of
all indebtedness or other obligations owed by Company to Imperial Bank,
Safeguard Capital 99 L.P., Safeguard Delaware, Inc. and/or Pennsylvania Early
Stage Partners L.P., which principal of indebtedness or obligations will be paid
by Parent contemporaneous with the Effective Time.
For purposes hereof, the term "Consideration Common" shall mean the
shares of Parent Common Stock issuable to the holders of Company Common Stock
and Company Preferred Stock in accordance with this Agreement.
As of the Effective Time, all such shares of Company Common Stock and
Company Preferred Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time represented any such
shares of Company Common Stock or Company Preferred Stock shall cease to have
any rights with respect thereto, except the right to receive shares of Parent
Common Stock and
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any cash in lieu of fractional shares of Parent Common Stock to be issued or
paid in consideration therefor upon surrender of such certificate in accordance
with Section 1.9, without interest. Notwithstanding the foregoing, if between
the date of this Agreement and the Effective Time the outstanding shares of
Parent Common Stock shall have been changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares or
if Parent pays an extraordinary dividend, the Exchange Ratio shall be
appropriately adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange or
extraordinary dividend.
(d) Stock Option Plans. As of the Effective Time, each option to
purchase shares of Company Common Stock granted under Company's 1998 Stock
Option Plan ("Company Options") shall become an option to acquire that number of
shares of Parent Common Stock as is equal to the number of shares of Company
Common Stock subject to such option multiplied by the Exchange Ratio rounded
down to the nearest whole share. The exercise price for each such option shall
be adjusted to an exercise price equal to the exercise price per share of
Company Common Stock (as currently provided for in such option) divided by the
Exchange Ratio and rounded up to the nearest $0.001. The vesting of all Company
Options granted on or prior to June 19, 2000 shall be accelerated in full as of
the Effective Time. In the case of any Company Options to which Section 421 of
the Code applies by reason of its qualification under any of Sections 422-424 of
the Code ("Qualified Company Options"), the option price, the number of shares
purchasable pursuant to such Qualified Company Option and the terms and
conditions of such option shall be determined in order to comply with Section
425(a) of the Code.
(e) Warrants and Other Convertible Instruments. As of the Effective
Time, all warrants, rights or other instruments to purchase or subscribe for
shares of Company Common Stock or Company Preferred Stock, or securities or
instruments convertible into or exercisable for Company Common Stock or Company
Preferred Stock, shall have become exercised for or converted into Company
Common Stock or Company Preferred Stock, as the case may be, or shall have been
terminated. This Section 1.8(d) shall not apply to Company Options.
SECTION 1.9 Exchange of Certificates
(a) Exchange Agent. As of the Effective Time, Parent shall deposit
with Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx. or such other bank or trust company as
may be designated by Parent (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock and Company Preferred Stock, for
exchange in accordance with this Article I, through the Exchange Agent,
certificates representing the shares of Parent Common Stock (such shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto with a record date after the Effective Time and any cash payments in
lieu of any fractional shares of Parent Common Stock, being hereinafter referred
to as the "Exchange Fund") issuable pursuant to Section 1.8 in exchange for
outstanding shares of Company Common Stock, other than the shares of Company
Common Stock that will be deposited in escrow pursuant to Section 1.10.
(b) Exchange Procedures. As soon as reasonably practicable but not
more than ten (10) business days after the Effective Time, Parent shall cause
the Exchange Agent to mail to
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each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock and
Company Preferred Stock (the "Certificates") whose shares were converted into
the right to receive shares of Parent Common Stock pursuant to Section 1.8(c),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other customary documents as may reasonably
be required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of Section 1.8 after taking into account all
the shares of Company Common Stock and Company Preferred Stock then held by such
holder under all such Certificates so surrendered, cash in lieu of fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 1.9(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 1.9(c), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Common
Stock or Company Preferred Stock which is not registered in the transfer records
of the Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a person other than the person in whose name the
Certificate so surrendered is registered, if, upon presentation to the Exchange
Agent, such Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the person requesting such issuance shall pay any transfer
or other taxes required by reason of the issuance of shares of Parent Common
Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of Parent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 1.9(b), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of Parent Common Stock, cash in lieu of any fractional shares of Parent
Common Stock as contemplated by Section 1.9(e) and any dividends or other
distributions to which such holder is entitled pursuant to Section 1.9(c). No
interest will be paid or will accrue on any cash payable pursuant to Sections
1.9(c) or 1.9(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 1.9(e) until the holder of record of such
Certificate shall surrender such Certificate. Following surrender of any such
Certificate, there shall be paid to the record holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 1.9(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the
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Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of shares of
Company Common Stock and Company Preferred Stock in accordance with the terms
hereof (including any cash paid pursuant to Section 1.9(c) or 1.9(e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock or Company Preferred Stock, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such shares of Company Common Stock and
Company Preferred Stock in accordance with the terms of this Agreement or prior
to the date of this Agreement and which remain unpaid at the Effective Time, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock or Company
Preferred Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Section 1.9.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) Notwithstanding any other provision of this Agreement,
each holder of shares of Company Common Stock and Company Preferred Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount, less the amount of any withholding taxes which
may be required thereon, equal to such fractional part of a share of Parent
Common Stock multiplied by the amount of Section 1.8(c)(B).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
I shall thereafter look only to Parent for payment of their claim for Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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(h) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable amount as the
Surviving Corporation may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect thereof,
pursuant to this Agreement.
SECTION 1.10 Escrow. At the Closing, Parent shall withhold from the
Consideration Common and deliver to Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx as Escrow
Agent (in its capacity as Escrow Agent, the "Escrow Agent"), pursuant to the
terms of the Escrow Agreement substantially in the form attached hereto as
Exhibit A (the "Escrow Agreement") among Parent, Xxxx X. Xxxxxx, XX, as agent
and attorney-in-fact for each holder of Company Common Stock and Company
Preferred Stock (the "Stockholder Agent") and the Escrow Agent, fifteen percent
(15%) of the aggregate of the Consideration Common less the amount of
Consideration Common to be delivered to, or reserved for, holders of Company
Options (such amount, together with dividends or other distributions and
earnings thereon, being referred to herein as the "Escrow Amount"), which Escrow
Amount shall be held and disbursed in accordance with the terms of the Escrow
Agreement and Article VII of this Agreement. The Escrow Amount shall be
available to compensate Parent and its affiliates for any claims, losses,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, incurred by Parent, its officers, directors or affiliates
(including the Surviving Corporation) in accordance with the indemnification
provisions of Article VII of this Agreement. As soon as reasonably practicable
following the Closing Norwest Bank Minnesota, N.A. shall be substituted as
Escrow Agent.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure schedule delivered by the Company
to Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Sub as follows:
SECTION 2.1 Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
other than in any such jurisdiction where the failure to be so qualified or
licensed individually or in the aggregate would not
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have a material adverse effect (as defined in Section 9.2) on the Company. The
Company has delivered to Parent complete and correct copies of the Certificate
of Incorporation and Bylaws, in each case as amended to the date hereof, of the
Company.
SECTION 2.2 Subsidiaries. The Company has no subsidiaries and does not
own, directly or indirectly, beneficially or of record, any shares of capital
stock or other security of any other entity or any other investment in any other
entity.
SECTION 2.3 Capital Structure. The authorized capital stock of the
Company consists of 15,000,000 shares of Common Stock, $.001 par value and
7,500,000 shares of Series A Preferred Stock, $.001 par value. At the close of
business on the date immediately preceding the date of this Agreement, a)
3,111,065 total shares of Company Common Stock were issued and outstanding, b)
4,550,000 shares of Company Preferred Stock were issued and outstanding, c)
2,713,867 shares of Company Common Stock were reserved for issuance pursuant to
stock option, stock purchase or similar plans, d) 2,165,069 shares of Company
Common Stock were reserved for issuance on the exercise of warrants and e)
1,499,636 shares of Company Common Stock were reserved for issuance on the
conversion of convertible debt. The holders of record of all of the issued and
outstanding shares of Company Common Stock and Company Preferred Stock are set
forth in Section 2.3 of the Company Disclosure Schedule. Except as set forth
above, at the close of business on the date immediately preceding the date of
this Agreement, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except as set
forth in Section 2.3 of the Company Disclosure Schedule, there are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth in Section 2.3
of the Company Disclosure Schedule, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company is a party, or by which it is bound, obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or obligating
the Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. Except
as set forth in Section 2.3 of the Company Disclosure Schedule, there are not
any outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of capital stock or other securities of the
Company. There are no stockholder agreements, voting trusts or other agreements
or understandings to which the Company is a party or by which it is bound
relating to the voting of any shares of capital stock of the Company.
