1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXX.XXX, INC.
ADC ACQUISITIONS, INC.
AND
XXXXXX.XXX FINANCIAL SERVICES CORPORATION
DATED AS OF APRIL 25, 1999
2
CONTENTS
ARTICLE I - THE MERGER................................................................. 1
1.1 The Merger.............................................................. 1
1.2 The Closing............................................................. 2
1.3 Effective Date and Time................................................. 2
1.4 Articles of Incorporation of the Surviving Corporation.................. 2
1.5 Bylaws of the Surviving Corporation..................................... 3
1.6 Directors and Officers.................................................. 3
1.7 Merger Consideration and Conversion of Shares........................... 3
1.7.1. Merger Consideration........................................... 3
1.7.2 Exchange Ratio; Escrow Shares.................................. 3
1.7.3 Exchange of Certificates....................................... 6
1.7.4 No Fractional Shares........................................... 8
1.7.5 No Further Transfers........................................... 8
1.8 Shareholder Representative.............................................. 8
1.9 Amendment to Provide for Alternative Merger Structures.................. 9
1.10 Tax Free Reorganization................................................. 9
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 10
2.1 Organization............................................................ 10
2.2 Enforceability.......................................................... 11
2.3 Capitalization.......................................................... 11
2.4 Subsidiaries and Affiliates............................................. 13
2.5 No Approvals; No Conflicts.............................................. 13
2.6 Financial Statements.................................................... 14
2.7 Absence of Certain Changes or Events.................................... 15
2.8 Taxes................................................................... 17
2.9 Property................................................................ 19
2.10 Contracts............................................................... 21
2.10.1 Material Contracts............................................. 21
2.10.2 Required Consents.............................................. 22
2.11 Claims and Legal Proceedings............................................ 23
2.12 Labor and Employment Matters............................................ 23
2.13 Employee Benefit Plans.................................................. 24
2.13.1 Employee Benefit Plan Listing.................................. 24
2.13.2 Documents Provided............................................. 24
2.13.3 Compliance..................................................... 25
-i-
3
2.13.4 Contributions and Premium Payments............................. 26
2.13.5 Related Employers.............................................. 26
2.13.6 Multiemployer and Title IV Plans............................... 26
2.13.7 Post-Termination Welfare Benefits.............................. 27
2.13.8 Suits, Claims and Investigations............................... 27
2.13.9 Payments Resulting From Transactions........................... 27
2.14 Intellectual Property................................................... 28
2.14.1 General........................................................ 28
2.14.2 Company Technology............................................. 28
2.14.3 Third Party Technology......................................... 29
2.14.4 Trademarks..................................................... 30
2.14.5 Intellectual Property Rights................................... 30
2.14.6 Maintenance of Rights.......................................... 31
2.14.7 Third Party Infringement....................................... 31
2.14.8 Infringement by the Company.................................... 32
2.14.9 Confidentiality................................................ 32
2.14.10 Warranty Against Defects....................................... 33
2.14.11 Domain Names................................................... 33
2.14.12 Year 2000...................................................... 34
2.14.13 Indemnification................................................ 35
2.14.14 Restrictions on Intellectual Property.......................... 35
2.15 Corporate Books and Records............................................. 36
2.16 Licenses, Permits, Authorizations, etc.................................. 36
2.17 Compliance With Laws.................................................... 36
2.18 Insurance............................................................... 37
2.19 Brokers or Finders...................................................... 37
2.20 Absence of Questionable Payments........................................ 37
2.21 Bank Accounts........................................................... 38
2.22 Insider Interests....................................................... 38
2.23 Compliance With Environmental Laws...................................... 38
2.24 Full Disclosure......................................................... 39
2.25 Xxxx-Xxxxx-Xxxxxx....................................................... 39
2.26 Employment of Required Employees........................................ 39
2.27 Voting Agreements....................................................... 39
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF XXXXXX.XXX AND THE PURCHASER........... 40
3.1 Organization............................................................ 40
3.2 Enforceability.......................................................... 41
3.3 Securities.............................................................. 41
-ii-
4
3.4 No Approvals or Notices Required; No Conflicts With Instruments......... 42
3.5 Capitalization.......................................................... 42
3.6 SEC Documents........................................................... 42
3.7 Absence of Certain Changes.............................................. 43
3.8 Information Supplied by Xxxxxx.xxx...................................... 43
3.9 Full Disclosure......................................................... 43
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXX.XXX AND THE PURCHASER....... 43
