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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CORSAIR COMMUNICATIONS, INC.,
ANTEATER ACQUISITION CORP.
AND
SUBSCRIBER COMPUTING, INC.
DATED AS OF APRIL 2, 1998
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER................................................................ 1
1.1 The Merger................................................................ 1
1.2 Effective Time............................................................ 2
1.3 Effect of the Merger...................................................... 2
1.4 Certificate of Incorporation; Bylaws...................................... 2
1.5 Directors and Officers.................................................... 2
1.6 Maximum Shares to Be Issued; Effect on Capital Stock...................... 3
1.7 Dissenting Shares......................................................... 8
1.8 Surrender of Certificates................................................. 9
1.9 No Further Ownership Rights in Company Common Stock....................... 10
1.10 Lost, Stolen or Destroyed Certificates.................................... 11
1.11 Tax and Accounting Consequences........................................... 11
1.12 Taking of Necessary Action; Further Action................................ 11
1.13 Company Certificate; Release.............................................. 11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY................................................................... 12
2.1 Organization of the Company............................................... 12
2.2 Company Capital Structure................................................. 12
2.3 Subsidiaries.............................................................. 13
2.4 Authority................................................................. 13
2.5 Company Financial Statements.............................................. 14
2.6 No Undisclosed Liabilities................................................ 14
2.7 No Changes................................................................ 15
2.8 Tax and Other Returns and Reports......................................... 16
2.9 Restrictions on Business Activities....................................... 18
2.10 Title to Properties; Absence of Liens and Encumbrances.................... 18
2.11 Intellectual Property..................................................... 19
2.12 Agreements, Contracts and Commitments..................................... 20
2.13 Interested Party Transactions............................................. 22
2.14 Compliance with Laws...................................................... 22
2.15 Litigation................................................................ 22
2.16 Insurance................................................................. 23
2.17 Minute Books.............................................................. 23
2.18 Environmental Matters..................................................... 23
2.19 Brokers' and Finders' Fees: Third Party Expenses.......................... 24
2.20 Employee Matters and Benefit Plans........................................ 24
2.21 Employees................................................................. 28
2.22 Pooling of Interest....................................................... 28
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2.23 Disclosure Documents...................................................... 28
2.24 Representation Complete................................................... 29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB................................................................ 29
3.1 Organizati on, Standing and Power......................................... 29
3.2 Authority................................................................. 29
3.3 Capital Structure......................................................... 30
3.4 SEC Documents; Parent Financial Statements................................ 30
3.5 No Material Adverse Change................................................ 31
3.6 Litigation................................................................ 31
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME....................................... 32
4.1 Conduct of Business of the Company........................................ 32
4.2 No Solicitation........................................................... 35
4.3 Conduct of Business of Parent............................................. 36
5.1 Sale and Registration of Shares; Stockholder Matters...................... 36
5.2 Access to Information..................................................... 38
5.3 Confidentiality........................................................... 38
5.4 Expenses.................................................................. 38
5.5 Public Disclosure......................................................... 38
5.6 Consents.................................................................. 39
5.7 FIRPTA Compliance......................................................... 39
5.8 Reasonable Efforts........................................................ 39
5.9 Notification of Certain Matters........................................... 39
5.10 Certain Benefit Plans..................................................... 39
5.11 Pooling Accounting........................................................ 40
5.12 Affiliate Agreements...................................................... 40
5.13 Voting Agreement.......................................................... 40
5.14 Additional Documents and Further Assurances............................... 40
5.15 Registration Statement on Form S-8........................................ 40
5.16 Company Auditors.......................................................... 40
5.17 Termination Fee........................................................... 41
5.18 Nasdaq National Market Listing............................................ 41
ARTICLE VI CONDITIONS TO THE MERGER.................................................. 41
6.1 Conditions to Obligations of Each Party to Effect the Merger.............. 41
6.2 Additional Conditions to Obligations of the Company....................... 42
6.3 Additional Conditions to the Obligations of Parent and Merger Sub......... 43
ARTICLE VII ESCROW.................................................................... 44
7.1 Escrow Period............................................................. 44
7.2 Escrow Arrangements....................................................... 45
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER......................................... 52
8.1 Termination............................................................... 52
8.2 Effect of Termination..................................................... 53
8.3 Amendment................................................................. 53
8.4 Extension; Waiver......................................................... 54
ARTICLE IX GENERAL PROVISIONS........................................................ 54
9.1 Survival of Representations, Warranties and Agreements.................... 54
9.2 Notices................................................................... 54
9.3 Interpretation............................................................ 56
9.4 Counterparts.............................................................. 56
9.5 Entire Agreement: Assignment.............................................. 56
9.6 Severability.............................................................. 56
9.7 Other Remedies............................................................ 57
9.8 Governing Law............................................................. 57
9.9 Rules of Construction..................................................... 57
9.10 Specific Performance...................................................... 57
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Stockholder Questionnaire
Exhibit B Form of Affiliate Agreement
Exhibit C Form of Company Stockholder Voting Agreement
Exhibit D Form of Parent Stockholder Voting Agreement
Exhibit E Form of Legal Opinion of Counsel to Parent
Exhibit F Form of Legal Opinion of Counsel to the Company
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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3.6 Litigation
5.12 Affiliate Agreement Signatories
5.13 Voting Agreement Signatories
6.3(C) Third Party Consents
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of April 2, 1998 among Corsair Communications, Inc., a Delaware
corporation ("Parent"), Anteater Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Subscriber Computing,
Inc., a Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
options, warrants or other rights to acquire or receive shares of Company
Capital Stock shall be converted into the right to receive shares of voting
Common Stock of Parent ("Parent Common Stock").
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of
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Parent. The Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, 000 Xxxx X Xxxxxx, Xxxxx 0000, Xxx Xxxxx,
Xxxxxxxxxx, unless another place or time is agreed to by Parent and the Company.
The date upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing an Agreement or Certificate of Merger (or like
instrument) with the Secretary of State of the State of Delaware (the "Merger
Agreement"), in accordance with the relevant provisions of applicable law (the
time of confirmation by the Secretary of State of Delaware of such filing being
referred to herein as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation; provided, however, that Article I
of the Certificate of Incorporation of the Surviving Corporation shall be
amended to read as follows: "The name of the corporation is Subscriber
Computing, Inc."
(b) Unless otherwise determined by Parent, the Bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws
of the Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
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1.6 Maximum Shares to Be Issued; Effect on Capital Stock. The maximum
number of shares of Parent Common Stock to be issued (including Parent Common
Stock to be reserved for issuance upon exercise of any of the Company's options
and warrants to be assumed by Parent) in exchange for the acquisition by Parent
of all outstanding Company Capital Stock and all unexpired and unexercised
options, warrants or other rights to acquire Company Capital Stock shall be
equal to that number of shares of Parent Common Stock obtained by dividing (x)
the sum of (A) Seventy Million Dollars ($70,000,000) and (B) the exercise price
of all warrants and options to acquire Company Capital Stock outstanding
immediately prior to the Effective Time and (C) any cash received by the Company
after April 1, 1998, but prior to the Effective Time, as payment for the
exercise of warrants or options to acquire Company Capital Stock (collectively,
the "Purchase Price") by (y) the Parent Closing Average Price Per Share (as
defined in Section 1.6(j)(v)) (the "Total Parent Shares"), provided, however,
that the Purchase Price shall be reduced by that amount of the obligations of
the Company relating to any mortgages, indentures, loans or credit agreements,
security agreements or other arrangements or instruments relating to the
borrowing of money or extension of credit to the Company including guaranties
(collectively, "Borrowings) that exceed Ten Million Dollars ($10,000,000) as of
the Effective Time excluding any Borrowings by the Company in the form of
capital equipment leases, but including, without limitation, that certain Master
Loan and Security Agreement dated December 10, 1997 in the amount of Two Million
Six Hundred Thousand Dollars ($2,600,000) with Transamerica. Subject to the
terms and conditions of this Agreement, as of the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holder of any shares of the Company Capital Stock, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common
Stock of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Capital Stock to be canceled pursuant to Section 1.6(d) and any Dissenting
Shares (as defined and to the extent provided in Section 1.7(a)) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of Parent Common Stock (except for the number of
shares of Parent Common Stock contributed to the Escrow Fund (as defined in
Section 7.2(b)) equal to the Exchange Ratio (as defined in Section 1.6(j)(vii)
below), upon surrender of the certificate representing such share of Company
Common Stock in the manner provided in Section 1.8, provided, however, that if
the Company has a repurchase right with respect to the Company Common Stock of
any holder, then the shares of Parent Common Stock issuable to the respective
holder shall be subject to a schedule with respect to the lapse of repurchase
rights such that repurchase rights lapse with respect to the number of shares of
Parent Common Stock in the same proportion as the number of shares of Company
Common Stock which would have lapsed multiplied by the Exchange Ratio.
(b) Conversion of Company Series A Preferred Stock. Each share of
Series A Preferred Stock of the Company ("Company Series A Preferred Stock")
issued and
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outstanding immediately prior to the Effective Time (other than any shares of
Company Capital Stock to be canceled pursuant to Section 1.6(d) and any
Dissenting Shares (as defined and to the extent provided in Section 1.7(a)) will
be canceled and extinguished and be converted automatically into the right to
receive that number of shares of Parent Common Stock (except for the number of
shares of Parent Common Stock contributed to the Escrow Fund (as defined in
Section 7.2(b)) equal to the number of shares of Company Common Stock that would
have been issued upon conversion of such share of Company Series A Preferred
Stock immediately prior to the Effective Time multiplied by the Exchange Ratio,
upon surrender of the certificate representing such share of Company Series A
Preferred Stock in the manner provided in Section 1.8.