SECTION 2.4 Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
approval of this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock, to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company,
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subject, in the case of this Agreement, to approval of this Agreement by the
holders of a majority of the outstanding shares of Company Common Stock. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms. Except as set forth in Section 2.4 of the Company
Disclosure Schedule, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any pledge, claim, lien, charge, encumbrance or security
interest of any kind or nature whatsoever (collectively, "Liens") in or upon any
of the properties or assets of the Company under any provision of (a) the
Certificate of Incorporation or Bylaws of the Company, (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or its properties or assets or (c), subject to the governmental filings and
other matters referred to in the following sentence, any (i) statute, law,
ordinance, rule or regulation or (ii) judgment, order or decree applicable to
the Company or its properties or assets, other than, in the case of clause (b)
and clause (c)(i), any such conflicts, violations, defaults, rights or Liens
that individually or in the aggregate would not (x) have a material adverse
effect on the Company, (y) impair in any material respect the ability of the
Company to perform its obligations under this Agreement, or (z) prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any third party, including any
Federal, state or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated by this
Agreement, except for (1) the filing of the Certificate of Merger with the
Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business and
(2) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a material adverse effect on the Company
or prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
SECTION 2.5 Financial Information.
(a) The Company has furnished Parent with a copy of (i) the
unaudited balance sheets of the Company as of May 31, 2000 and December 31, 1999
and the related unaudited statements of income and cash flows for the five-month
and twelve-month periods then ended (together with any notes thereto, the
"Interim Financials"), and (ii) the audited balance sheets of the Company as of
March 31, 1999 and 1998 and the related audited statements of operations,
stockholders' equity and cash flows for the fiscal years then ended together
with any notes thereto (collectively, the "Annual Financials"). The Interim
Financials and the Annual Financials (including, any related notes to such
statements) (i) have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved, except to the extent required
by
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changes in GAAP and (ii) fairly present the financial position of the Company as
of the respective dates thereof and the results of operations and cash flows of
the Company for the periods then ended (subject, in the case of the Interim
Financials, to normal year-end adjustments).
(b) Except as and to the extent set forth in the balance sheet
included in the Interim Financials or as disclosed in Section 2.5 of the Company
Disclosure Schedule, the Company does not have any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a balance sheet of the
Company or in the notes thereto, prepared in accordance with GAAP, except for
liabilities or obligations incurred in the ordinary course of business since May
31, 2000, none of which is a liability resulting from breach of contract, breach
of warranty, tort, infringement, claim or lawsuit.
SECTION 2.6 Absence of Certain Changes or Events. Except as set forth in
Section 2.6 of the Company Disclosure Schedule, since the date of the Interim
Financials, the Company has conducted its business only in the ordinary course
consistent with past practice, and there has not been:
(a) any material adverse change (as defined in Section 9.2) in the
Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock;
(c) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
the Company's capital stock;
(d) (x) any granting by the Company to any officer of the Company
of any increase in compensation, except in the ordinary course of business
consistent with prior practice, (y) any granting by the Company to any officer
of any increase in severance or termination pay or (z) any entry by the Company
into any employment, severance or termination agreement with any officer;
(e) any damage, destruction or loss, whether or not covered by
insurance, that individually or in the aggregate would have a material adverse
effect on the Company;
(f) any change in accounting methods, principles or practices by
the Company materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in GAAP;
(g) any tax election that individually or in the aggregate would
have a material adverse effect on the Company or any of its tax attributes or
any settlement or compromise of any material income tax liability;
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(h) any incurrence of any material obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except items incurred in the ordinary course of business and consistent with
past practice;
(i) any cancellation of any debts or claims, or waiver of any
rights, of substantial value;
(j) any sale, transfer, conveyance, encumbrance or grant of any
security interest in any of the Company's assets (whether real, personal or
mixed, tangible or intangible), except in the ordinary course of business and
consistent with past practice;
(k) any capital expenditure or commitment in excess of $10,000 in
the aggregate for replacements or additions to property, plant, equipment or
intangible capital assets of the Company; or
(l) any agreement, whether in writing or otherwise, to take any
action described in this Section 2.6.
SECTION 2.7 Litigation. There is no suit, action or proceeding pending
or threatened against the Company that individually or in the aggregate would
have a material adverse effect on the Company, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against, or, to the knowledge of the Company, investigation by any
Governmental Entity involving, the Company that individually or in the aggregate
would have a material adverse effect on the Company.
SECTION 2.8 Contracts. Section 2.8 of the Company Disclosure Schedule
sets forth a list of the Company's material contracts. Except as set forth in
Section 2.8 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice or both
would cause such a violation of or default under) any lease, permit, concession,
franchise, license or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that individually or in the
aggregate would not have a material adverse effect on the Company. Except as set
forth in Section 2.8 of the Company Disclosure Schedule, the Company has not
entered into any contract, agreement arrangement or understanding with any
affiliate of the Company.
SECTION 2.9 Compliance with Laws. The Company is in compliance with all
applicable statutes, laws, ordinances, regulations, rules, judgments, decrees
and orders of any Governmental Entity (collectively, "Legal Provisions")
applicable to its business or operations, except for instances of possible
noncompliance that, individually or in the aggregate, would not have a material
adverse effect on the Company or prevent or materially delay the consummation of
the Merger. The Company has in effect all Federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Permits"), necessary for it to own,
lease or operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under, or violation of, any such
Permit, except for the
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lack of Permits and for defaults under, or violations of, Permits which lack,
default or violation individually or in the aggregate would not have a material
adverse effect on the Company. Except as disclosed in Section 2.9 of the Company
Disclosure Schedule, the Company has not received any notice or other
communication from any Governmental Entity alleging any violation of any Legal
Provision by the Company.
SECTION 2.10 Environmental Matters. The Company is not in violation of
any applicable statute, law or regulation relating to the environment , the
Company is not in material violation of any occupational health and safety
regulation, and no expenditures are or will be required in order to comply with
any existing statute, law or regulation relating to the environment.
SECTION 2.11 Labor Matters. There are no collective bargaining
agreements or other labor union agreements to which the Company is a party, or
by which it is bound. To the best of its knowledge, the Company is in compliance
with all federal, state and local laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. There is no unfair labor practice
complaint against the Company pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board or the United States
Department of Labor. There is no labor strike, dispute, slowdown or stoppage in
progress or, to the knowledge of the Company, threatened against or involving
the Company. No question concerning representation has been raised or, to the
knowledge of the Company, is threatened respecting the Company. No grievance or
arbitration proceeding is pending and, to the knowledge of the Company, no claim
therefor exists. No private agreement restricts the Company from relocating,
closing or terminating any of its operations or facilities. The Company has not,
in the past three years, experienced any labor strike, dispute, slowdown,
stoppage or other labor difficulty.
SECTION 2.12 Absence of Changes in Benefit Plans. Except as disclosed in
Section 2.12 of the Company Disclosure Schedule, since June 30, 2000, there has
not been any adoption or amendment in any material respect by the Company of any
collective bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company (collectively, "Benefit Plans").
Except as disclosed in Section 2.12 of the Company Disclosure Schedule, there
exist no employment, consulting, severance, termination or indemnification
agreements, arrangements or understandings between the Company, any current or
former employee, officer or director of the Company, which is either currently
effective or will become effective at the Closing Date.
SECTION 2.13 ERISA Compliance. Section 2.13(a) of the Company Disclosure
Schedule contains a list of all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (referred to herein as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(l) of ERISA), "employee benefit plans" (as
defined in Section 3(3) of ERISA), which are maintained in connection with any
trust
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described in Section 501(c)(9) of the Code, and all other Benefit Plans
maintained, or contributed to, by the Company or any person or entity that,
together with the Company, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (the Company and each such other person or entity, a
"Commonly Controlled Entity") for the benefit of any current or former
employees, officers or directors of the Company. The Company has made available
to Parent true, complete and correct copies of (i) each Benefit Plan (or, in the
case of any unwritten Benefit Plans, descriptions thereof), (ii) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Benefit Plan (if any such report was required), (iii) the most recent
summary plan description for each Benefit Plan for which such summary plan
description is required and (iv) each trust agreement and group annuity contract
relating to any Benefit Plan. Each Benefit Plan has been administered in all
material respects in accordance with its terms. Each of the Benefit Plans is in
compliance in all material respects with applicable provisions of ERISA and the
Code.