4.1 Accuracy of Representations and Warranties.............................. 43
4.2 Performance of Agreements............................................... 44
4.3 Opinion of Counsel for the Company...................................... 44
4.4 Compliance Certificate.................................................. 44
4.5 Approvals and Consents.................................................. 44
4.6 Proceedings and Documents; Secretary's Certificate...................... 44
4.7 Nonforeign Affidavit.................................................... 45
4.8 Compliance With Laws.................................................... 45
4.9 Shareholder Approval.................................................... 45
4.10 Legal Proceedings....................................................... 45
4.11 Employment and Noncompetition Arrangements.............................. 45
4.12 Affiliate Letters....................................................... 45
4.13 Termination of Certain Agreements....................................... 46
4.14 Exercise of Stock Purchase Rights; Conversion of Convertible Securities. 46
4.15 Dissenter Rights........................................................ 46
4.16 Transmittal Letters..................................................... 46
4.17 Amendment of Options and Restricted Stock Agreements.................... 46
4.18 Escrow Agreement........................................................ 47
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY......................... 47
5.1 Accuracy of Representations and Warranties.............................. 47
5.2 Performance of Agreements............................................... 47
5.3 Opinion of Counsel...................................................... 47
5.4 Compliance Certificate.................................................. 48
5.5 Legal Proceedings....................................................... 48
5.6 Approvals and Consents.................................................. 48
5.7 Compliance With Laws.................................................... 48
5.8 Escrow Agreement........................................................ 48
-iii-
5
ARTICLE VI - COVENANTS................................................................. 48
6.1 Conduct of Business by the Company Pending the Merger................... 49
6.2 Access to Information; Confidentiality.................................. 51
6.3 No Alternative Transactions............................................. 51
6.4 Notification of Certain Matters......................................... 51
6.5 Further Action; Commercially Reasonable Efforts......................... 52
6.6 Shareholder Approval.................................................... 52
6.7 Proxy Statement......................................................... 52
6.8 Xxxxxx.xxx Common Stock................................................. 53
6.9 Securities Act Compliance............................................... 53
6.10 Dissenting Shares....................................................... 54
6.11 Publicity............................................................... 54
6.12 Option Shares; Registration............................................. 54
6.13 Employee Matters........................................................ 54
6.14 Audited Financial Statements............................................ 55
6.15 Repayment of Indebtedness to Company.................................... 55
6.16 Real Property........................................................... 55
6.17 Subsidiary Roll-Up...................................................... 55
6.18 Release of Liens........................................................ 55
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER........................................ 56
7.1 Termination............................................................. 56
7.2 Effect of Termination................................................... 56
7.3 Amendment............................................................... 57
7.4 Waiver.................................................................. 57
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION............................................ 57
8.1 Survival................................................................ 57
8.2 Indemnification by the Holders of Company Capital Stock................. 58
8.3 Threshold and Limitations; Adjustment of Merger Consideration........... 58
8.4 Procedure for Indemnification........................................... 59
8.5 Remedies; Specific Performance.......................................... 61
ARTICLE IX - GENERAL................................................................... 61
9.1 Expenses................................................................ 61
9.2 Notices................................................................. 62
9.3 Severability............................................................ 63
9.4 Entire Agreement........................................................ 63
9.5 Assignment.............................................................. 63
-iv-
6
9.6 Parties in Interest..................................................... 63
9.7 Governing Law........................................................... 64
9.8 Headings................................................................ 64
9.9 Counterparts............................................................ 64
9.10 Waiver of Jury Trial.................................................... 64
EXHIBITS
1.3(i) - Certificate of Merger
1.3(ii) - Agreement of Merger, including Officers' Certificate
1.7.1 - Key Employees
1.7.2 - Form of Escrow Agreement
1.7.3 - Letter of Transmittal
2 - Disclosure Memorandum
2.27 - Form of Voting Agreement
4.3 - Opinion of Counsel for the Company
4.7 - Real Property Tax Affidavit
4.11 - Form of Confidentiality, Noncompetition and Invention
Assignment Agreement
4.12 - Form of Affiliate Letter
5.3 - Opinion of Counsel for Xxxxxx.xxx and the Purchaser
-v-
7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of April 25, 1999, by and among Xxxxxx.xxx, a Delaware corporation
("Xxxxxx.xxx"), ADC Acquisitions, Inc., a Delaware corporation and wholly owned
subsidiary of Xxxxxx.xxx (the "Purchaser"), and Xxxxxx.xxx Financial Services
Corporation, a California corporation (the "Company").