(c) Conversion of Company Series B Preferred Stock. Each share of
Series B Preferred Stock of the Company ("Company Series B Preferred Stock")
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Capital Stock to be canceled pursuant to Section 1.6(d) and
any Dissenting Shares (as defined and to the extent provided in Section 1.7(a))
will be canceled and extinguished and be converted automatically into the right
to receive that number of shares of Parent Common Stock (except for the number
of shares of Parent Common Stock contributed to the Escrow Fund (as defined in
Section 7.2(b)) equal to (i) the Series B Preference Shares (as defined in
Section 1.6(j)(i) below) divided by the Aggregate Series B Number (as defined in
Section 1.6(j)(iii) below), plus (ii) the Exchange Ratio, upon surrender of the
certificate representing such share of Company Series B Preferred Stock in the
manner provided in Section 1.8.
(d) Cancellation of Company-Owned Stock. Each share of Company
Capital Stock owned by the Company or any direct or indirect wholly-owned
subsidiary of the Company immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(e) Stock Options. At the Effective Time, all options to purchase
Company Common Stock then outstanding under the Company's 1997 Incentive Stock
Option Plan (the "Option Plan") or otherwise shall be assumed by Parent in
accordance with provisions described below.
(i) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (each a "Company Option") under the
Option Plan or otherwise, whether vested or unvested, shall be, in connection
with the Merger, assumed by Parent. Each Company Option so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded
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down (in the case of Company Options granted under the Option Plan) to the
nearest whole number of shares of Parent Common Stock and (B) the per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such assumed Company Option shall be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), to the extent the Company Options qualified as incentive
stock options immediately prior to the Effective Time.
(iii) Promptly following the Effective Time, Parent will
issue to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(f) Warrants. At the Effective Time, the warrants to purchase
shares of Company Common Stock ( a "Common Warrant"), Company Series A Preferred
Stock (a "Series A Warrant") and Company Series B Preferred Stock (a "Series B
Warrant") listed on Schedule 1.6(f) then outstanding, if any, (each a "Warrant")
shall be assumed by Parent in accordance with the provisions described below:
(i) At the Effective Time, each Warrant shall be, in
connection with the Merger, assumed by Parent. Each Warrant so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the respective agreement governing such Warrant
immediately prior to the Effective Time, except that (A) each such Common
Warrant shall be exercisable for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Common Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded to the nearest whole
number of shares of Parent Common Stock, with one-half share being rounded up,
at that exercise price per share equal to the quotient determined by dividing
the exercise price per share at which such Common Warrant was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded to the
nearest whole cent, with one-half cent being rounded up, (B) each such Series A
Warrant shall be exercisable for that number of whole shares of Parent Common
Stock equal to the number of shares of Parent Common Stock that would have been
issued in respect of such Warrant in the Merger had such Warrant been exercised
in full immediately prior to the Effective Time, rounded to the nearest whole
number of shares of Parent Common Stock, with one-half share being rounded up,
at that exercise price per share equal to the quotient determined by dividing
the aggregate exercise price at which such Series A Warrant was exercisable
immediately prior to the Effective Time if exercised in full by the number of
shares of Parent Common Stock issuable upon
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exercise of such Warrant following the Merger, rounded to the nearest whole
cent, with one-half cent being rounded up, and (C) each such Series B Warrant
shall be exercisable for that number of whole shares of Parent Common Stock
equal to the number of shares of Parent Common Stock that would have been issued
in respect of such Warrant in the Merger had such Warrant been exercised in full
immediately prior to the Effective Time, rounded to the nearest whole number of
shares of Parent Common Stock, with one-half share being rounded up, at that
exercise price per share equal to the quotient determined by dividing the
aggregate exercise price at which such Series B Warrant was exercisable
immediately prior to the Effective Time if exercised in full by the number of
shares of Parent Common Stock issuable upon exercise of such Warrant following
the Merger, rounded to the nearest whole cent, with one-half cent being rounded
up,
(ii) Promptly following the Effective Time, Parent will
issue to each holder of an outstanding Warrant a document evidencing the
foregoing assumption of such Warrant by Parent.
(g) Capital Stock of Merger Sub. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares of Common
Stock of the Merger Sub shall, as of the Effective Time, evidence ownership of
such shares of Common Stock of the Surviving Corporation.
(h) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Company Capital Stock), reorganization, recapitalization or other like change
with respect to Company Capital Stock occurring after the date hereof and prior
to the Effective Time.
(i) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive, without any interest,
from Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the average closing price of a
share of Parent Common Stock for the five (5) consecutive trading days ending on
the trading day immediately prior to the Closing Date, as reported on the Nasdaq
National Market.
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(j) Definitions.
(i) Series B Preference Shares. The "Series B Preference
Shares" shall mean the quotient obtained by dividing (x) the product of $3.563
multiplied by the Aggregate Series B Number (as defined below), by (y) the
Parent Closing Average Price Per Share (as defined below).
(ii) Aggregate Common Number. The "Aggregate Common
Number" shall mean the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time.
(iii) Aggregate Series A Number. The "Aggregate Series A
Number" shall mean the aggregate number of shares of Company Common Stock
issuable upon conversion of all of the Company Series A Preferred Stock
outstanding immediately prior to the Effective Time (including all shares of
Company Series A Preferred Stock issued or issuable upon exercise of the Series
A Preferred Warrants).
(iv) Aggregate Series B Number. The "Aggregate Series B
Number" shall mean the aggregate number of shares of Company Series B Preferred
Stock outstanding immediately prior to the Effective Time (including all shares
of Company Series B Preferred Stock issued or issuable upon exercise of the
Series B Preferred Warrants).
(v) Aggregate Option Number. The "Aggregate Option Number"
shall mean the aggregate number of shares of Company Common Stock issuable upon
the exercise of all outstanding Company options, warrants and other rights to
acquire shares of Company Common Stock (excluding Common Stock issuable upon
conversion of the Company Series A Preferred Stock and/or Company Series B
Preferred Stock issuable upon the exercise of the Series A Warrants or the
Series B Warrants) immediately prior to the Effective Time.
(vi) Parent Closing Average Price Per Share. The "Parent
Closing Average Price Per Share" shall mean the average of the closing prices
per share of Parent Common Stock as quoted on the Nasdaq National Market (or
such other exchange or quotation system on which Parent Common Stock is then
traded or quoted) and reported in The Wall Street Journal for the ten (10)
trading days immediately preceding (but not including) the Closing Date,
provided, however, that notwithstanding the foregoing, the Parent Closing
Average Price Per Share shall in no event be greater than one hundred ten
percent (110%) nor less than ninety percent (90%) of the average of the closing
prices per share of Parent Common Stock as quoted on the Nasdaq National Market
(or such other exchange or quotation system on which Parent Common Stock is then
traded or quoted) and reported in The Wall Street Journal for the ten (10)
trading days immediately preceding (but not including) the date hereof.
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(vii) Escrow Amount. The "Escrow Amount" shall be a number
of shares of Parent Common Stock equal to the sum of (x) (i) 0.10 multiplied by
(ii) the sum of the Exchange Ratio multiplied by (iii) the sum of the Aggregate
Common Number, the Aggregate Series A Number (excluding all shares of Series A
Preferred Stock issuable upon exercise of Series A Warrants outstanding as of
the Effective Time) and the Aggregate Series B Number, and (y) 0.10 multiplied
by the number of Series B Preference Shares.
(viii) Exchange Ratio. The "Exchange Ratio" shall mean the
quotient obtained by dividing (x) the difference between (A) the Total Parent
Shares and (B) the Series B Preference Shares, by (y) the sum of (A) the
Aggregate Common Number, (B) the Aggregate Series A Number, (C) the Aggregate
Series B Number and (D) the Aggregate Option Number.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
Delaware Law and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal or dissenters' rights ("Dissenting Shares") shall not be
converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by Delaware Law.
(b) Notwithstanding the provisions of subsection(a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under Delaware Law shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock and payment for any fractional share as provided in Section 1.6,
without interest thereon, upon surrender of the certificate representing such
shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to
Delaware Law and received by the Company and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
Delaware Law. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisal
of capital stock of the Company or offer to settle or settle any such demands.
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1.8 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company with assets of not less than $500 million to
act as exchange agent (the "Exchange Agent").
(b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the aggregate number of shares of Parent Common
Stock issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock; provided that, on behalf of the holders of Company
Capital Stock, Parent shall deposit into an escrow account a number of shares of
Parent Common Stock equal to the Escrow Amount out of the aggregate number of
shares of Parent Common Stock otherwise issuable pursuant to Section 1.6. The
portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive under
Section 1.6 by virtue of ownership of outstanding shares of Company Capital
Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock and which
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.6, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock, less the number of shares of Parent Common Stock,
if any, to be deposited in escrow on such holder's behalf pursuant to Article
VII hereto, plus cash in lieu of fractional shares in accordance with Section
1.6, to which such holder is entitled pursuant to Section 1.6, and the
Certificate so surrendered shall forthwith be canceled. As soon as practicable
after the Effective Time, and subject to and in accordance with the provisions
of Article VII hereof, Parent shall cause to be distributed to the Escrow Agent
(as defined in Article VII) a certificate or certificates representing the
number of shares of Parent Common Stock equal to the Escrow Amount, which
certificate shall be registered in the name of the Escrow Agent. Such shares
shall be beneficially owned by the holders on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate Parent as
provided in Article VII. Until so surrendered, each outstanding Certificate
that, prior to the
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Effective Time, represented shares of Company Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other that the payment
of dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Capital Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock declared or
made after the Effective Time and with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Parent
Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article 1.