(a) Each Benefit Plan intended to be qualified under Section 401(a)
of the Code has either obtained from the Internal Revenue Service a favorable
determination or opinion letter as to its qualified status under the Code or has
time remaining to apply for a favorable determination or opinion letter. No such
determination or opinion letter has been revoked nor has any event occurred
since the date of the most recent determination or opinion letter or application
therefor that would adversely affect any such Benefit Plan qualification or
materially increase its costs.
(b) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed or been obligated to contribute to any Benefit Plan that
is subject to Title IV of ERISA.
(c) With respect to any Benefit Plan that is an employee welfare
benefit plan, there are no understandings, agreements or undertakings, written
or oral, that would prevent any such plan (including any such plan covering
retirees or other former employees) from being amended or terminated without
material liability to the Company on or at any time after the Effective Time.
(d) The Company does not contribute to or have any liability to the
Pension Benefit Guaranty Corporation or any other person, plan or entity under
or with respect to (i) a pension plan subject to Title IV of ERISA or Section
412 of the Code, (ii) a multi-employer pension plan, as defined in Section 3(37)
of ERISA or (iii) an employee welfare benefit plan. The Company does not
maintain an employee welfare benefit plan providing health or medical benefits
for retired employees.
(e) No employee welfare benefit plan of the company provides for
continuing benefits or coverage after termination or retirement from employment,
except to the extent required under Section 4980B of the Code and Section 607 of
ERISA or comparable state law. With respect to each Benefit Plan, the Company
has complied in all material respects with the applicable health care
continuation and notice requirements of Section 4980(B) of the Code and Section
607 of ERISA or comparable state law.
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(f) There is no Benefit Plan covering any employee or former
employee of the Company that, individually or collectively, could give rise to
the payment of an amount that would not be deductible pursuant to the terms of
Sections 280G or 162 of the Code.
(g) Neither the Company nor any of its "affiliates" (as defined in
ERISA) has ever participated in or withdrawn from a multi-employer plan as
defined in Section 4001(a)(3) of Title IV of ERISA, and the Company has not
incurred nor owes any liability as a result of any partial or complete
withdrawal by any employer from such a multi-employer plan as described under
Sections 4201, 4203, or 4205 of ERISA.
(h) To the knowledge of the Company, no employee of the Company is
obligated under any agreement or judgment that would conflict with such
employee's obligation to use his best efforts to promote the interests of the
Company or would conflict with the Company's business as conducted or proposed
to be conducted. To the knowledge of the Company, no employee of the Company is
in violation of the terms of any employment agreement or any other agreement
relating to such employee's relationship with any previous employer and no
litigation is pending or, to the knowledge of the Company, threatened with
regard thereto.
(i) No employee of the Company will be entitled to any additional
compensation or benefits or any acceleration of the time of payment or vesting
of any compensation or benefits under any Benefit Plan as a result of the
transactions contemplated by this Agreement.
(j) The deduction of any amount payable pursuant to the terms of
the Benefit Plans will not be subject to disallowances under Section 162(m) of
the Code.
SECTION 2.14 Software Development. The proprietary computer software
owned or developed by the Company (the "Software") performs substantially in
accordance with the software and documentation that has been delivered to or
made available for inspection by Parent, in both human-readable and
machine-readable form, contains all current revisions of such software and
includes all computer programs, materials, tapes, object and source codes and
other written materials related to the Software. The Company has delivered to or
made available for inspection by Parent current copies of all user and technical
documentation in the Company's possession related to the Software.
(a) The Software includes all enhancements that any employee or
agent of the Company has developed or assisted in the development of in
connection with the Software.
(b) No employee of the Company is, or is now expected to be, in
default under any term of any employment contract, agreement or arrangement
relating to the Software, or any noncompetition arrangement, or any other
agreement or any restrictive covenant relating to the Software or its
development or exploitation. The Software was developed entirely by the
employees of the Company during the time they were, to the knowledge of the
Company, employees only of the Company or by consultants who, in connection with
the development of the Software, assigned in writing all of their rights in the
Software to the Company. Set forth in the Company Disclosure
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Schedule are the form of agreements under which rights in the Software were
assigned to the Company.
(c) Except as set forth on Section 2.14 of the Company Disclosure
Schedule, all right, title and interest in and to the Software is owned by the
Company, free and clear of all liens, claims, charges or encumbrances, are fully
transferable to Parent and no party other than the Company has any interest in
the Software, including without limitation, any security interest, license,
contingent interest or otherwise. The Company's development, distribution,
license, or sale of the Software did or does not violate any intellectual
property rights of any other person or entity and the Company has not received
any communication alleging such a violation. Except for compensation payable to
employees, or to consultants pursuant to consulting agreements, in each case in
the ordinary course of business, the Company does not have any obligation to
compensate any person or entity for the development, use, sale or exploitation
of the Software nor has the Company granted to any other person or entity any
license, option or other right to develop or exploit in any manner the Software,
whether requiring the payment of royalties or not. The Company is not in default
under any term of any license agreement relating to the Software or the
maintenance of the Software.
(d) The Company has kept secret and has not disclosed the source
code for the Software to any person or entity other than employees of the
Company, except pursuant to appropriate written confidentiality agreements. The
Company has taken all reasonable measures to protect the confidential and
proprietary nature of the Software.
SECTION 2.15 Taxes. The Company has filed all tax returns and reports
required to be filed by it and has paid all taxes required to be paid by it, and
the Interim Financials reflect an adequate reserve for all taxes payable by the
Company for all taxable periods and portions thereof through the date of such
financial statements. The Company is not aware that any deficiencies for any
taxes have been proposed, asserted or assessed against the Company, nor to the
Company's knowledge, after reasonable investigation, is there any reasonable
basis for the assertion of any such deficiency. No requests for waivers of the
time to assess any such taxes are pending. No material special charges,
penalties, fines, liens, or similar encumbrances have been asserted against the
Company with respect to payment of or failure to pay any taxes. The Company has
not executed or filed with any taxing authority any agreements extending the
period for assessment or collection of any taxes. Proper amounts have been
withheld by the Company from employee compensation payments for all periods in
compliance with the tax withholding provisions of applicable federal and state
laws. None of the Federal income tax returns of the Company have been examined
by the United States Internal Revenue Service for the fiscal years through
December 31, 1999. The Company has not been delinquent in the payment of any
Tax, nor is there any Tax deficiency outstanding, proposed or assessed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax. There is no pending or, to the knowledge of the Company, threatened action,
audit, proceeding or investigation for the assessment or collection of any
Taxes, nor has the Company been notified of any request for such an audit or
other examination. There are no requests for rulings, subpoenas, or information
pending with respect to any taxing authority. The Company does not have any
liabilities
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for unpaid federal, state, local, and foreign Taxes which have not been accrued
or reserved against in accordance with GAAP on the Company's balance sheet,
whether asserted or unasserted, contingent or otherwise. The Company has not
taken any action nor does it have any knowledge of any fact or circumstance that
is reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code. As used in this Agreement,
"Tax" or collectively "Taxes" shall include all Federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
profits, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, income, property, sales, excise and
other taxes, tariffs or governmental charges of any nature whatsoever together
with all interest, penalties, and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
SECTION 2.16 Title to Properties
(a) Section 2.16 of the Company Disclosure Schedule contains a
correct and complete list of each item of capital equipment, including machinery
and equipment, tools, dies, fixtures, furniture, furnishings, plant and office
equipment and vehicles with a fair market value in excess of $25,000 which is
owned by the Company and used in connection with its business (the "Equipment").
(b) The Company has good and marketable title to, or valid
leasehold interests in, all its material properties and assets except for such
as are no longer used or useful in the conduct of its businesses or as have been
disposed of in the ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances that individually or
in the aggregate would not materially interfere with the ability of the Company
to conduct its business as currently conducted. All such material assets and
properties, other than assets and properties in which the Company has a
leasehold interest, are free and clear of all Liens and except for Liens that
individually or in the aggregate would not materially interfere with the ability
of the Company to conduct its business as currently conducted.
(c) The Company does not own any real property. The real property
devised by the leases described under the caption referencing this Section 2.16
in the Company Disclosure Schedule constitutes all of the real property used or
occupied by the Company. The Company has complied in all material respects with
the terms of all leases for real property to which it is a party and under which
it is in occupancy, and all such leases are in full force and effect. The
Company enjoys peaceful and undisturbed possession under all such material
leases, except for failures to do so that would not individually or in the
aggregate have a material adverse effect on the Company.