RECITALS
A. The Company, Xxxxxx.xxx and the Purchaser believe it advisable and in
their respective best interests to effect a merger of the Company and the
Purchaser pursuant to this Agreement (the "Merger").
B. The Board of Directors of the Company has approved this Agreement and
the Merger as required by applicable law.
C. The Boards of Directors of Xxxxxx.xxx and the Purchaser and the sole
stockholder of the Purchaser have approved this Agreement and the Merger as
required by applicable law.
D. It is intended that the Merger will qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
E. It is intended that certain shareholders of the Company will enter
into voting agreements with Xxxxxx.xxx in connection with the Merger
concurrently herewith.
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions hereof, (a) at the
Effective Time (as defined in Section 1.3 hereof) the separate existence of the
Purchaser shall cease and the Purchaser shall be merged with and into the
Company (the Company as the surviving corporation after the Merger is sometimes
referred to herein as the "Surviving Corporation"), and (b) from and after the
Effective Time, the Merger shall
-1-
8
have all the effects of a merger under the laws of the State of Delaware, the
State of California and other applicable law.
1.2 THE CLOSING
Subject to the terms and conditions of this Agreement, the closing of
the Merger pursuant to this Agreement (the "Closing") shall take place on the
earliest practicable business day (the "Closing Date") after the satisfaction or
waiver of the conditions set forth in Articles IV and V at 10:00 a.m. local time
at the offices of Xxxxxxx Coie LLP, 1201 Third Avenue, 48th Floor, Seattle,
Washington, or such other date, time or location as Xxxxxx.xxx and the Company
shall agree.
1.3 EFFECTIVE DATE AND TIME
On the Closing Date and subject to the terms and conditions hereof, (i)
a certificate of merger complying with the applicable provisions of the Delaware
General Corporation Law ("Delaware Law"), substantially in the form attached as
Exhibit 1.3(i) (the "Certificate of Merger"), shall be delivered for filing to
the Secretary of State of the State of Delaware (the "Delaware Secretary of
State"), and (ii) an agreement of merger, together with an officers'
certificate, complying with the applicable provisions of the California
Corporations Code ("California Law"), substantially in the form attached as
Exhibit 1.3(ii) (the "Agreement of Merger"), shall be delivered for filing to
the Secretary of State of the State of California (the "California Secretary of
State"). The Merger shall become effective on the date (the "Effective Date")
and at the time (the "Effective Time") of the filing of the Agreement of Merger
with the California Secretary of State or at such other time as may be specified
in the Agreement of Merger as filed. If the Delaware Secretary of State or the
California Secretary of State requires any changes in the Certificate of Merger
or Agreement of Merger, respectively, as a condition to filing or to issuing its
certificate to the effect that the Merger is effective, Xxxxxx.xxx, the
Purchaser and the Company will execute any necessary revisions incorporating
such changes, provided such changes are not inconsistent with and do not result
in any material change in the terms of this Agreement.
1.4 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION
At the Effective Time, the Articles of Incorporation of the Surviving
Corporation shall be amended and restated in their entirety to conform to the
substantive portions of the Certificate of Incorporation of the Purchaser in
effect immediately prior to the Effective Time. Thereafter, the Articles of
Incorporation of
-2-
9
the Surviving Corporation may be amended in accordance with their terms and as
provided by law.
1.5 BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Bylaws of the Purchaser, as in effect
immediately prior to the Effective Time, shall become the Bylaws of the
Surviving Corporation. Thereafter, the Bylaws may be amended or repealed in
accordance with their terms and the Articles of Incorporation of the Surviving
Corporation and as provided by law.
1.6 DIRECTORS AND OFFICERS
At the Effective Time, the directors and officers of the Surviving
Corporation shall be the directors and officers of the Purchaser immediately
prior to the Effective Time, and such directors and officers shall hold office
in accordance with and subject to the Articles of Incorporation and Bylaws of
the Surviving Corporation.