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1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereto, such shares of Parent Common Stock and cash for
fractional share, if any, as may be required pursuant to Section 1.6; provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and (ii) qualify for accounting treatment as a
pooling of interests.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
1.13 Company Certificate; Release.
(a) Certificate. At or prior to the Closing, the Company shall
deliver to Parent a certificate signed on behalf of the Company by the chief
executive office and chief financial officer of the Company (the "Company
Certificate") identifying each of the holders of Company Capital Stock, Company
Options and Warrants and the consideration that each such holder is entitled to
receive pursuant to Section 1.6 above. Parent shall be entitled to rely without
investigation on the information set forth in the Company Certificate in
delivering the consideration set forth in the Company Certificate to the holders
of Company Capital Stock, Company Options and Warrants. Notwithstanding anything
to the contrary in this Agreement, Parent shall not be obligated to deliver any
portion of the consideration set forth in Section 1.6 to the holders of Company
Capital Stock, Company Options and Warrants unless and until the Company shall
have delivered the Company Certificate to Parent.
(b) Release. The Company, for itself, and each of its officers,
directors, stockholders, partners, agents, administrators, representatives,
affiliates, predecessors in interest, successors and assigns, hereby
unconditionally and forever releases and discharges Parent, each of its
subsidiaries (including the Surviving Corporation), and each of their respective
officers, directors, stockholders, partners, agents, administrators,
representatives,
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18
affiliates, predecessors in interest, successors and assigns (the "Released
Parties") of and from any and all claims, causes of action, liabilities,
obligations, costs and expenses of every kind and nature whatsoever, at law or
in equity, whether contractual, common law, statutory, federal, state or
otherwise, known or unknown, suspected or unsuspected, direct or derivative,
which now exists or may exist at any time in the future based upon or relating
in any manner to the allocation of the consideration pursuant to Section 1.6 or
any dispute with respect to the interpretation of the manner in which such
consideration is to be distributed. This release shall not apply to Parent's
obligation to deliver the consideration set forth in Section 1.6 to the holders
of Company Capital Stock, Company Options and Warrants in accordance with the
information contained in the Company Certificate.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are disclosed in the disclosure letter supplied by
the Company to Parent (the "Company Schedules") and dated as of the date hereof,
as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have, or would reasonably be expected
to have, a material adverse effect on the business, assets (including intangible
assets), financial condition, results of operations, liabilities or prospects of
the Company (hereinafter referred to as a "Material Adverse Effect"). The
Company has delivered a true and correct copy of its Certificate of
Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of authorized Common Stock, of which 8,443,944 shares are
issued and outstanding, 348,687 shares of authorized Series A Preferred Stock,
of which -0- shares are issued and outstanding and 4,300,000 shares of
authorized Series B Preferred Stock, of which 4,209,863 shares are issued and
outstanding. The Company Capital Stock is held of record by the persons, with
the addresses of record and in the amounts set forth on Schedule 2.2(a) along
with the vesting schedule for such shares, if any. Except as set forth on
Schedule 2.2(a), all outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Certificate of
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Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which it is bound.
(b) The Company has reserved 2,750,000 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
1,618,489 shares are subject to outstanding, unexercised options, 1,111,405
shares remain available for future grant and 20,106 shares have been issued
pursuant to the exercise of options issued under the Option Plan. The Company
has reserved -0- shares of Common Stock for issuance upon exercise of
outstanding Company Options granted outside the Option Plan and 447,695 shares
of Common Stock for issuance upon exercise of the Warrants. Schedule 2.2(b) sets
forth for each outstanding Company Option or Warrant the name of the holder of
such option or Warrant, the domicile address of such holder, the number of
shares of Common Stock subject to such option or Warrant, the exercise price of
such option or Warrant and the vesting schedule for such option or Warrant,
including the extent vested to date and whether the exercisability of such
option or Warrant will be accelerated and become exercisable by reason of the
transactions contemplated by this Agreement. Except as set forth on Schedule
2.2(b), there are no options, warrants, calls, rights, commitments or agreements
of any character, written or oral, to which the Company is a party or by which
it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The holders
of Company Options and Warrants have been or will be given, or shall have
properly waived, any required notice prior to the Merger, and all such rights
will be exercised or exchanged for substantially identical rights in Parent's
securities at or prior to the Effective Time. As a result of the Merger, Parent
will be the record and sole beneficial owner of all capital stock of the Company
and rights to acquire or receive such capital stock.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the requisite approval of the Merger and
this Agreement by the Company's stockholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
stockholders to duly approve the Merger and this Agreement is a majority of the
outstanding shares of (a) Common Stock and Preferred Stock, voting together on
an as-converted basis and (b) of each class of the Company's stock. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger and this Agreement by the Company's stockholders. The Company's Board of
Directors has unanimously approved the
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Merger and this Agreement. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. Except as set forth on Schedule 2.4, subject
only to the approval of the Merger and this Agreement by the Company's
stockholders, the execution and delivery of this Agreement by the Company does
not, and, as of the Effective Time, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision of
the Certificate of Incorporation or Bylaws of the Company or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, country, local or foreign governmental authority, instrumentality, agency
or commission ("Governmental Entity") or any third party (so as not to trigger
any Conflict) is required by or with respect to the Company in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Merger
Agreement with the Delaware Secretary of State, (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and (iii)
such other consents, waivers, authorizations, filings, approvals and
registrations which are set forth on Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
balance sheet (the "Balance Sheet") and the related unaudited profit and loss
statement as at and for the five-month period ended February 28, 1998
(collectively, the "Company Financials"). The Company Financials are correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a basis consistent throughout
the periods indicated and consistent with each other, except that the Company
Financials may not contain all footnotes required by GAAP and are subject to
normal year-end adjustments, which such adjustments will not be material in
amount or significance. The Company Financials present fairly the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein, subject to normal year-end adjustments, which such
adjustments will not be material in amount or significance.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
other than the obligations of the Company under all executory contracts and
agreements to which it is a party and liabilities incurred in the ordinary
course of business since the date of the Balance
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Sheet, the Company does not have any material liability, indebtedness,
obligations, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, matured, or to its knowledge, contingent, unmatured
or other (whether or not required to be reflected in financial statements in
accordance with GAAP), which individually or in the aggregate, has not been
reflected in the Balance Sheet. Except as set forth on Schedule 2.7, the
accounts receivable balance, net of reserves, as recorded on the Balance Sheet
is correct in all respects and all accounts receivable will be collected within
twelve (12) months.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of
the Balance Sheet, there has not been, occurred or arisen any:
(a) material transaction by the Company except in the ordinary
course of business as conducted on the date of the Balance Sheet and consistent
with past practices;
(b) amendments or changes to the Certificate of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $100,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not by covered by insurance);
(e) claim of wrongful discharge or other claim of unlawful labor
practice or action;
(f) material revaluation by the Company of any of its assets;
(g) declaration, setting aside of payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any Company
Capital Stock;
(h) material sale, lease, license or other disposition of any of
the assets or properties of the Company, except in the ordinary course of
business as conducted on that date and consistent with past practices;
(i) amendment or termination of any material contract, agreement
or license to which the Company is a party or by which it is bound;
(j) loan by the Company to any person or entity, incurring by the
Company of any indebtedness for borrowed money, guaranteeing by the Company or
any indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any
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debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
(k) material waiver or release of any right or claim of the
Company, including any material write-off or other compromise of any account
receivable of the Company;
(l) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(m) notice of any claim of ownership by a third party of Company
Intellectual Property Rights (as defined in Section 2.11 below) or of
infringement by the Company of any third party's intellectual property rights;
(n) issuance or sale by the Company of any of its shares of
Company Capital Stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(o) material change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or royalties set or charged
by persons who have licensed Company Intellectual Property Rights to the
Company;
(p) to the Company's knowledge, any event or condition of any
character that has or could be reasonably expected to have a Material Adverse
Effect on the Company; or
(q) agreement by the Company or any officer or employees thereof
to do any of the things described in the preceding clauses (a) through (p).
2.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes" means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, exercise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
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(i) The Company as of the Effective Time will have
prepared and filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes concerning or attributable to the Company or its operations and such
Returns are true and correct and have been completed in accordance with
applicable law.
(ii) The Company as of the Effective Time: (A) will have
paid or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) 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.
(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against in accordance with GAAP on the Balance Sheet, whether asserted or
unasserted, contingent or otherwise, and the Company has no knowledge of any
basis of the assertion of any such liability attributable to the Company, its
assets or operations.
(vi) The Company has provided to Parent copies of its
three most recent federal and state income and state sales and use Tax Returns.
(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the assets of the
Company relating to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or
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collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company has not, and has not been at any time,
a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Company's tax books and records.
2.9 Restrictions on Business Activities. Except as set forth in Schedule
2.9, there is no agreement (noncompete or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding
upon the Company which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company. Except as set forth in Schedule 2.9, without limiting the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect, are valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets,
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real, personal and mixed, used or held for use in its business, free and clear
of any Liens (as defined in Section 2.8(b)(vii)), except as reflected in the
Company Financials or in Schedule 2.10(b) and except for liens for taxes not yet
due and payable and such imperfections of title and encumbrances, if any, which
are not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
2.11 Intellectual Property.
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, computer software programs or applications in
both source code and object code form ("Software"), and tangible or intangible
proprietary information or material that are used in the business of the Company
as currently conducted or as proposed to be conducted by the Company
(collectively, the "Company Intellectual Property Rights").