SECTION 2.17 Intellectual Property. Set forth in Section 2.17 of the
Company Disclosure Schedule is a list of all patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each
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case a brief description of the nature of such rights. The Company represents
and warrants as follows, in each case except as set forth in Section 2.17 of the
Company Disclosure Schedule:
(a) The Company has sufficient title and ownership of all patents,
patent applications, licenses, trademarks, service marks, trade names,
inventions, franchises, copyrights, trade secrets, information and other
proprietary rights necessary for the operation of its business as now conducted
and as proposed to be conducted with no known infringement of the rights of
others.
(b) There are no outstanding options, licenses, or agreements of
any kind related to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements with respect to the patents, patent
applications, licenses, trade marks, service marks, trade names, inventions,
franchises, copyrights, trade secrets, information, proprietary rights and
processes of any other person or entity.
(c) The Company has not received any written communication alleging
that the Company has violated, or by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights,
trade secrets or other proprietary rights of any other person or entity.
(d) The Company is not aware that any of the Company's employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of the
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted.
(e) Neither the execution nor delivery of this Agreement, nor the
operation of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under,
any contract, covenant or instrument under which any of such employees is now
obligated.
(f) The Company does not and will not, in order to conduct its
business as currently conducted or as currently proposed to be conducted, need
to utilize inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company.
SECTION 2.18 Voting Requirements. The affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock and the affirmative
vote of the holders of a majority of the outstanding shares of Company Preferred
Stock are the only stockholder votes necessary to approve this Agreement and the
transactions contemplated by this Agreement.
SECTION 2.19 Brokers; Schedule of Fees and Expense. Except for Business
Development Advisors, no broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the
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transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
SECTION 2.20 Equipment and Other Personal Property Leases. Section 2.20
of the Company Disclosure Schedule sets forth a correct and complete list of all
of the leases of Equipment and other personal property to which the Company is a
party (the "Equipment and Other Personal Property Leases"). The Equipment and
Other Personal Property Leases listed in Section 2.20 include all leases by the
Company of any item of personal property used by the Company in connection with
the operation of its business. Except as set forth in such Section 2.20, all of
the equipment and personal property leased by the Company under the Equipment
and Other Personal Property Leases is currently used by the Company in the
ordinary course of its business. The Company has delivered to Parent correct and
complete copies of all Equipment and Other Personal Property Leases. The
Equipment and Other Personal Property Leases are valid, subsisting and in full
force and effect, and neither the Company nor any other party thereto is in
default of any of its obligations under any of such leases. Except as set forth
in such Section 2.20, no consent to the consummation of the transactions
contemplated by this Agreement is required from the lessors of any of the
Equipment or Other Personal Property.
SECTION 2.21 Product and Service Warranties. Except as described in
Section 2.21 of the Company Disclosure Schedule, the Company has not given or
made any warranties to third parties with respect to any products supplied or
services performed in respect of its business which may still be in effect at
any time after the date hereof, except for warranties imposed by law. Except as
described in such Section 2.21, there have been no claims or investigations made
with respect to any product or service warranties which have not been fully
settled and resolved or any unresolved warranty claims. The Company does not
know of any basis for any other claim or investigation.
SECTION 2.22 Disclosure. Each of the representations and warranties set
forth in this Article II shall be deemed made at and as of the date of this
Agreement and again at and as of the Closing Date, as if made at such time and
substituting the Closing Date for the date of this Agreement throughout this
Article II, except to the extent such representations and warranties
specifically refer to a date other than the date of this Agreement. No
representation or warranty contained in this Agreement or in the Company
Disclosure Schedule, or in any document delivered by the Company to Parent
pursuant to this Agreement, contains or will, at the Closing, contain any untrue
statement of a material fact or omits or will, at the Closing, omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were or will be made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
SECTION 3.1 Organization, Standing and Corporate Power. Each of Parent
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to carry on its business as now
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being conducted. Each of Parent and Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed individually or in the aggregate would
not have a material adverse effect on Parent. Parent has delivered to the
Company complete and correct copies of its Certificate of Incorporation and
Bylaws and the Certificate of Incorporation and Bylaws of Sub, in each case as
amended to the date hereof.
SECTION 3.2 Capital Structure. The authorized capital stock of Parent
consists of 100,000,000 shares of Common Stock, par value $0.001 per share, and
10,000,000 shares of preferred stock, par value $0.001 per share ("Preferred
Stock"). At the close of business on June 6, 2000, a) 33,899,067 shares of
Parent Common Stock were issued and outstanding, (b) no shares of Preferred
Stock were held by Parent in its treasury, and (c) 6,375,000 shares of Parent
Common Stock were reserved for issuance pursuant to Parent's stock option and
employee stock purchase plans ("Parent Equity Incentive Plans"). The Shares of
the Parent common stock to be issued pursuant to the Merger will be duly
authorized, validly issued, fully paid and nonassessable. Except as set forth
above, at the close of business on March 31, 2000, no shares of capital stock or
other voting securities of Parent were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of Parent are, and all
shares which may be issued pursuant to the Parent Equity Incentive Plans will
be, when issued in accordance with the terms thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness of Parent having the right
to vote (or convertible into securities having the right to vote) on any matters
on which stockholders of Parent may vote. Except as set forth above, there are
no securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Parent is a party, or by which
it is bound, obligating Parent to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Parent or obligating Parent to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are not any outstanding contractual obligations of Parent to
repurchase, redeem or otherwise acquire any shares of capital stock or other
securities of Parent. There are no stockholder agreements, voting trusts or
other agreements or understandings to which Parent is a party or by which it is
bound relating to the voting of any shares of capital stock of Parent.
All of the outstanding capital stock of Parent's subsidiaries is owned
by Parent, directly or indirectly, free and clear of any Lien (as defined in
Section 2.4) or any other limitation or restriction (including any restriction
on the right to vote or sell the same, except as may be provided as a matter of
law). There are no securities of Parent or its subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from Parent or its
subsidiaries, and no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of any capital stock or other ownership interests in, or any other
securities of, any subsidiary of Parent. There are no outstanding contractual
obligations of Parent or its subsidiaries to repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or other ownership interests in
any subsidiary of Parent.
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SECTION 3.3 Authority; Noncontravention. Parent and Sub have all
requisite corporate power and authority to enter into this Agreement and the
Escrow Agreement referred to in Section 7.2 and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the Escrow Agreement, and the consummation of the transactions contemplated by
this Agreement and the Escrow Agreement, have been duly authorized by all
necessary corporate action on the part of Parent and Sub. This Agreement has
been duly executed and delivered by Parent and Sub, and the Escrow Agreement
have been duly executed and delivered by Parent and each constitutes a valid and
binding obligation of each such party, enforceable against each such party in
accordance with its terms. The execution and delivery of this Agreement and the
Escrow Agreement do not, and the consummation of the transactions contemplated
by this Agreement and the Escrow Agreement and compliance with the provisions of
this Agreement and the Escrow Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any of its
subsidiaries under, any provision of (a) the Certificate of Incorporation or
Bylaws of Parent or the Certificate of Incorporation or Bylaws of Sub or any
provision of the comparable charter or organizational documents of any other
subsidiary of Parent, (b) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent, Sub or any other subsidiary of Parent or their
respective properties or assets or (c) subject to the governmental filings and
other matters referred to in the following sentence, any (i) statute, law,
ordinance, rule or regulation or (ii) judgment, order or decree applicable to
Parent, Sub or any other subsidiary of Parent or their respective properties or
assets, other than, in the case of clause (b) and clause (c)(i), any such
conflicts, violations, defaults, rights or Liens that individually or in the
aggregate would not (x) have a material adverse effect on Parent, (y) impair in
any material respect the ability of Parent and Sub to perform their respective
obligations hereunder or (z) prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent, Sub or any other
subsidiary of Parent in connection with the execution and delivery of this
Agreement and the Escrow Agreement by Parent and Sub or the consummation by
Parent and Sub of the transactions contemplated by this Agreement, except for
(1) the filing of the Certificate of Merger with the Delaware Secretary of State
and (to the extent necessary under applicable law) appropriate documents with
the relevant authorities of other states in which Company is qualified to do
business and (2) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the "blue sky"
laws of various states, the failure of which to be obtained or made would not,
individually or in the aggregate, have a material adverse affect on Parent or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
SECTION 3.4 SEC Documents. Parent has timely filed all required reports,
schedules, forms, statements and other documents with the SEC since February 25,
2000 (the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933 (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
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SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SEC Document has been revised or superseded by
a later-filed SEC Document, none of the SEC Documents contains any untrue
statement of a material fact or omits 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. The financial
statements of Parent included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited financial statements, as permitted by Form 10-Q of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of
Parent as of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited financial
statements, to normal year-end audit adjustments). Except as set forth in the
SEC Documents, Parent has no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or in the
aggregate, would have a material adverse effect on Parent.