1.7 MERGER CONSIDERATION AND CONVERSION OF SHARES
1.7.1. MERGER CONSIDERATION
For purposes of this Agreement, the term "Merger Consideration" shall
mean the number of shares of common stock, par value $0.01 per share, of
Xxxxxx.xxx ("Xxxxxx.xxx Common Stock") determined by dividing the Base Amount
(as defined below) by $184.4375, the closing price of Xxxxxx.xxx Common Stock as
reported on the Nasdaq National Market on April 12, 1999 (the "Closing Price").
The term "Base Amount" shall mean $175,000,000; provided, however, if any of the
individuals listed on Exhibit 1.7.1 as "Primary Key Employees" (the "Primary Key
Employees") or "Secondary Key Employees" (the "Secondary Key Employees") have
not accepted Xxxxxx.xxx's offer of continued employment with Surviving
Corporation, as set forth in Section 6.13, the Base Amount shall be reduced by
the amount set forth opposite the name of the individual or individuals on
Exhibit 1.7.1 who have not accepted such continued employment as of the Closing.
1.7.2 EXCHANGE RATIO; ESCROW SHARES
As of the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof:
(a) All shares of any class of capital stock of the Company held
by the Company as treasury shares shall be canceled.
-3-
10
(b) Each issued and outstanding share of Common Stock of the
Company (the "Company Common Stock"), including each share of Company Common
Stock issued upon conversion of each issued and outstanding share of the
Company's Series A Preferred Stock, no par value (the "Company Series A Stock"
and, collectively with the Company Common Stock, the "Company Capital Stock"),
other than shares of Company Capital Stock, if any, for which dissenters' rights
are perfected in compliance with applicable law, shall be converted into the
right to receive from Xxxxxx.xxx a number of shares of Xxxxxx.xxx Common Stock
determined by dividing (i) the number of shares comprising the Merger
Consideration by (ii) the Fully Diluted Common Stock Number. The "Fully Diluted
Common Stock Number" shall mean the total number of shares of Company Common
Stock outstanding immediately prior to the Effective Time on a fully diluted
basis, which calculation assumes (x) the exercise of all outstanding rights,
warrants or options, vested or unvested, to acquire Company Capital Stock,
regardless of restrictions on exercise, and (y) the conversion of all
outstanding securities (including, without limitation, Company Series A Stock)
and notes convertible at any time into Company Common Stock, regardless of
restrictions on conversion (such rights, warrants, options and convertible
securities referenced in clauses (x) and (y) being referred to herein as "Stock
Purchase Rights"). The quotient as derived above shall be referred to herein as
the "Exchange Ratio." The number of shares of Xxxxxx.xxx Common Stock to be
issued to each holder of Company Capital Stock in existence immediately prior to
the Effective Time (collectively, the "Shareholders") under this Section
1.7.2(b) shall be calculated by aggregating all shares of Company Common Stock
held by each such Shareholder, so that such number of shares of Xxxxxx.xxx
Common Stock to be issued shall be equal to the number of shares of Company
Common Stock held by such Shareholder multiplied by the Exchange Ratio, with
cash paid in lieu of any fractional share of Xxxxxx.xxx Common Stock pursuant to
Section 1.7.5 hereof.
(c) Notwithstanding the foregoing, 15% of that number of shares
comprising the Merger Consideration (the "Escrow Shares") shall be deposited in
escrow (the "Escrow") with ChaseMellon Shareholder Services L.L.C.
("ChaseMellon" or the "Escrow Agent"), to be held and administered in accordance
with an Escrow Agreement, in substantially the form attached hereto as Exhibit
1.7.2 (the "Escrow Agreement"), such Escrow Shares to be withheld and deducted,
pro rata, from the shares of Xxxxxx.xxx Common Stock otherwise issuable to each
Shareholder. With respect to each Shareholder subject to a Restricted Stock
Agreement (as defined herein), the Escrow Shares deposited in the Escrow by such
Shareholder shall be prorated between such Shareholder's Vested Shares and
Unvested Shares (each, as defined in the respective Restricted Stock
Agreements), and the vesting of such Escrow Shares shall be at a prorated rate
of the total vesting of shares
-4-
11
of such Shareholder subject to such Restricted Stock Agreement. By approving the
Merger at a special meeting of the shareholders or by written consent or by
delivering their certificates representing shares of Company Capital Stock to
ChaseMellon in accordance with the provisions of Section 1.7.3, the Shareholders
shall agree to be bound with respect to the indemnification obligations of the
Shareholders and the procedures set forth in Article VIII. Fractional shares of
Xxxxxx.xxx Common Stock shall not be deposited in escrow. In lieu thereof, each
Shareholder shall round up such fractional share to the nearest whole number and
deposit into escrow a full share of Xxxxxx.xxx Common Stock for such fractional
share. The Escrow Shares shall be held by the Escrow Agent in book entry form.