(b) Schedule 2.11(a) sets forth a complete list of all patents,
registered and material unregistered trademarks, registered copyrights, trade
names and service marks, and any applications therefor, included in the Company
Intellectual Property Rights, and specifies, where applicable, the jurisdictions
in which each such Company Intellectual Property Right has been issued or
registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners (collectively, the "Patents and Trademarks").
Schedule 2.11(b) sets forth a complete list of Software, except for commercially
available software licensed from third parties ("Third Party Software"). Except
for Third Party Software, Schedule 2.11(c) sets forth a complete list of all
licenses, sublicenses and other agreements (i) as to which the Company is a
licensee or sublicensee ("Licenses-In") and (ii) to which any other person is
authorized to use any Company Software, Patents and Trademarks or trade secrets
("License-Out") (excluding object code end-user licenses granted to end-users in
the ordinary course of business that permit use of software products without a
right to modify, distribute or sublicense the same ("End-User Licenses")), and
includes the identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty or other fees and the term
thereof. The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will neither cause the
Company to be in material violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except for Third Party Software and as set forth in Schedule 2.11(a),
2.11(b) or 2.11(c), subject to the terms of the Licenses-In, the Licenses-Out
and the End-User Licenses, the Company is the sole and exclusive owner of all,
patents, trademarks (to the extent used in connection with computer programs or
applications sold or licensed by the Company), trade names, service marks,
copyrights (to the extent related to the computer software programs or
applications sold or licensed by the
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Company), and computer software programs or applications in both source code and
object code form (excluding Third Party Software) that are used in the business
of the Company as currently conducted or as proposed to be conducted by the
Company (the "Exclusive Intellectual Property Rights"), with all right, title
and interest in and to (free and clear of any liens or encumbrances), and has
sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or the
material covered thereby in connection with the services or products in respect
to which the Exclusive Intellectual Property Rights are being used. Except as
set forth in Schedule 2.11(a), 2.11(b) or 2.11(c), the Licenses-In, the
Licenses-Out and the End-User Licenses, the Company is the owner, a licensee or
otherwise has the right to use all Company Intellectual Property Rights, and has
rights (and is not contractually obligated to pay any compensation to any third
party in respect thereof) to the use thereof or the material covered thereby in
connection with the services or products in respect to which the Company
Intellectual Property Rights are being used.
(c) No claims with respect to the Company Intellectual Property
Rights have been asserted or are, to the Company's knowledge, threatened by any
person, nor to the Company's knowledge are there any valid grounds for any bona
fide claims, (i) to the effect that the manufacture, sale, licensing or use of
any of the products of the Company infringes on any copyright, patent, trade
xxxx, service xxxx, trade secret or other proprietary right, (ii) against the
use by the Company of any trademarks, service marks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer software
programs and applications used in the Company's business as currently conducted
or as proposed to be conducted by the Company, or (iii) challenging the
ownership by the Company, validity or effectiveness of any of the Company
Intellectual Property Rights. All registered trademarks, service marks and
copyrights held by the Company are valid and subsisting. To the Company's
knowledge, the Company has not infringed, and the business of the Company as
currently conducted or as proposed to be conducted does not infringe, any
copyright, patent, trademark, service xxxx, trade secret or other proprietary
right of any third party. To Company's knowledge, there is not material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company. No Company Intellectual Property Right or
product of the Company or any of its subsidiaries is subject to any outstanding
decree, order, judgment, or stipulation restriction in any manner the licensing
thereof by the Company. Each employee, consultant or contractor of the Company
has executed a proprietary information and confidentiality agreement
substantially in the Company's standard forms. Except as set forth on Schedule
2.11(c), all software included in the Company Intellectual Property Rights is
original work of the Company and has been either created by employees of the
Company on a work-for-hire basis or by consultants or contractors who have
created such software themselves and have assigned all rights they may have had
in such software to the Company.
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2.12 Agreements, Contracts and Commitments. Except as set forth on
Schedule 2.12(a), the Company does not have, is not a party to nor is it bound
by:
(i) any collective bargaining agreements.
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements;
(iv) any employment or consulting agreement, contract or
commitment (other than an oral offer of employment as an employee at will) with
an employee or individual consultant or salesperson or any consulting or sales
agreement, contract or commitment under which any firm or other organization
provides services to the Company.
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of personal property having a value
individually in excess of $100,000;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person;
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $100,000;
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business;
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(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other arrangements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof;
(xiii) any purchase order or contract for the purchase of
raw materials involving $100,000 or more;
(xiv) any construction contracts;
(xv) any distribution, joint marketing or development
agreement;
(xvi) any agreement pursuant to which the Company has
granted or may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code, or,
(xvii) any other agreement, contract or commitment that
involves future obligations of or payments to the Company of $100,000 or more.
Except for such alleged breaches, violations and defaults, and events that would
constitute a breach, violation or default with the lapse of time, giving of
notice, or both, as are all noted in Schedule 2.12(b), the Company has not
materially breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule 2.12(a)
or Schedule 2.11(b) (any such agreement, contract or commitment, a "Contract").
Each Contract is in full force and effect and, except as otherwise disclosed in
Schedule 2.12(b), is not subject to any material default thereunder of which the
Company has knowledge by any party obligated to the Company pursuant thereto.
2.13 Interested Party Transactions. Except as set forth on Schedule
2.13, no officer, director or stockholder of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had an interest), has or
has had, directly or indirectly, (i) an economic interest in any entity which
furnished or sold, or furnishes or sells, services or products that the Company
furnishes or sells or proposes to furnish or sell, (ii) an economic interest in
any entity that purchases from or sells or furnishes to, the Company, any goods
or services or (iii) a beneficial interest in any contract or agreement set
forth in Schedule 2.12(a) or Schedule 2.11(b); provided, that ownership of no
more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13.
2.14 Compliance with Laws. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation, except those
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pertaining to employment matters, as to which the Company represents that to the
best of its knowledge it has complied therewith in all material respects.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to its knowledge threatened
against the Company, its properties or any of its officers or directors, in
their respective capacities as such. Except as set forth in Schedule 2.15, there
is no investigation pending or to its knowledge threatened against the Company,
its properties or any of its officers or directors by or before any governmental
entity. Schedule 2.15 sets forth, with respect to any pending or to its
knowledge threatened action, suit, proceeding or investigation, the forum, the
parties thereto, the subject matter thereof and the amount of damages claims or
other remedy requested. No governmental entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
its products in the present manner or style thereof.
2.16 Insurance. The Company maintains valid and enforceable insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company, which
are identified in Schedule 2.16, and there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
is otherwise in material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.17 Minute Books. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and stockholders or actions by written consent since the time of incorporation
of the Company.
2.18 Environmental Matters.
(a) Hazardous Material. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, at any time,
of any underground storage tank (or related piping or pumps), at any property
that the Company has at any time owned, operated, occupied or leased. The
Company has not released any amount of any substance that has been designated by
any Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBS, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any law, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as
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amended; the Federal Water Pollution Control Act, as amended; the Clean Air Act,
as amended, or the regulations promulgated pursuant to said laws (a "Hazardous
Material"). No Hazardous Materials are present as a result of the actions or
omissions of the Company, or, to the Company's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that the
Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to as "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances, and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
2.19 Brokers' and Finders' Fees: Third Party Expenses. Except as set
forth on Schedule 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Schedule 2.19 sets forth the principal terms
and conditions of any agreement, written or oral, with respect to such fees.
Schedule 2.19 sets forth the Company's current reasonable estimate of all Third
Party Expenses (as defined in Section 5.4) expected to be incurred by the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
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(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall apply
only to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, other than a Multiemployer Plan,
which is or has been maintained, contributed to, or required to be contributed
to, by the Company or any Affiliate for the benefit of any "Employee" (as
defined below), and pursuant to which the Company or any Affiliate has or may
have any material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, retired
employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
employment, severance, consulting, relocation, repatriation, expiration, visas,
work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan," as defined in Section 3(37)
of ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete
list of each Employee Agreement. Except as expressly set forth on Company
Schedule 2.20(b), all liabilities under each Company Employee Plan or Employee
Agreement have been properly and accurately reflected on the Balance Sheet to
the extent required by GAAP. The Company does not have any plan or commitment,
whether legally binding or not, to establish
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any new Company Employee Plan or Employee Agreement, to modify any Company
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such Company Employee Plan or Employee Agreement to the requirements
of any applicable law, in each case as previously disclosed to Parent in
writing, or as required by this Agreement), or to enter into any Company
Employee Plan or Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent (i) correct and
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination letters and rulings relating to Company Employee Plans and
copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Company Employee Plan; (vii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company; and (viii) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all materials
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; and (iv) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, Parent or any of
its Affiliates (other than ordinary administration expenses typically incurred
in a termination event); (v) there are not inquiries or proceedings pending or,
to the knowledge of the Company or any affiliates, threatened by the IRS or DOL
with respect to any Company Employee Plan; and (vi) neither the Company nor any
Affiliate is subject to any penalty or
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tax with respect to any Company Employee Plan under Section 402(i) of ERISA or
Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed
to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as may
be required by statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) Effect of Transaction.
(i) Except as set forth on Schedule 2.20(h)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.20(h)(ii), no
payment or benefit of which will or may be made by the Company or Parent or any
of their respective affiliates with respect to any Employee will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to
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unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the Company
is pending or threatened. Except as set forth in Schedule 2.20(j)), the Company
is not involved in or threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company. Neither the Company nor
any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a liability to the Company. Except
as set forth in Schedule 2.20(j)), the Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company.