SECTION 3.5 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents and publicly available prior to the date of this Agreement,
since the date of the most recent unaudited financial statements included in the
SEC Documents and through the date of this Agreement, Parent has conducted its
business only in the ordinary course consistent with past practice, and there
has not been:
(a) any material adverse change (as defined in Section 9.2) in
Parent;
(b) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Parent's capital stock;
(c) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock;
(d) any damage, destruction or loss, whether or not covered by
insurance, that individually or in the aggregate would have a material adverse
effect on Parent or any of its subsidiaries;
(e) any change in accounting methods, principles or practices by
Parent materially affecting its assets, liabilities or business, except insofar
as may have been required by a change in GAAP;
(f) any Tax election that individually or in the aggregate would
have a material adverse effect on Parent or any of its Tax attributes or any
settlement or compromise of any material income Tax liability;
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(g) any incurrence of any material obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except items incurred in the ordinary course of business and consistent with
past practice;
(h) any cancellation of any debts or claims, or waiver of any
rights, of substantial value;
(i) any sale, transfer, conveyance, encumbrance or grant of any
security interest in any of Parent's assets (whether real, personal or mixed,
tangible or intangible), except in the ordinary course of business and
consistent with past practice; or
(j) any agreement, whether in writing or otherwise, to take any
action described in this Section 3.5.
SECTION 3.6 Litigation. Except as set forth in the Parent SEC Documents,
there is no suit, action or proceeding pending or, to the knowledge of Parent,
threatened against or affecting Parent or any of its subsidiaries that
individually or in the aggregate would have a material adverse effect on Parent,
nor is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against, or, to the knowledge of Parent,
investigation by any Governmental Entity involving, Parent or any of its
subsidiaries that individually or in the aggregate would have a material adverse
effect on Parent.
SECTION 3.7 Compliance with Laws. Parent and each of its subsidiaries is
in compliance with all applicable statutes, laws, ordinances, regulations,
rules, judgments, decrees and orders of any Governmental Entity (collectively,
"Legal Provisions") applicable to its business or operations, except for
instances of possible noncompliance that, individually or in the aggregate,
would not have a material adverse effect on Parent or prevent or materially
delay the consummation of the Merger. Parent and each of its subsidiaries has in
effect all Federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("Permits"), necessary for it to own, lease or operate its properties
and assets and to carry on its business as now conducted, and there has occurred
no default under, or violation of, any such Permit, except for the lack of
Permits and for defaults under, or violations of, Permits which lack, default or
violation individually or in the aggregate would not have a material adverse
effect on Parent. Except as disclosed in the SEC Documents, Parent has not
received any notice or other communication from any Governmental Entity alleging
any violation of any Legal Provision by Parent.
SECTION 3.8 Taxes. Parent has not taken any action nor does it have any
knowledge of any fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
SECTION 3.9 Title to Properties. Parent and each of its subsidiaries has
good and marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful in the
conduct of its businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive covenants and
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similar encumbrances that individually or in the aggregate would not materially
interfere with the ability of Parent or any of its subsidiaries to conduct its
business as currently conducted. All such material assets and properties, other
than assets and properties in which Parent or any of its subsidiaries has a
leasehold interest, are free and clear of all Liens and except for Liens that
individually or in the aggregate would not materially interfere with the ability
of Parent and each of its subsidiaries to conduct its business as currently
conducted. Parent and each of its subsidiaries has complied in all material
respects with the terms of all material leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect.
Parent and/or one or more of its subsidiaries enjoys peaceful and undisturbed
possession under all such material leases, except for failures to do so that
would not individually or in the aggregate have a material adverse effect on
Parent.
SECTION 3.10 Voting Requirements. No vote of or other action by the
holders of Parent's Common Stock (or securities convertible into Parent's Common
Stock) is necessary in connection with the approval of this Agreement or the
consummation by Parent of the transactions contemplated by this Agreement.
SECTION 3.11 Brokers; Schedule of Fees and Expense. No broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
SECTION 3.12 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
SECTION 4.1 Conduct of Business by the Company. Except as set forth in
Section 4.1 of the Company Disclosure Schedule, during the period from the date
of this Agreement to the Effective Time, the Company shall carry on its
businesses in the ordinary course consistent with the manner as heretofore
conducted and, to the extent consistent therewith, use reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time, the
Company shall not:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire any shares of
capital stock of the
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Company or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(b) amend its Certificate of Incorporation, Bylaws or other
comparable charter or organizational documents;
(c) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (ii) any assets which,
individually, is in excess of $10,000 or, in the aggregate, are in excess of
$25,000, except purchases of inventory in the ordinary course of business
consistent with past practice;
(d) take any action that would, or that could reasonably be
expected to, result in (i) any of its representations and warranties set forth
in this Agreement that are qualified as to materiality becoming untrue, (ii) any
of such representations and warranties that are not so qualified becoming untrue
in any material respect or (iii) any of the conditions to the Merger set forth
in Article VI not being satisfied.
(e) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, provided, however, that between June 19,
2000 and the Closing Date, the Company may grant Company Options to purchase up
to 1,600,000 shares of Company Common Stock;
(f) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets, except
sales of inventory in the ordinary course of business consistent with past
practice;
(g) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary course of
business consistent with past practice or (ii) make any loans, advances or
capital contributions to, or investments in, any other person, other than
advances to employees in the ordinary course in accordance with past practice;
(h) make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $10,000 or, in the aggregate,
are in excess of $25,000;
(i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
Interim Financials
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or incurred in the ordinary course of business consistent with past practice, or
waive any material benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company is a
party;
(j) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company is a party or
waive, release or assign any material rights or claims thereunder;
(k) enter into any contracts, agreements, arrangement or
understandings relating to the distribution, sale or marketing by third parties
of the Company's products or products licensed by the Company;
(l) except as required to comply with applicable law or by the
terms of this Agreement, (i) adopt, enter into, terminate or amend any Benefit
Plan or other arrangement for the benefit or welfare of any director, officer or
current or former employee, (ii) increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any director, officer or employee
(except for normal increases of cash compensation or cash bonuses in the
ordinary course of business consistent with past practice), (iii) pay any
benefit not provided for under any Benefit Plan, (iv) except as permitted in
clause (ii), grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock or the removal of existing restrictions in
any Benefit Plans or agreements or awards made thereunder) or (v) take any
action to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or Benefit
Plan;
(m) form any subsidiary to the Company; or
(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Registration of Parent Common Stock. At or before the
Effective Time, Stockholders of Company Common Stock receiving the Consideration
Common shall become parties to Parent's Amended and Restated Investor Rights
Agreement dated November 10, 1999 (the "Registration Rights Agreement") with
respect to Sections 1.3 (piggyback registration rights) and 7 (miscellaneous
provisions) thereof. In addition, Parent shall prepare and file a shelf
registration statement on Form S-3 under the Securities Act (the "Form S-3"),
covering the Consideration Common issued pursuant to the Merger and held by
signatory(ies) to the Registration Rights Agreement as of the filing date, as
soon as practicable following Parent's becoming eligible to use Form S-3, but in
any event no later than March 31, 2001. The Form S-3 shall be prepared and filed
in accordance with Section 1.12 of the Registration Rights Agreement.
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SECTION 5.2 Access to Information . The Company shall afford to Parent,
and to Parent's officers, employees, accountants, counsel, financial advisors
and other representatives, reasonable access during normal business hours during
the period prior to the Effective Time.
SECTION 5.3 Public Announcements. Parent and Sub, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
give each other the opportunity to review and comment upon, any press release or
other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system. The parties agree that the initial press release to be issued
with respect to the transactions contemplated by this Agreement shall be in the
form theretofore agreed to by the parties.