Notwithstanding the escrow of the Escrow Shares, dividends or other
distributions declared and paid on such shares shall continue to be paid by
Xxxxxx.xxx to the holders of Escrow Shares and all voting rights with respect to
such shares shall inure to the benefit of and be enjoyed by such stockholders.
Any securities received by the Escrow Agent in respect of any Escrow Shares held
in escrow as a result of any stock split or combination of shares of Xxxxxx.xxx
Common Stock, payment of a stock dividend or other stock distribution in or on
shares of Xxxxxx.xxx Common Stock, or change of Xxxxxx.xxx Common Stock into any
other securities pursuant to or as a part of a merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation of
Xxxxxx.xxx, or otherwise, shall be held by the Escrow Agent as, and shall be
included within the definition of, Escrow Shares. The Escrow Shares shall be
available to satisfy any indemnification obligations pursuant to Article VIII
for the Survival Period (as defined in Section 8.1).
(d) Each issued and outstanding share of capital stock of the
Purchaser shall continue to remain outstanding as a share of capital stock of
the Surviving Corporation.
(e) Xxxxxx.xxx shall assume the Company's 1998 Stock Plan (the
"Company Plan"), and each outstanding option to purchase shares of Company
Common Stock set forth on Appendix A to Schedule 2.3(c) to the Disclosure
Memorandum, whether or not vested or exercisable (each, an "Option"), shall be
assumed by Xxxxxx.xxx and shall constitute an option to acquire, on the same
vesting terms, and on substantially the same other terms and conditions as were
applicable under such assumed Option, that number of shares of Xxxxxx.xxx Common
Stock equal to the product of the Common Stock Exchange Ratio and the number of
shares of Company Common Stock subject to such Option, at a price per share
(rounded to the nearest $0.01) equal to the aggregate exercise price for the
shares of Company Common Stock subject to such Option divided by the number of
full shares of Xxxxxx.xxx Common Stock deemed to be purchasable pursuant to such
Option;
-5-
12
provided, however, that (i) subject to the provisions of clause (ii) below, the
number of shares of Xxxxxx.xxx Common Stock that may be purchased upon exercise
of such Option shall not include any fractional shares, and, at the time of such
assumption, Xxxxxx.xxx shall pay to the holder thereof as soon as practicable
after the assumption thereof an amount of cash equal to such fraction multiplied
by the average of the high and low selling price of Xxxxxx.xxx Common Stock on
the assumption date, and (ii) in the case of any Option to which Section 421 of
the Code applies by reason of its qualification under Section 422 of the Code,
the option price, the number of shares purchasable pursuant to such Option and
the terms and conditions of exercise of such Option shall be determined in order
to comply with Section 424 of the Code. Xxxxxx.xxx shall assume the obligations
of the Company under the Company Plan and shall comply with the terms of such
plan as they apply to the Options assumed as set forth above.
(f) Holders of shares of Company Capital Stock who have complied
with all the requirements for perfecting dissenters' rights, as required under
California Law, shall be entitled to their rights under California Law with
respect to such shares (the "Dissenting Shares"). Notwithstanding the foregoing,
if any holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to dissent, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
shares of Xxxxxx.xxx Common Stock to which such holder is then entitled under
this Agreement and California Law, without interest thereon and upon surrender
of the certificate representing such shares. Notwithstanding any provision of
this Agreement to the contrary, any Dissenting Shares held by a Shareholder who
has perfected dissenter's rights for such shares in accordance with California
Law shall not be converted in Xxxxxx.xxx Common Stock pursuant to this Section
1.7.2.
(g) If, prior to the Effective Time, Xxxxxx.xxx recapitalizes
through a split-up of its outstanding shares of capital stock into a greater
number, or a combination of its outstanding shares of capital stock into a
lesser number, reorganizes, reclassifies or otherwise changes its outstanding
shares of capital stock into the same or a different number of shares of other
classes of capital stock, or declares a dividend on its outstanding shares of
capital stock payable in shares or securities convertible into shares, the
number of shares of Xxxxxx.xxx Common Stock into which the shares of Company
Capital Stock are to be converted, and the number of shares of Xxxxxx.xxx Common
Stock issuable upon the exercise of each assumed Option, will be adjusted
appropriately so as to maintain the proportionate interests of the holders of
the Company Capital Stock and Options and the holders of shares of capital stock
of Xxxxxx.xxx.