2.21 Employees. To the best of the Company's knowledge, (i) no employees
of the Company are in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or presently
proposed to be conducted by the Company or to the use of trade secrets or
proprietary information of others and (ii) no officer or key employee has given
notice to the Company, nor is the Company otherwise aware, that any employee
intends to terminate his or her employment with the Company.
2.22 Pooling of Interest. To the Company's knowledge, based on
consultation with its independent accountants, neither the Company nor any of
its directors, officers or stockholders has taken any action which would
interfere with Parent's ability to account for the Merger as a pooling of
interests.
2.23 Disclosure Documents. None of the information supplied or to be
supplied by the Company for inclusion in and which is in fact included in (i)
the combined proxy statement relating to the meetings of the Company's and
Parent's stockholders to be held in connection with the Merger (the "Proxy
Statement"), and (ii) the registration statement on Form S-4 or other
appropriate registration form to be filed with the SEC by Parent in connection
with the offer and issuance of Parent Common Stock in or as a result of the
Merger (the "Registration Statement") including the Proxy Statement included
therein, will, in the case of the Proxy Statement, at the time of mailing of the
Proxy Statement to stockholders of the Company and/or Parent, contain any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading or will, in the
case of the Registration Statement, at the time the Registration
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Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder, except that no representation is made by the Company
with respect to information supplied by Parent or Merger Sub for inclusion
therein.
2.24 Representation Complete. To the best of its knowledge, none of the
representations or warranties made by the Company (as modified by the Company
Schedules), nor any statement made in any schedule or certificate furnished by
the Company pursuant to this Agreement, or furnished in or in connection with
documents mailed or delivered to the stockholders of the Company in connection
with soliciting their consent to this Agreement and the Merger, contains or will
contain at the Effective Time, any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company and its
stockholders as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a material adverse effect on Parent and Merger Sub as
a whole.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
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application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. The execution and delivery of this Agreement
by Parent does not, and, as of the Effective time, the consummation of the
transactions contemplated hereby will not result in a Conflict with (i) any
provision of the Certificate of Incorporation or Bylaws of Parent or (ii) any
mortgage, indenture, lease, contract, or other agreement or instrument to which
Parent is a party, or any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity or any third party (so as not to trigger any Conflict) is required by or
with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Merger Agreement with the Delaware
Secretary of State, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and (iii) such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Schedule 3.2.
3.3 Capital Structure.
(a) The authorized stock of Parent consists of 75,000,000 shares
of Common Stock, of which 13,693,151 shares were issued and outstanding as of
February 28, 1998, and 10,000,000 shares of Preferred Stock, none of which is
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, all of which, as of the date hereof, are issued
and outstanding and are held by Parent. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly issues,
are fully paid and nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger, when issued, will be duly authorized, validly issued, fully paid and
nonassessable.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the U.S. Securities and Exchange
Commission (the "SEC") under the Exchange Act for all periods since July 29,
1997, all in the form so filed (all the foregoing being collectively referred to
as the "SEC Documents"). As of the date hereof, Parent has filed with the SEC
all reports, proxy statements and other information required to be filed by it
under the Exchange Act. As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, including where applicable the
requirements under Item 601(10) of Regulation S-K to file certain contracts, 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
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therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a document subsequently filed with the SEC. The financial
statements of Parent, including the notes thereto, included in the SEC Documents
(the "Parent Financial Statements") comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP consistently applied (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and present fairly the consolidated financial position of Parent at the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
audit adjustments). There has been no change in Parent accounting policies
except as described in the notes to the Parent Financial Statements.
3.5 No Material Adverse Change. Since the date of the balance sheet
included in the Parent's most recently filed report on Form 10-K, Parent has
conducted its business in the ordinary course and except as otherwise disclosed
in Parent's most recently filed report on Form 10-K, there has not occurred: (a)
any material adverse change in the business, assets (including intangible
assets), financial condition, results of operations, liabilities or prospects of
the Parent; (b) any amendment or change in the Certificate of Incorporation or
Bylaws of parent, or (c) any damage to, destruction or loss of any assets of the
Parent (whether or not covered by insurance) that materially and adversely
affects the financial condition or business of Parent.
3.6 Litigation. Except as set forth in Schedule 3.6, there is no action,
suit or proceeding of any nature pending or threatened against Parent, its
properties or any of its officers or directors, in their respective capacities
as such. Except as set forth in Schedule 3.6, there is no investigation pending
or to its knowledge threatened against Parent, its properties or any of its
officers or directors by or before any governmental entity. Schedule 3.6 sets
forth, with respect to any pending or threatened action, suit, proceeding or
investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claims or other remedy requested. No governmental entity
has at any time challenged or questioned the legal right of Parent to
manufacture, offer or sell any of its products in the present manner or style
thereof.
3.7 Intellectual Property.
(a) Parent owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, computer software programs or applications (in both source
code and object code form), and tangible or intangible proprietary information
or material that are used in the business of Parent as currently conducted or as
proposed to be conducted by Parent (the "Parent Intellectual Property Rights").
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(b) No claims with respect to the Parent Intellectual Property Rights
have been asserted or are, to Parent's knowledge, threatened by any person, nor
to Parent's knowledge are there any valid grounds for any bona fide claims, (i)
to the effect that the manufacture, sale, licensing or use of any of the
products of Parent infringes on any copyright, patent, trade xxxx, service xxxx,
trade secret or other proprietary right, (ii) against the use by Parent of any
trademarks, service marks, trade names, trade secrets, copyrights, maskworks,
patents, technology, know-how or computer software programs and applications
used in Parent's business as currently conducted or as proposed to be conducted
by Parent, or (iii) challenging the ownership by Parent, validity or
effectiveness of any of the Parent Intellectual Property Rights. All registered
trademarks, service marks and copyrights held by Parent are valid and
subsisting. To Parent's knowledge, Parent has not infringed, and the business of
Parent as currently conducted or as proposed to be conducted does not infringe,
any copyright, patent, trademark, service xxxx, trade secret or other
proprietary right of any third party. To Parent's knowledge, there is not
material unauthorized use, infringement or misappropriation of any of Parent's
Intellectual Property Rights by any third party, including any employee or
former employee of Parent. No Parent Intellectual Property Right or product of
Parent or any of its subsidiaries is subject to any outstanding decree, order,
judgment, or stipulation restriction in any manner the licensing thereof by
Parent. Each employee, consultant or contractor of Parent has executed a
proprietary information and confidentiality agreement substantially in Parent's
standard forms. All software included in the Parent Intellectual Property Rights
that is original work of the Company has been either created by employees of the
Company on a work-for-hire basis or by consultants or contractors who have
created such software themselves and have assigned all rights they may have had
in such software to the Company.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees
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and preserve its relationships with customers, suppliers, distributors,
licensors, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent of any event or occurrence or emergency
not in the ordinary course of its business, and any material event involving or
adversely affecting the Company or its business. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Parent (which such consent shall not be unreasonably withheld by
Parent):
(a) Enter into any commitment, activity or transaction not in the
ordinary course of business.
(b) Transfer to any person or entity any rights to any Company
Intellectual Property Rights (other than pursuant to End-User Licenses in the
ordinary course of business).
(c) Enter into or amend any agreements pursuant to which any
other party is granted manufacturing, marketing, distribution or similar rights
of any type or scope with respect to any products of the Company;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
(e) Commence any litigation or any dispute resolution process;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any of Company Capital Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Company Capital Stock, or repurchase, redeem
or otherwise acquire, directly or indirectly, any shares of Company Capital
Stock (or options, warrants or other rights exercisable therefor);
(g) Except for the issuance of shares of Company Capital Stock
upon exercise or conversion of presently outstanding Company Options or
Warrants, issue, grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any shares
of Company Capital Stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities;
(h) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
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(i) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets except in the ordinary course of business and consistent
with past practice;
(k) Except as contemplated on Schedule 2.7(a), incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities of the Company or guarantee any debt securities of
others;
(l) Grant any severance or termination pay to any director,
officer, employee or consultant, except payments made pursuant to standard
written agreements outstanding on the date hereof (which such agreements are
disclosed on Schedule 4.1(1));
(m) Adopt or amend any employee benefit plan, program, policy or
arrangement (other than changes made to the Company's health insurance plans
made in the ordinary course of business consistent with past practices), or
enter into any employment contract, extend any employment offer, pay or agree to
pay any special bonus or special remuneration to any director, employee or
consultant, or increase the salaries or wage rates of its employees;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business and consistent with past practice;
(o) Take any action, including the acceleration of vesting of any
options, warrants, restricted stock or other rights to acquire shares of Company
capital stock, which would be reasonably likely to interfere with Parent's
ability to account for the Merger as a pooling of interests or any other action
that could jeopardize the tax-free reorganization hereunder;
(p) Pay, discharge or satisfy, in an amount in excess of $10,000,
in any one case, or $25,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Company Financial
Statements or liabilities incurred in the ordinary course of business consistent
with past practices after the date of the Company Financial Statements;
(q) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle
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any claim or assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or assessment in respect
of Taxes;
(r) Enter into any strategic alliance, joint development or joint
marketing arrangement or agreement;
(s) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(t) Waive or commit to waive any rights with a value in excess of
$10,000, in any one case, or $25,000, in the aggregate;
(u) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(v) Alter, or enter into any commitment to alter, its interest in
any corporation, association, joint venture, partnership or business entity in
which the Company directly or indirectly holds any interest on the date hereof;
or
(w) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (v) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, stockholders, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, initiate, entertain, or encourage
any proposals or offers from, or conduct discussions with or engage in
negotiations with, any person relating to any possible acquisition of the
Company or any of its subsidiaries (whether by way of merger,
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purchase of capital stock, purchase of assets or otherwise), any material
portion of its or their capital stock or assets or any equity interest in the
Company or any of its subsidiaries, (b) provide information with respect to it
to any person, other than Parent, relating to, or otherwise cooperate with,
facilitate or encourage any effort or attempt by any such person with regard to,
any possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in the Company or any of
its subsidiaries, (c) enter into an agreement with any person, other than
Parent, providing for the acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise), any material
portion of its or their capital stock or assets or any equity interest in the
Company or any of its subsidiaries, or (d) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in the Company or any of
its subsidiaries by any person, other than by Parent. The Company shall
immediately cease and cause to be terminated any such contacts or negotiations
with third parties relating to any such transaction or proposed transaction. In
addition to the foregoing, if the Company receives prior to the Effective Time
or the termination of this Agreement any offer or proposal relating to any of
the above, the Company shall immediately notify Parent thereof, including
information as to the identity of the offeror or the party making any such offer
or proposal and the specific terms of such offer or proposal, as the case may
be, and such other information related thereto as Parent may reasonably request.