SECTION 5.4 Tax Treatment. Each of Parent and the Company shall not take
any action and shall not fail to take any action which action or failure to act
would prevent, or would be reasonably likely to prevent, the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 5.5 NMS Listing. Parent shall cause the shares of Parent Common
Stock to be issued in the Merger to be approved for listing on the Nasdaq Stock
Market National Market, subject to official notice of issuance, prior to the
Closing Date.
SECTION 5.6 Certain Tax Matters. Notwithstanding any other provision in
this Agreement to the contrary, the following covenants will survive the Merger
through the applicable statute of limitation. From the date hereof until the
Effective Time, (i) the Company will file all Tax Returns and reports
("Post-Signing Returns") required to be filed by it; (ii) the Company will
timely pay all Taxes due and payable with respect to such Post-Signing Returns
that are so filed; (iii) the Company will make provision for all Taxes payable
by the Company for which no Post-Signing Return is due prior to the Effective
Time; (iv) the Company will promptly notify Parent of any action, suit,
proceeding, claim or audit (collectively, "Actions") pending against or with
respect to the Company in respect of any Tax where there is a reasonable
possibility of a determination or decision which would have a material adverse
effect on the Company's Tax liabilities or Tax attributes and will not settle or
compromise any such Action without Parent's consent; and (v) the Company will
not make any material Tax election without the consent of Parent.
SECTION 5.7 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if
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any) and the taking of all reasonable steps as may be necessary to avoid an
action or proceeding by any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In connection with and without limiting the foregoing, the Company
and its Board of Directors shall, if any state takeover statute or similar
statute or regulation is or becomes applicable to the Merger, this Agreement or
any other transactions contemplated by this Agreement, use all reasonable
efforts to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the term
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger, this Agreement and the other transactions
contemplated by this Agreement. Nothing in this Agreement shall be deemed to
require Parent to dispose of any significant asset or collection of assets.
(b) Each party shall give prompt notice to the other of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
SECTION 5.8 Fees and Expenses. All fees and expenses incurred in
connection with the Merger, this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated. Notwithstanding the foregoing, any
fees and expenses incurred by the Company in excess of $450,000 in transaction
costs relating to this Agreement and the Merger shall be borne by the
stockholders of the Company if the Merger is consummated. Transaction costs
shall include, but not be limited to, legal fees and expenses, financial
advisory and investment banking fees and expenses and accounting and auditing
fees and expenses.
SECTION 5.9 S-8 Registration Statement; Company Employee Options.
(a) Parent shall, within 90 days of the Closing Date, file with the
Securities and Exchange Commission an S-8 registration statement covering shares
of Parent Common Stock issuable upon exercise of Company Options which are
assumed by Parent pursuant to this Agreement and Company's stock option plan(s).
(b) Parent shall, with respect to employees of Company that become
employees of Parent following the Closing, review the stock and stock option
positions of such employees as compared to stock and stock option positions of
individuals in similar positions with Parent. If
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necessary to make the stock and stock option positions of such former Company
employees relatively consistent with those of Parent's employees in similar
positions, Parent will grant additional stock options to such former Company
employees. Such review, and the determination of whether to grant additional
options as well as the amounts and terms of such option grants, shall be in the
sole discretion of Parent's Board of Directors and the compensation committee
thereof.
SECTION 5.10 Transferability Parent shall permit any Stockholder of
Company receiving Consideration Common to subsequently sell or transfer the
Shares it receives to a third party who would otherwise qualify to receive the
Shares from Parent in a transaction exempt from registration under the
Securities Act of 1933, as amended.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
SECTION 6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligation of each party to effect the merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted by the stockholders of the Company.
(b) National Market Listing. The shares of Parent Company Stock
issuable to the Company's stockholders pursuant to this Agreement shall have
been approved for listing on the Nasdaq Stock Market National Market, subject to
official notice of issuance.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect.
SECTION 6.2 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and warranties
of Parent and Sub set forth in this Agreement that are not so qualified shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except as otherwise contemplated by this Agreement.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
(c) No Material Adverse Change. At any time on or after the date of
this Agreement there shall not have occurred any material adverse change (as
defined in Section 9.2) in
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the business, properties, assets, liabilities (contingent or otherwise),
financial condition or results of operations of Parent.
(d) Execution of Registration Rights Agreement. The Stockholders of
the Company receiving the Consideration Common shall have become parties to the
Registration Rights Agreement to the extent provided in and pursuant to Section
5.1.
(e) No Litigation. There shall not be pending or threatened any
suit, action or proceeding by any Governmental Entity, (i) challenging the
acquisition by Parent or Sub of any shares of Company Common Stock, seeking to
restrain or prohibit the consummation of the Merger, seeking to place
limitations on the ownership of shares of Company Common Stock (or shares of
common stock of the Surviving Corporation) by Parent or Sub or seeking to obtain
from the Company, Parent or Sub any damages that are material in relation to the
Company, (ii) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of Parent's subsidiaries of any material portion of any
business or of any assets of the Company, Parent or any of Parent's
subsidiaries, or to compel the Company, Parent or any of Parent's subsidiaries
to dispose of or hold separate any material portion of any business or of any
assets of the Company, Parent or any of Parent's subsidiaries, as a result of
the Merger or (iii) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect the business or operations of
the Company.
SECTION 6.3 Additional Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Company set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except as otherwise contemplated by this Agreement.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) No Litigation. There shall not be pending or threatened any
suit, action or proceeding by any Governmental Entity, (i) challenging the
acquisition by Parent or Sub of any shares of Company Common Stock, seeking to
restrain or prohibit the consummation of the Merger, seeking to place
limitations on the ownership of shares of Company Common Stock (or shares of
common stock of the Surviving Corporation) by Parent or Sub or seeking to obtain
from the Company, Parent or Sub any damages that are material in relation to the
Company, (ii) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of Parent's subsidiaries of any material portion of any
business or of any assets of the Company, Parent or any of Parent's
subsidiaries, or to compel the Company, Parent or any of Parent's subsidiaries
to dispose of or hold separate any material portion of any business or of any
assets of the Company, Parent or any of
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Parent's subsidiaries, as a result of the Merger or (iii) seeking to prohibit
Parent or any of its subsidiaries from effectively controlling in any material
respect the business or operations of the Company.
(d) No Material Adverse Change. Other than as set forth in the
Company Disclosure Schedule, at any time on or after the date of this Agreement
there shall not have occurred any material adverse change (as defined in Section
9.2) in the business, properties, assets, liabilities (contingent or otherwise),
financial condition or results of operations of the Company.
(e) Stockholder Approval. The holders of at least 90% of the issued
and outstanding shares of Company Common Stock and Company Preferred Stock shall
have approved, at a meeting of stockholders or by written consent, this
Agreement and the Merger.
ARTICLE VII
SURVIVAL, ESCROW AND INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. Except for
Section 2.15, which shall survive the Merger through the expiration of the
applicable statutes of limitations, all of Company's representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement (each as modified by the Company Disclosure Schedule) shall survive
the Merger and continue until the date which is 12 months following the Closing
Date (the "Expiration Date").
SECTION 7.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time, the holders of
Consideration Common, to the extent set forth in Section 1.10, shares will be
deemed to have received and deposited with the Escrow Agent the Escrow Amount
(plus any additional shares as may be issued upon any stock split, stock
dividend or recapitalization effected by Parent after the Effective Time)
without any act of any stockholder. As soon as practicable after the Effective
Time, the Escrow Amount, without any act of any stockholder, will be deposited
with the Escrow Agent by Parent, such deposit to constitute an escrow fund (the
"Escrow Fund") to be governed by the terms set forth herein (and in the Escrow
Agreement) and at Parent's cost and expense. The Escrow Fund shall be available
to compensate Parent and its affiliates for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of investigation and defense (hereinafter
individually a "Loss" and collectively "Losses") incurred by Parent, its
officers, directors, agents, employees, stockholders or affiliates (including
the Surviving Corporation) directly or indirectly as a result of (i) any
inaccuracy or breach of a representation or warranty of the Company contained
herein (as modified by the Company Disclosure Schedule) and (ii) any failure by
the Company to perform or comply with any covenant contained herein. Any shares
remaining in the Escrow Fund after the final determination of any unsatisfied
Losses existing at the end of the Escrow Period shall be returned to the
holders. Parent may not receive any shares from the Escrow Fund unless and until
Officer's Certificates (as defined in Section 7.2(d) below) identifying Losses
have been delivered to the Escrow Agent as provided in Section 7.2(e), and all
other procedures in this Article VII shall have been followed.