-6-
13
1.7.3 EXCHANGE OF CERTIFICATES
(a) As soon as practicable after the Effective Date, ChaseMellon, as
exchange agent (the "Exchange Agent"), shall make available, and each
Shareholder will be entitled to receive, in no event more than five business
days after surrender to the Exchange Agent of a letter of transmittal in the
form set forth as Exhibit 1.7.3 hereto (the "Letter of Transmittal") together
with documents delivered as required therein, including certificates
representing shares of Company Capital Stock for cancellation, certificates
representing the number of shares of Xxxxxx.xxx Common Stock that such
Shareholder is entitled to receive pursuant to Section 1.7.2 hereof; provided,
however, that the Escrow Shares shall (i) be retained by ChaseMellon in
accordance with the provisions of the Escrow Agreement, (ii) not be issued in
certificated form and (iii) be held by ChaseMellon in book entry form. In the
event that any certificates representing shares of Company Capital Stock shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Shareholder claiming such certificate to be lost, stolen or
destroyed, Xxxxxx.xxx shall issue in exchange for such lost, stolen or destroyed
certificate the shares of Xxxxxx.xxx Common Stock that such Shareholder is
entitled to receive pursuant to Section 1.7.2 hereof; provided, however, that
Xxxxxx.xxx may in its discretion and as a condition precedent to the issuance
thereof, require such Shareholder to provide Xxxxxx.xxx with an indemnity
agreement against any claim that may be made against Xxxxxx.xxx with respect to
the certificate alleged to have been lost, stolen or destroyed. The shares of
Xxxxxx.xxx Common Stock that each Shareholder shall be entitled to receive in
connection with the Merger pursuant to Section 1.7.2 and the Escrow Shares shall
be deemed to have been issued at the Effective Time. No interest shall accrue on
the Merger Consideration. If the Merger Consideration (or any portion thereof)
is to be delivered to any person other than the person in whose name the
certificate or certificates representing shares of Company Capital Stock
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the person requesting such exchange shall pay to Xxxxxx.xxx any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate or
certificates so surrendered, or shall establish to the satisfaction of
Xxxxxx.xxx that such tax has been paid or is not applicable. Notwithstanding
anything to the contrary, neither Xxxxxx.xxx nor any other party hereto shall be
liable to a holder of shares of Company Capital Stock for any Merger
Consideration delivered to a public official pursuant to applicable law,
including, without limitation, abandoned property, escheat and similar laws.
(b) Xxxxxx.xxx or the Exchange Agent will be entitled to deduct and
withhold from the Merger Consideration such amounts as Xxxxxx.xxx or the
-7-
14
Exchange Agent are required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld, such amounts will be treated
for all purposes of this Agreement as having been paid to the former holder of
the Company Capital Stock in respect of whom such deduction and withholding were
made by Xxxxxx.xxx or the Exchange Agent.
1.7.4 NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Xxxxxx.xxx
Common Stock shall be issued by virtue of the Merger, and no dividend, stock
split or other distribution with respect to Xxxxxx.xxx Common Stock shall relate
to any such fractional interest, and any such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
thereof, Xxxxxx.xxx shall pay to the holder of shares of Company Capital Stock
who would otherwise be entitled to a fraction of a share of Xxxxxx.xxx Common
Stock, as soon as practicable after the Effective Date (and in the same timely
manner required for delivery of certificates of Xxxxxx.xxx Common Stock provided
in Section 1.7.3), an amount in cash equal to such fraction multiplied by the
Closing Price.
1.7.5 NO FURTHER TRANSFERS
After the Effective Time, there shall be no transfers of any shares of
Company Capital Stock on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, certificates formerly representing shares of
Company Capital Stock are presented to the Surviving Corporation, they shall be
forwarded to Xxxxxx.xxx and be canceled and exchanged in accordance with this
Section 1.7, subject to applicable law in the case of Dissenting Shares.