Except as contemplated by this Agreement, disclosure by the Company of the terms
hereof (other than the prohibition of this section) shall be deemed to be a
violation of this Section 4.2.
4.3 Conduct of Business of Parent. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement, the Effective Time or June 15, 1998, except in connection with the
transactions contemplated hereby, Parent shall not, without the prior written
consent of the Company (which such consent shall not be unreasonably withheld by
the Company), issue securities of Parent with an aggregate fair market value in
excess of $30,000,000 (exclusive of the fair market value of (i) any securities
issued upon the conversion or exercise of currently outstanding convertible or
exercisable securities, (ii) shares of Parent Common Stock issued in the Merger,
(iii) warrants or options to acquire Parent Common Stock issued in the Merger,
(iv) the issuance or sale of Parent Common Stock (or options therefor) to
employees, consultants and directors, directly or pursuant to a stock option
plan or employee stock purchase plan).
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Sale and Registration of Shares; Stockholder Matters.
(a) Registration Statement on Form S-4; Stockholder Matters. As
promptly as reasonably practicable after the execution of this Agreement, Parent
and the Company shall prepare the Registration Statement pertaining to the offer
and sale of shares of Parent Common Stock to be issued by virtue of the Merger.
The Registration Statement shall include therein the Proxy Statement relating to
the solicitation of the consent of the stockholders of Parent and the Company to
the Merger. Parent shall file with the SEC the Registration Statement as soon as
is reasonably practicable following preparation thereof. As promptly as
reasonably practicable after the date of this Agreement, parent will file any
other filings required under the Exchange Act, the Securities Act or any other
Federal or Blue Sky laws related to the Merger and the transactions contemplated
by this Agreement (collectively,
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the "Other Filings"). The Company shall provide to Parent and its counsel for
inclusion in the Proxy Statement and Other Filings, in form and substance
reasonably satisfactory to Parent and its counsel, such information concerning
the Company, and its operations, capitalization, technology, share ownership and
other material information as Parent or its counsel may reasonably request in
connection with any action contemplated by this Section 5.1(a). Each of Parent
and the Company shall use its commercially reasonable efforts to respond to any
comments of the SEC, to have the Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing and to cause the
Proxy Statement to be mailed to the Parent's stockholders and Company's
stockholders at the earliest practicable time. Each party will notify the other
parties hereto promptly of the receipt of any comments from the SEC or its staff
and of any request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, the Proxy Statement or
any Other Filing or for additional information and will supply the other party
with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government official, on the other hand, with respect to the Registration
Statement, the Proxy Statement or any Other Filing. Whenever any event occurs
which should be set forth in an amendment or supplement to the Proxy Statement,
Registration Statement or any Other Filing, Parent or the Company, as the case
may be, shall promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, such
amendment or supplement.
(b) Stockholder Questionnaire. The Company will use reasonable
efforts to cause each stockholder of the Company to execute and deliver to
Parent a Stockholder Questionnaire in the form attached hereto as Exhibit A (the
"Stockholder Questionnaire").
(c) Stockholders' Meeting; Proxy Material. The Company and Parent
shall each cause a meeting of its respective stockholders to be duly called and
held as soon as practicable following the mailing of the Proxy Statement for the
purpose of voting on the approval of this Agreement and the Merger. The Board of
Directors of each of the Company and Parent shall, subject to their fiduciary
duties, unanimously recommend approval and adoption of this Agreement and the
Merger by their respective stockholders. In connection with such meetings, each
of the Company and Parent:
(i) will, together with Merger Sub, promptly prepare and
file with the SEC, will use its best efforts to have cleared by the SEC and will
thereafter mail to its stockholders as promptly as practicable the Proxy
Statement and all other proxy materials for its respective meeting and will hold
its respective meeting no later than 15 days after the effectiveness of the
Registration Statement;
(ii) will, subject to its directors' fiduciary duties, use
all reasonable efforts to obtain the necessary approvals by its stockholders of
this Agreement and the transactions contemplated hereby; and
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(iii) will otherwise comply with all legal requirements
applicable to its respective meeting.
(d) Registration Rights. Parent shall use commercially reasonable
efforts to amend its Amended and Restated Investors' Rights Agreement dated
October 30, 1996, as amended (the "Investors' Rights Agreement"), to cause the
recipients of Parent Common Stock set forth on Schedule 5.1(d) (the "Scheduled
Shareholders") to be included as parties to the Investors' Rights Agreement;
provided, however, that such parties shall not have the right to request the
initiation of a registration under Section 1.2 or Section 1.12 of the Investors'
Rights Agreement (but shall be entitled to request inclusion in such
registrations pursuant to the terms of such sections). For the purposes of
determining 33% pursuant to the terms of Section 1.2 of the Investor Rights
Agreement only, the Scheduled Shareholders shall be excluded from the
denominator of Registrable Securities.
(e) Additional Assurances. At the request of Parent, the Company
shall use its best efforts to cause the Company's stockholders to execute and
deliver to Parent such instruments and do and perform such acts and things as
may be necessary or desirable for complying with all applicable securities laws
and state corporate law.
5.2 Access to Information. Each party shall afford the others and their
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of its
properties, books, contracts, commitments and records, and (b) all other
information concerning its business, properties and personnel (subject to
restrictions imposed by applicable law) as the others may reasonably request,
subject, in the case of Parent, to reasonable limits on access to its technical
and other non-public information. No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty contained herein or, except as provided by
Section 6.3(n), the conditions of the parties to consummate the Merger.
5.3 Confidentiality. Each of the parties hereto hereby agrees to keep
such information or knowledge obtained in any investigation pursuant to Section
5.2, or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party from other sources, (e) is required to be disclosed by order of court or
government agency with subpoena powers or (f) which is disclosed in the course
of any litigation between any of the parties hereto.
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5.4 Expenses. All fees and expenses incurred in connection with the
Merger including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties ("Third Party
Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that at the Closing, Parent shall pay
the Third Party Expenses of the Company (not to exceed $1,250,000.00).
5.5 Public Disclosure. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Parent, by the
rules and regulations of the Nasdaq Stock Market Inc., prior to the Effective
Time, no public disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release, provided that such approval
shall not be unreasonably withheld.
5.6 Consents. The Company shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers and approvals are set
forth in Company Schedules) so as to preserve all rights of and benefits to the
Company thereunder.
5.7 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.145-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
ensure that its representations and warranties remain true and correct in all
material respects, and to take promptly, or cause to be taken all actions, and
to do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or any business, assets or property of
Parent or its subsidiaries or affiliates or the Company or its affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
5.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any
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representation or warranty of the Company and Parent, respectively, contained in
this Agreement to be untrue or inaccurate at or prior to the Effective Time and
(ii) any failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.9 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.10 Certain Benefit Plans. Subject to compliance with
pooling-of-interest accounting treatment of the Merger, Parent shall take such
reasonable actions as are necessary to allow eligible employees of the Company
to participate in the benefit of the programs of Parent, or alternative benefits
programs substantially comparable to those applicable to employees of Parent, as
soon as practicable after the Effective Time.
5.11 Pooling Accounting. The Company and Parent shall each use its
reasonable efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests. The Company shall use its
reasonable efforts to cause its respective employees, directors, stockholders
and affiliates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests.
5.12 Affiliate Agreements. Schedule 5.12 sets forth those persons who,
in the Company's reasonable judgment, are or may be "affiliates" of the Company
within the meaning of Rule 145 (each such person an "Affiliate") promulgated
under the Securities Act ("Rule 145"). The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes of
reviewing such list. The Company has delivered or shall cause to be delivered to
Parent, concurrently with the execution of this Agreement an executed Affiliate
Agreement from each "Affiliate" in the form attached hereto as Exhibit B. Parent
shall be entitled to place appropriate legends on the certificates evidencing
any Parent Common Stock to be received by such Affiliates pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Parent Common Stock, consistent with the terms of such
Affiliate Agreements.
5.13 Voting Agreement. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, from
each person listed on Schedule 5.13(a), an executed Voting Agreement (the
"Voting Agreements") in the form attached hereto as Exhibit C, agreeing, among
other things, to vote in favor of the Merger. Parent shall deliver or cause to
be delivered to Company, concurrently with the execution of this Agreement, from
each person listed on Schedule 5.13(b), an executed Voting Agreement in the Form
attached hereto as Exhibit D.
5.14 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and
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perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions and
contemplated hereby.
5.15 Registration Statement on Form S-8. Parent shall file a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Options promptly after the Effective
Time.