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(b) Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate as provided in
Section 7.3(b) (the "Escrow Period"); provided that the Escrow Period shall not
terminate with respect to such amount (or some portion thereof) that, together
with the aggregate amount remaining in the Escrow Fund is necessary in the
reasonable judgment of Parent, subject to the objection of the Stockholder Agent
in the manner provided in Section 7.2(e), to satisfy any unsatisfied Losses
concerning facts and circumstances existing prior to the termination of such
Escrow Period specified in any Officer's Certificate delivered to the Escrow
Agent prior to termination of such Escrow Period. Promptly upon termination of
the Escrow Period, the Escrow Agent shall deliver to the holders of Shares the
remaining portion of the Escrow Fund not required to satisfy such claims.
Deliveries of Escrow Amounts to the holders of Shares pursuant to this Section
7.2(b) shall be made in proportion to their respective original contributions to
the Escrow Fund.
(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split, stock dividend or recapitalization) ("New Shares") in respect of Parent
Common Stock in the Escrow Fund which have not been released from the Escrow
Fund shall be added to the Escrow Fund and become a part thereof. New Shares
issued in respect of shares of Parent Common Stock which have been released from
the Escrow Fund shall not be added to the Escrow Fund but shall be distributed
to the recordholders thereof. Cash dividends on Parent Common Stock shall not be
added to the Escrow Fund but shall be distributed to the recordholders thereof.
(iii) Each stockholder shall have voting rights with respect
to the shares of Parent Common Stock contributed to the Escrow Fund by such
stockholder (and on any voting securities added to the Escrow Fund in respect of
such shares of Parent Common Stock).
(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or
before the last day of the Escrow Period of a certificate signed by any officer
of Parent (an "Officer's Certificate"): (A) stating that Parent has paid Losses,
and (B) specifying in reasonable detail the individual items of Losses included
in the amount so stated, the date each such item was paid, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(e) hereof,
deliver to Parent out of the Escrow Fund, as promptly as practicable, shares of
Parent Common Stock held in the Escrow Fund in an amount determined pursuant to
Section 7.2(d)(ii) equal to such Losses. Notwithstanding the above, the Escrow
Agent shall not deliver to Parent any shares of Parent Common Stock from the
Escrow Fund
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unless and until the aggregate amount of Losses claimed pursuant to this
paragraph exceeds $100,000 (the "Deductible"). If the aggregate amount of
claimed Losses exceeds the Deductible, the Escrow Agent shall only deliver to
Parent such shares of Parent Common Stock to compensate Losses over and above
the Deductible, subject to the provisions of Section 7.2(e) and 7.2(f).
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 7.2(d)(i), the shares of Parent Common Stock shall be valued at the
value determined pursuant to Section 1.8(c)(B).
(e) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Stockholder Agent and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to Parent of any Escrow
Amounts pursuant to Section 7.2(d) or withhold any distribution pursuant to
Section 7.2(b) unless the Escrow Agent shall have received written authorization
from the Stockholder Agent to make such delivery or withhold such distribution.
After the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery or withdrawal of shares of Parent Common Stock from the Escrow Fund in
accordance with Section 7.2(d), provided that no such payment or withholding may
be made if the Stockholder Agent shall object in a written statement to the
claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(f) Resolution of Conflicts. In case the Stockholder Agent shall so
object in writing to any claim or claims made in any Officer's Certificate, the
Stockholder Agent and Parent shall attempt in good faith for a period of 60 days
to agree upon the rights of the respective parties with respect to each of such
claims. If the Stockholder Agent and Parent should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to
rely on any such memorandum and distribute shares of Parent Common Stock from
the Escrow Fund in accordance with the terms thereof. If no such agreement can
be reached during such initial 60-day period, either Parent and the Stockholder
Agent will participate in a mutually agreeable form of non-binding mediation for
a period of up to 60 additional days. Each party shall bear its own costs and
expenses of such mediation, and each party shall pay one-half of the costs and
fees of the mediator. If no resolution can be achieved during such additional
60-day period, the parties may seek legal remedies in accordance with Section
9.8 hereof. The time periods set forth in this paragraph shall not begin to run
with respect to any claimed Losses until the claimed Losses in the aggregate
have exceeded the Deductible. When the aggregate amount of claimed Losses
exceeds the Deductible, the provisions of this paragraph shall apply to all
previously claimed Losses in Officer's Certificates and objection to such claims
under Section 7.2(e). However, under no circumstances will the Escrow Agent
deliver to Parent any shares of Parent Common Stock from the Escrow Fund for
Losses falling within the Deductible.
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(g) Stockholder Agent; Power of Attorney.
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any stockholder, Xxxx X. Xxxxxx, XX shall
be appointed as agent and attorney-in-fact (the "Stockholder Agent") for each
holder of Consideration Common shares, for and on behalf of stockholders, to
execute the Escrow Agreement, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common Stock from the Escrow
Fund in satisfaction of claims by Parent, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
Stockholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the holders of Shares prior to the Effective Time, and after the
Effective Time by the former holders of Shares as of the Effective Time from
time to time upon not less than thirty (30) days prior written notice to Parent;
provided that the Stockholder Agent may not be removed unless holders of a
two-thirds interest of the Escrow Fund agree to such removal. Any vacancy in the
position of Stockholder Agent may be filled by approval of the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Stockholder Agent, and the Stockholder Agent shall not receive compensation for
his or her services. Notices or communications to or from the Stockholder Agent
shall constitute notice to or from each of the holders of Shares.
(ii) The Stockholder Agent shall not be liable for any act
done or omitted hereunder as Stockholder Agent while acting in good faith and in
the exercise of reasonable judgment. The stockholders of the Company on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall severally
indemnify the Stockholder Agent and hold the Stockholder Agent harmless against
any loss, liability or expense incurred without negligence or bad faith on the
part of the Stockholder Agent and arising out of or in connection with the
acceptance or administration of the Stockholder Agent's duties hereunder,
including the reasonable fees and expenses of any legal counsel retained by the
Stockholder Agent.
(h) Actions of the Stockholder Agent. A decision, act, consent or
instruction of the Stockholder Agent shall constitute a decision of all the
holders of Consideration Common for whom a portion of the Escrow Amount
otherwise issuable to them are deposited in the Escrow Fund and shall be final,
binding and conclusive upon each of such stockholders, and the Escrow Agent and
Parent may rely upon any such decision, act, consent or instruction of the
Stockholder Agent as being the decision, act, consent or instruction of each and
every such stockholder of the Company. The Escrow Agent and Parent are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Stockholder
Agent.
(i) Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Stockholder Agent of such claim, and the
Stockholder Agent, as representative for the holders of Consideration Common,
shall be entitled, at their option and expense, to participate in or take over
any defense of such claim. Parent shall have the right in its sole discretion to
settle any such claim; provided, however, that except with the consent of the
Stockholder Agent which shall not be
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unreasonably withheld, no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of any claim against the
Escrow Fund; except that in the event a claim with third-party claimants is
settled for less than the full amount of the claim, Parent shall have no right
to obtain any additional amount from the Escrow Fund in respect of such claim;
provided, further, that if the Stockholder Agent has taken over the defense of a
claim as permitted by this Section 7.2(i), the Stockholder Agent shall have the
right in its sole discretion to settle such claim, with the consent of the
Parent which shall not be unreasonably withheld, and the Parent shall have no
right to settle such claim. In the event that the Stockholder Agent has
consented to any such settlement and acknowledged that the claim is a valid
claim against the Escrow Fund, the Stockholder Agent shall have no power or
authority to object under any provision of this Section 7.2 to the amount of any
claim by Parent against the Escrow Fund with respect to such settlement.
(j) Escrow Agent's Duties. The Escrow Agent shall be obligated only
for the performance of such duties as are specifically set forth in the Escrow
Agreement.
(k) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
SECTION 7.3 Limitation of Remedies.
(a) Parent and Sub acknowledge and agree that, in the event the
Merger is completed, the indemnification provisions in this Section 7.3 shall be
the exclusive remedy of Parent and Sub for Losses described in Section 7.2, and
for any other claims made pursuant to this Agreement, except in the event of
fraud, including both active fraud and fraudulent concealment by the Company,
its officers, directors, employees, agents or one or more former stockholder(s)
of the Company against whom recovery for such fraud is sought.
(b) At the one-year anniversary of the Effective Time, the escrow
shall terminate and all shares in the Escrow Fund, except shares that have been
delivered to Parent under Article VII or the number of shares of Parent Common
Stock which are, at such date, claimed by Parent to be deliverable to Parent in
satisfaction of claims identified in Officers' Certificates pursuant to Section
7.2(d) and (e), shall be distributed to the former Company stockholders.