5.16 Company Auditors. The Company will use its commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) as required by Parent to comply with
applicable SEC regulations, (ii) the review of the Company's audit work papers
for up to the past three years, including the examination of selected interim
financial statements and data, and (iii) the delivery of such representations
from the Company's independent accountants as may be reasonably requested by
Parent or its accountants in order for Parent's accountants to render the
opinion called for by Section 6.3(l) hereof.
5.17 Termination Fee. In the event that this Agreement is terminated
pursuant to Section 8.1(b)(i) solely due to the failure of Parent to obtain the
approval of its stockholders as provided in Section 6.1(a), then Parent shall,
within five (5) business days after termination of this Agreement, pay the
Company, by cashier's check or wire transfer, a termination fee of Two Million
Dollars ($2,000,000) (the "Termination Fee") as liquidated damages.
5.18 Nasdaq National Market Listing. Prior to Closing, Parent shall
authorize for listing on the Nasdaq National Market the shares of Parent Common
Stock issuable, and those required to be reserved for issuance, in connection
with the Merger, upon official notice of issuance.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the stockholders of the Company and Parent by
the requisite vote under applicable law and the respective Certificates of
Incorporation of the Company and Parent.
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(b) Government Approvals. All approvals of governments and
governmental agencies necessary to consummate the transactions hereunder shall
have been received.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(d) Tax Opinions. Parent and the Company shall each have received
substantially identical written opinions from their counsel, Xxxxxxx Xxxxxxx &
Xxxxxxxx LLP and Paul, Hastings, Janosfsky & Xxxxxx LLP, respectively, in form
and substance reasonably satisfactory to them, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code. The parties to this Agreement agree to make reasonable representations as
requested by such counsel for the purpose of rendering such opinions.
(e) Registration Statement Effective. The SEC shall have declared
the Registration effective. No stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened in writing by the SEC.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company.
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had nor reasonably would be expected to have a material adverse
effect on Parent; and the Company shall have received a certificate to such
effect signed on behalf of Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or compiled in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them or prior to
the Effective Time,
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and the Company shall have received a certificate to such effect signed by a
duly authorized officer of Parent.
(c) Third Party Consents. The Company shall have been furnished
with evidence satisfactory to it that Parent has obtained the consents,
approvals and waivers set forth in Schedule 6.2(c).
(d) Legal Opinion. The Company shall have received a legal
opinion from Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, counsel to Parent, in substantially
the form attached hereto as Exhibit E.
(e) Material Adverse Change. Except as disclosed in Parent's
Annual Report on Form 10-K for the period ended December 31, 1997, there shall
not have occurred any material adverse change in the business, assets (including
intangible assets), financial condition, results of operations, liabilities or
prospects of the Parent since December 31, 1997, except for changes directly
caused by changes in general economic conditions or changes which affect the
Parent's industry as a whole.
(f) Amendment to Investors' Rights Agreement. A majority of the
current holders of Registrable Securities (as defined in the Investors' Rights
Agreement) shall have executed the Amendment to the Amended and Restated
Investors' Rights Agreement contemplated by Section 5.1(d).
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representation and Warranties. The representation and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had nor reasonably would be expected to have a Material Adverse
Effect on the Company or Parent; and Parent and Merger Sub shall have received a
certificate to such effect signed on behalf of the Company by the chief
executive officer and chief executive financial officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this
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Agreement to be performed or complied with by it on or prior to the Effective
Time, and Parent and Merger Sub shall have received a certificate to such effect
signed by a duly authorized officer of the Company.
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
(d) Legal Opinion. Parent shall have received a legal opinion
from Paul, Hastings, Janosfsky & Xxxxxx LLP, legal counsel to the Company, in
substantially the form attached hereto as Exhibit F.
(e) Affiliate Agreements. Each of the parties identified by the
Company as being an Affiliate of the Company shall have delivered to Parent an
executed Affiliate Agreement which shall be in full force and effect.
(f) Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets (including intangible assets),
financial condition, results of operations, liabilities or prospects of the
Company since February 28, 1997, except for changes directly caused by changes
in general economic conditions or changes which affect the Company's industry as
a whole, or losses of the Company's customers in cases where such customers
certify that the primary reason for terminating business with the Company was
not wanting to do business with Parent.
(g) Dissenters' Rights. Holders of more than 5% of the
outstanding shares of Company Capital Stock shall not have exercised, nor shall
they have any continued right to exercise, appraisal, dissenters' or similar
rights under applicable law with respect to their shares by virtue of the
Merger.
(h) Opinion of Accountants. Parent shall have received a letter
from KPMG Peat Marwick LLP regarding such firm's concurrence with Parent
management's conclusion as to the appropriateness of pooling of interests
accounting for the Merger under Accounting Principles Board Opinion No. 16, if
consummated in accordance with this Agreement. In addition, the Company's
accountants shall have provided a letter, satisfactory in form and substance to
Parent, regarding the appropriateness of pooling of interests accounting for a
transaction involving the Company.
ARTICLE VII
ESCROW
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7.1 Escrow Period. Subject to the following requirements, the Escrow
Fund shall be in existence immediately following the Effective Time and
terminate at 5:00 p.m., California time, on the date which is the earlier of (i)
one year following the Closing Date or (ii) the date of the filing with the SEC
of the next audit opinion issued by the Company's auditors (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 Securityholder Agent (as defined below) and the
subsequent arbitration of the matter in the manner provided in Section 7.2(f)
hereof, to satisfy any unsatisfied claims 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.
7.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time, the Company's
stockholders will be deemed to have received and deposited with the Escrow Agent
(as defined below) 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 an institution acceptable to Parent and the
Securityholder Agent (as defined in Section 7.2(g) below)) as Escrow Agent (the
"Escrow Agent"), such deposit to constitute an escrow fund (the "Escrow Fund")
to be governed by the terms set forth herein and at Parent's cost and expense.
The portion of the Escrow Amount contributed on behalf of each stockholder of
the Company shall be in proportion to the aggregate Parent Common Stock which
such holder would otherwise be entitled under Section 1.6(a). No portion of the
Escrow Amount shall be contributed in respect of any Company Options or
Warrants. 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, or affiliates (including
the Surviving Corporation) directly or indirectly as a result of any inaccuracy
or breach of a representation or warranty of the Company contained in Article II
herein (as modified by the Company Schedules), or any failure by the Company to
perform or comply with any covenant contained herein; provided, however, that
the Escrow Fund shall only be available to compensate Parent, its officers,
directors or affiliates to the extent that the aggregate amount of Losses is in
excess of $500,000, in which event the full amount of the Escrow Fund shall be
available to so compensate Parent, its officers, directors or affiliates for any
Losses. Parent and the Company each acknowledge that such Losses, if any, would
relate to the unresolved contingencies existing at the Effective Time, which, if
resolved at the Effective Time would have led to a reduction in the aggregate
Merger consideration. The Escrow Fund shall be the sole source of damages to
Parent arising from any claim hereunder (other than for
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damages due to fraud or willful misrepresentation). Nothing herein shall limit
the liability of the Company for any such breach of any representation, warranty
or covenant if the Merger does not close.
(b) Distribution Upon Termination of Escrow Period. Upon
termination of the Escrow Period, the Parent shall cause to be delivered to the
Escrow Agent a list of each timely filed claim of loss submitted by the Parent
in accordance with the provisions of this Article VII which remains not fully
resolved ("Unresolved Claims"), for which there shall be reserved out of the
Escrow Fund an amount equal to the Losses claimed by the Parent, and the Escrow
Agent shall deliver to the stockholders of the Company that portion of the
Escrow Fund that is not required to satisfy the Unresolved Claims. Following the
resolution of each Unresolved Claim, the Escrow Agent shall deliver to the
stockholders of the Company the remaining portion of the Escrow Fund, if any,
not used in the satisfaction of that claim. Deliveries of Escrow Amounts to the
stockholders of the Company 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) ("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 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 Certificate"): (A) stating that Parent has paid or
properly accrued or reasonably anticipates
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that it will have to pay or accrue 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 or properly accrued, or the basis for such anticipated
liability, 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(d)(iii) hereof, deliver to Parent out of the Escrow
Fund, as promptly as practicable after such Losses have been incurred in excess
of $500,000, shares of Parent Common Stock held in the Escrow Fund in an amount
equal to such Losses so incurred.
(ii) For 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) hereof or to Securityholder Agent pursuant to either Section
7.2(b) or Section 7.2(e)(iv) hereof, the shares of Parent Common Stock shall be
valued at the average of the closing prices of Parent's Common Stock on the
principal securities exchange on which Parent's Common Stock is then traded or
if not so traded, the National Market System of the National Association of
Securities Dealers Automated Quotation system, in either case as reported in The
Wall Street Journal for the five (5) consecutive trading days ending on the date
that is one (1) trading day prior to the Closing Date. Parent and the
Securityholder Agent shall certify such fair market value in a certificate
signed by both Parent and the Securityholder Agent, and shall deliver such
certificate to the Escrow Agent.
(iii) 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 Securityholder 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) hereof unless the Escrow Agent shall have
received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Parent Common Stock from the Escrow Fund in
accordance with Section 7.2(d) hereof, provided that no such payment or delivery
may be made if the Securityholder 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.
(e) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder 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 form the Escrow Fund in
accordance with the terms thereof.
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(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Securityholder Agent may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by one
arbitrator. Parent and the Securityholder Agent shall agree on one arbitrator;
provided that if Parent and Securityholder Agent cannot agree on one arbitrator,
either Parent or Securityholder Agent can request that the Judicial Arbitration
and Mediation Services ("JAMS") select the arbitrator. The arbitrator shall set
a limited time period and establish procedures designed to reduce the cost and
time for discovery while allowing the parties an opportunity, adequate in the
sole judgment of the arbitrator, 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 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 as
to the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and notwithstanding
anything in Section 7.2(d) hereof, the Escrow Agent shall be entitled to act in
with such decision and make or withhold payments out of the Escrow Fund in
accordance therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrator.
(iii) Judgment upon any award rendered by the arbitrator
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Orange County, California under the rules then in effect of the American
Arbitration Association. For purposes of this Section 7.2(e), in any arbitration
hereunder in which any claim or the amount thereof stated in the Officer's
Certificate is at issue, Parent shall be deemed to be the Non- Prevailing Party
in the event that the arbitrator awards Parent less than the sum of one-half
(1/2) of the disputed amount plus any amounts not in dispute; otherwise, the
stockholders of the Company as represented by the Securityholder Agent shall be
deemed to be the Non- Prevailing Party. The NonPrevailing Party to an
arbitration shall pay its own expenses, the fees of the arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
(iv) In connection with any claims made by Corsair against
the Escrow Amount, Securityholder Agent shall have the right, upon the delivery
of invoices therefor to Parent and the Escrow Agent, to have delivered to
Securityholder Agent out of the Escrow Fund a number of shares of Parent Common
Stock not to exceed $250,000 in value in the aggregate for purposes of paying
its expenses and costs thereof, including, but
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not limited to reasonable attorneys' fees and costs, fees of the arbitrator,
administrative costs of arbitration and expenses of arbitration.
(f) Securityholder Agent of the Stockholders; Power of Attorney.
(i) In the event that the Merger is approved, effective
upon such vote, and without further act of any stockholder, a committee
comprised of Xx. Xxxxxx Xxxxxx, Mr. Xxxx Xxxxxxx and Xx. Xxxx Xxxxxxxx shall be
appointed as agent and attorney-in-fact (the "Securityholder Agent," and a
majority vote of these three members of such committee shall be deemed to be the
act of the Securityholder Agent) for each stockholder of the Company (except
such stockholders, if any, as shall have perfected their appraisal or
dissenters' rights under Delaware Law), for an one behalf of stockholders of the
Company, to give and receive notices and communication, 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
order of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of Securityholder
Agent for the accomplishment of the foregoing. Such Securityholder Agent may be
changed by the stockholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that the
Securityholder Agent may not be removed unless holders of a two-thirds interest
of the Escrow Fund agree to such removal and to the identity of the substituted
agent. Any vacancy in the position of Securityholder 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 Securityholder Agent, and the Securityholder Agent
shall not receive compensation for his or her services. Notice or communications
to or from the Securityholder Agent shall constitute notice to or form each of
the stockholders of the Company.
(ii) In performing any duties under the Agreement, the
Securityholder Agent shall not be liable to any party for damages, losses, or
expenses, except for gross negligence or willful misconduct on the part of the
Securityholder Agent. The Securityholder Agent shall not incur any such
liability for (A) any act or failure to act made or omitted in good faith, or
(B) any action taken or omitted in reliance upon any instrument, including any
written statement or affidavit provided for in this Agreement that the
Securityholder Agent shall in good faith believe to be genuine, nor will the
Securityholder Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Securityholder Agent may consult with the legal counsel in
connection with Securityholder Agent's duties under this Agreement and shall be
fully protected in any act taken, suffered, or permitted by it in good faith in
accordance with the advice of counsel. The Securityholder Agent is not
responsible for determining and verifying the authority of any person acting or
purporting to act on behalf of any party to this Agreement. Each stockholder of
the Company on whose behalf the Escrow Amount was contributed to the Escrow Fund
shall, up to an amount equal to ten percent
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(10%) of (total number of shares of Parent Common Stock allocated to such
stockholder, including escrowed shares x the Parent Average Price Per Share),
indemnify the Securityholder Agent and hold the Securityholder Agent harmless
against any loss, liability or expense incurred without gross negligence or
willful misconduct on the part of the Securityholder Agent and arising out of or
in connection with the acceptance or administration of the Securityholder
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Securityholder Agent.
(g) Actions of the Securityholder Agent. A decision, act, consent
or instruction of the Securityholder Agent shall constitute a decision of all
the stockholders 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 Securityholder Agent as
being the decision, act, consent or instruction of each 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 Securityholder Agent.
(h) 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 Securityholder Agent of such claims, and
the Securityholder Agent, as representative for the stockholders of the Company,
shall be entitled, at their expense, to participate in any defense of such
claim. Parent shall have the right in its sole discretion to settle any such
claim; provided, however, that unless such settlement was made with the consent
of the Securityholder Agent, no settlement of any such claim with third-party
claimants shall be evidence of the validity or amount of Losses attributable to
that claim against the Escrow Fund. In the event that the Securityholder Agent
has consented to any such settlement, the Securityholder Agent shall have no
power or authority to object under any provision of this Article VII to the
amount of any claim by Parent against the Escrow Fund with respect to such
settlement.
(i) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instruction reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
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(ii) The Escrow Agent is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court of law,
notwithstanding any notices, warning or other communications form any party or
any other person to the contrary. In case the Escrow Agent obeys or complies
with any such order, judgment or decree of any court, the Escrow Agent shall not
be liable to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without justification.
(iii) The Escrow Agent shall not be liable in any respect
on account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for gross negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock may wait for settlement
of any such controversy by final appropriate legal proceedings or other means
as, in the Escrow Agent's discretion, the Escrow Agent may be required, despite
what may be set forth elsewhere in this Agreement. In such event, the Escrow
Agent will not be liable for damage. Furthermore, the Escrow Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is authorized
to deposit with the clerk of the court all documents and shares of Parent Common
Stock held in escrow except all cost,
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expenses, charges and reasonable attorney fees incurred by the Escrow Agent due
to the interpleader action and which the parties jointly and severally agree to
pay. Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) The parties (excluding the Securityholder Agent) and
their respective successors and assigns agree jointly and severally to indemnify
and hold Escrow Agent harmless against all losses, claims, damages, liabilities,
and expenses, including reasonable costs of investigation, counsel fees, and
disbursements that may be imposed on Escrow Agent or incurred by Escrow Agent in
connection with the performance of his/her duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter.
(viii) The Escrow Agent may resign at any time upon giving
at least thirty (30) days written notice to the parties; provided, however, that
no such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the parties shall use their
best efforts to mutually agree on a successor escrow agent within thirty (30)
days after receiving such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the State of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
(j) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. 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.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
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8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on September 30, 1998 (provided that
the right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date); (ii) there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
(iii) there shall be any statute, rule, regulation order enacted, promulgated or
issued or deemed applicable to the Merger by any governmental entity that would
make consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of all or any portion of the business of
the Company or (ii) compel Parent or the Company to dispose of or hold separate
all or a portion of the business or assets of the Company or Parent as a result
of the Merger;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and (i) such breach has not been cured within five (5) business days
after written notice to the Company (provided that, no cure period shall be
required for a breach which by its nature cannot be cured), and (ii) as a result
of such breach the conditions set forth in Section 6.3(a) or 6.3(b), as the case
may be, would not then be satisfied;
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Parent or Merger Sub and (i) such breach has not been cured
within five (5) business days after written notice to Parent (provided that, no
cure period shall be required for a breach which by its nature cannot be cured),
and (ii) as a result of such breach the conditions set forth in Section 6.2(a)
or 6.2(b), as the case may be, would not then be satisfied.
When action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
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8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or the
Company, or their respective officer, directors or stockholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and provided further that, that provisions of Sections 5.3 and 5.4
and Articles VIII and IX (other than Section 9.1) of this Agreement shall remain
in full force and effect and survive any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the stockholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed in behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
consummation of the Merger and shall (except as otherwise specifically provided
herein) terminate at 5:00 p.m., California time, on the date which is the
earlier of (i) one year following the Closing Date or (ii) the date of the
filing with the SEC of the next audit opinion issued by the Company's auditors.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgement of complete transmission)
to the parties at the following addressed (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
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Corsair Communications, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxxx X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Subscriber Computing, Inc.
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to the Securityholder Agent:
Xxxx Xxxxxxxx
c/o Advent International
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000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxx Xxxxxx
0000 Xxxxxxxxxx
Xxx Xxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxx Xxxxxxx
00000 Xxx Xxxxxxx
Xxx Xxxx Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
9.3 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement: Assignment. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder except as otherwise contemplated
in Article III where it is the parties intention to cause the Company's
stockholders to become third party beneficiaries to Parent's and Merger Sub's
representations and warranties; and (c) shall not be assigned by operation of
law or otherwise except as otherwise specifically provided, except that Parent
and Merger Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
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9.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonable
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by any party of any one remedy will not preclude
the exercise of any other remedy.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
[Remainder of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Securityholder Agent (but only as to Articles VII and IX for Securityholder
Agent) and have caused this Agreement to be signed by their duly authorized
respective officers, all as of the date first written above.
CORSAIR COMMUNICATIONS, INC. SUBSCRIBER COMPUTING, INC.
By:______________________________ By:__________________________________
Name: Name:
Title: Title:
SECURITYHOLDER AGENT: ANTEATER ACQUISITION CORP.
_________________________________ By:__________________________________
Xxxxxx Xxxxxx Name:
Title:
_________________________________
Xxxx Xxxxxxx
_________________________________
Xxxx Xxxxxxxx
65
SCHEDULE 5.1(d)
SCHEDULED SHAREHOLDERS
Advent Global GECC Limited Partnership
Global Private Equity II Limited Partnership
Digital Media & Communications Limited Partnership
Advent Partners Limited Partnership
Xxxxxx Xxxxxx