SECTION 7.4 Indemnification
(a) From and after the Effective Time of the Merger, Parent shall
indemnify, defend and hold harmless the present and former officers, directors
and employees of Company
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(collectively, the "Indemnified Parties") against all losses, expenses, claims,
judgments, damages, liabilities or amounts that are paid in settlement of, with
the approval of Parent (which approval shall not be unreasonably withheld), or
otherwise in connection with, any claim, action, suit, judgment, proceeding or
investigation (a "Claim"), based in whole or in part on the fact that such
person is or was such a director, officer or employee and arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), in each case to
the fullest extent permitted under Delaware Law (and shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Delaware Law).
(b) Without limiting the foregoing, in the event any Claim is
brought against any Indemnified Party (whether arising before or after the
Effective Time) after the Effective Time (i) the Indemnified Parties may retain
their regularly engaged independent legal counsel as of the date of this
Agreement, or other independent legal counsel satisfactory to them provided that
such other counsel shall be reasonably acceptable to Parent, (ii) Parent shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received, and (iii) Parent will use its
reasonable efforts to assist in the vigorous defense of any such matter,
provided that Parent shall not be liable for any settlement of any Claim
effected without its written consent, which consent shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 7.4, promptly upon learning of any such Claim, shall notify Parent
(although the failure so to notify Parent shall not relieve Parent from any
liability which Parent may have under this Section 7.4, except to the extent
such failure prejudices Parent). The Indemnified Parties as a group may retain
one law firm (in addition to local counsel) to represent them with respect to
each such matter unless there is, under applicable standards of professional
conduct (as reasonably determined by counsel to such Indemnified Parties) a
conflict on any significant issue between the position of any two or more of
such Indemnified Parties, in which event, an additional counsel may be retained
by such Indemnified Parties.
This Section 7.4 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Parent, Parent's obligations
pursuant to this Section 7.4 and its and their successors and permitted assigns.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time, whether before or after approval of matters presented in connection with
the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
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(i) if the Merger shall not have been consummated by July 7,
2000 for any reason; provided, however, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a willful and material breach of this Agreement;
(ii) if any restraint having any of the effects set forth in
Section 6.1(c) shall be in effect and shall have become final and nonappealable.
(c) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any such representation or warranty or Parent shall have become
inaccurate, in either case such that the conditions set forth in Section 6.2(a)
or Section 6.2(b), as the case may be, would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall have become
inaccurate; provided, that if such inaccuracy in Parent's representations and
warranties or breach by Parent is curable by Parent through the exercise of its
reasonable efforts, then (i) the Company may not terminate this Agreement under
this Section 8.1(c) with respect to a particular breach or inaccuracy prior to
or during the 15-day period commencing upon delivery by the Company of written
notice to Parent describing such breach or inaccuracy, provided Parent continues
to exercise reasonable efforts to cure such breach or inaccuracy and (ii) the
Company may not, in any event, terminate this Agreement under this Section
8.1(c) if such inaccuracy or breach shall have been cured in all material
respects during such 15-day period; and, provided further that the Company may
not terminate this Agreement pursuant to this Section 8.1(c) if it shall have
willfully and materially breached this Agreement; or
(d) by Parent, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any such representation or warranty of the Company shall have
become inaccurate, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b), as the case may be, would not be satisfied as of the
time of such breach or as of the time such representation or warranty shall have
become inaccurate; provided, that if such inaccuracy in the Company's
representations and warranties or breach by the Company is curable by the
Company through the exercise of its reasonable efforts, then (i) Parent may not
terminate this Agreement under this Section 8.1(d) with respect to a particular
breach or inaccuracy prior to or during the 15-day period commencing upon
delivery by Parent of written notice to the Company describing such breach or
inaccuracy, provided the Company continues to exercise reasonable efforts to
cure such breach or inaccuracy and (ii) Parent may not, in any event, terminate
this Agreement under this Section 8.1(d) if such inaccuracy or breach shall have
been cured in all material respects during such 15-day period; and, provided
further that Parent may not terminate this Agreement pursuant to this Section
8.1(d) if it shall have willfully and materially breached this Agreement.
SECTION 8.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the
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Company, other than the provisions of this Section 8.2 and Article VIII and
except to the extent that such termination results from the willful and material
breach by a party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
SECTION 8.3 Amendment. This Agreement may be amended by the parties
hereto at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso of Section 8.3, waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxxxx
if to the Company, to:
Arista Knowledge Systems
Suite 250
0000 Xxxxxx Xxx Xxxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Chairman/CEO
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with copies to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Safeguard Scientifics, Inc.
Xxxxx 000
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
and Attention: General Counsel
Pennsylvania Early Stage Partners, L.P.
300 The Safeguard Building
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
and Attention: General Counsel
SECTION 9.2 Definitions. For purposes of this Agreement:
an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
"material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to result in
any change or effect) that is materially adverse to the business, properties,
assets, liabilities (contingent or otherwise), financial condition or results of
operations of either the Company or Parent and its subsidiaries, taken as a
whole, as the case may be;
a "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity; and
a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
SECTION 9.3 Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this
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Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
SECTION 9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.5 Entire Agreement. This Agreement, the Exhibits hereto and
the ancillary agreements contemplated hereby constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and such
Exhibits and ancillary agreements.
SECTION 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder and any holder of Consideration Common may assign, in its sole
discretion, its rights under Section 5.1 so long as it meets the requirements
for assignment set forth in the Registration Rights Agreement. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 9.8 Enforcement. In the event any dispute arises out of this
Agreement or the transactions contemplated hereby, Parent or the Company and,
after the Effective Time of the Merger with respect with matters related to the
Escrow Fund, the Stockholder Agent, may, by written notice to the other, demand
arbitration of the matter unless the amount of the damages is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration conducted by
one arbitrator. Parent and the Company or the Stockholder Agent, as the case may
be, shall agree on the arbitrator; provided that if Parent and the Company or
the Stockholder Agent, as the case may be, cannot agree on such arbitrator,
either party can request that Judicial Arbitration and Mediation Services
("JAMS") select the arbitrator. The arbitrator shall set a limit time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgment of the
arbitrator, to discover relevant information from the opposing parties about the
subject matter of the dispute. The arbitrator shall rule upon motions to compel
or limit discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the same extent as a court of
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competent law or equity, should the arbitrator determine that discovery was
sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the arbitrator
shall be written, shall be in accordance with applicable law and with this
Agreement, and shall be supported by written findings of fact and conclusions of
law, which shall set forth the basis for the decision of the arbitrator. The
decision of the arbitrator shall be binding and conclusive upon the parties to
this Agreement. Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
San Francisco County, California under the commercial rules then in effect of
the American Arbitration Association.
SECTION 9.9 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.10 Attorneys' Fees. In the event of any dispute, litigation or
arbitration pertaining to or arising out of this Agreement or the obligations of
the parties under this Agreement, the prevailing party shall be entitled to an
award of attorneys' fees and costs
(Reminder of page intentionally left blank)
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
DIGITALTHINK, INC.
By: /s/ XXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
---------------------------------
Title: President & CEO
--------------------------------
Date: 7/6/00
---------------------------------
XX XXXXXX SUB, INC.
By: /s/ XXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
---------------------------------
Title: President
--------------------------------
Date: 7/6/00
---------------------------------
ARISTA KNOWLEDGE SYSTEMS, INC.
By: /s/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
---------------------------------
Title: President
--------------------------------
Date: 7/6/00
---------------------------------
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 6, 2000 FOR DIGITALTHINK, INC., ARISTA
KNOWLEDGE SYSTEMS, INC. AND XX XXXXXX SUB, INC.
46
ATTACHMENT 1
The following persons, each a stockholder of Arista Knowledge Systems,
Inc., agree to vote any and all shares of such corporation's capital stock which
they hold, whether at a stockholders' meeting or pursuant to a stockholders'
written consent, in favor of the transactions contemplated by the foregoing
Agreement and Plan of Merger, to which this Attachment 1 is attached, agree to
be bound by the provisions of the Escrow Agreement mentioned therein and
understand that their covenants are made for the benefit of, and will be relied
upon by, DigitalThink, Inc. and XX Xxxxxx Sub, Inc.
STOCKHOLDERS:
SAFEGUARD SCIENTIFIC CORPORATION
By:
---------------------------------
Title:
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[insert names of other stockholders]