1.8 SHAREHOLDER REPRESENTATIVE
(a) By approving the Merger at a special meeting of shareholders or by
written consent of the shareholders, each Shareholder shall have irrevocably
authorized and appointed Xxxx Xxxx (the "Shareholder Representative"), with full
power of substitution and resubstitution, as such Shareholder's representative
and true and lawful attorney-in-fact and agent to act in such Shareholder's
name, place and stead as contemplated by Article VIII and to execute in the name
and on behalf of such Shareholder the Escrow Agreement and any other agreement,
certificate, instrument or document to be delivered by such Shareholder in
connection with the Escrow Agreement.
-8-
15
(b) The Shareholder Representative shall not be liable for any act done
or omitted hereunder or under the Escrow Agreement as the Shareholder
Representative while acting in good faith and in the exercise of reasonable
judgment. The Shareholders on whose behalf the Escrow Shares were contributed to
the Escrow shall indemnify the Shareholder Representative and hold the
Shareholder Representative harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Shareholder
Representative and arising out of or in connection with the acceptance or
administration of the Shareholder Representative's duties hereunder and under
the Escrow Agreement, including the reasonable fees and expenses of any legal
counsel retained by the Shareholder Representative.
(c) A decision, act, consent or instruction of the Shareholder
Representative shall constitute a decision of the Shareholders and shall be
final, binding and conclusive upon the Shareholders; and the Escrow Agent and
the Indemnified Parties (as defined herein) may rely upon any such decision,
act, consent or instruction of the Shareholder Representative as being the
decision, act, consent or instruction of the Shareholders. The Escrow Agent and
the Indemnified Parties 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 Shareholder Representative.
1.9 AMENDMENT TO PROVIDE FOR ALTERNATIVE MERGER STRUCTURES
If at any time prior to the Closing Date, Xxxxxx.xxx elects to have the
Purchaser be the Surviving Corporation or elects to have the Company merge with
and into Xxxxxx.xxx or have a different subsidiary of Xxxxxx.xxx merge with the
Company in a forward or reverse triangular merger, the parties shall promptly
enter into an amendment to this Agreement to so provide, so long as such action
does not result in a breach of a representation or warranty set forth in Article
II hereof or the inability to satisfy any of the conditions set forth in
Articles IV and V hereof. Section 1.10(b) and (c) shall be amended as necessary
to reflect any amendment under this Section 1.9.
1.10 TAX FREE REORGANIZATION
(a) Except as otherwise required by the Internal Revenue Service (the
"IRS") pursuant to a determination (as defined in Section 1313 of the Code) or
otherwise, or by applicable law, the parties shall not take a position on any
tax returns inconsistent with the treatment of the Merger for tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code by reason
of Section 368(a)(2)(D) of the
-9-
16
Code, in the case of the merger of the Company with and into the Purchaser with
the Purchaser being the surviving corporation, by reason of Section 368(a)(2)(E)
of the Code, in the case of any merger of the Purchaser with and into the
Company with the Company being the surviving corporation, or by reason of
Section 368(a)(1)(A) itself, in the case of the merger of the Company with and
into Xxxxxx.xxx.
(b) In addition, Xxxxxx.xxx represents, solely for tax purposes, now,
and as of the Closing Date, the following: (i) prior to the Merger, it will be
in "control" of Purchaser within the meaning of Section 368(c) of the Code; (ii)
except for reorganizations under Section 368(a)(1)(F) of the Code or a merger
with Xxxxxx.xxx, it has no present plan or intention to liquidate the Company or
to merge the Company with or into another corporation, to sell, distribute or
otherwise dispose of the Company Capital Stock, except for transfers of stock
described in Section 368(a)(2)(C) of the Code or Treasury Regulation Section
1.368-2(k)(2), or to cause the Company to sell or otherwise dispose of any of
its assets except for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C) or Treasury Regulation Section
1.368-2(k)(2); and (iii) that it presently intends to continue the Company's
historic business or use a significant portion of the Company's business assets
in business in a manner that satisfies the continuity of business enterprise
requirement set forth in Treasury Regulation Section 1.368-1(d). Notwithstanding
the foregoing, neither Xxxxxx.xxx nor the Purchaser makes any representation or
warranty with respect to any Tax consequences to the Company or its shareholders
arising under this Agreement or as a result of the transactions contemplated
hereby.
(c) The Company represents that it has not taken any action that would
prevent the Merger from meeting the requirement under Section 368(a)(2)(E) of
the Code that "substantially all of the assets" of the Company must be acquired
in the Merger.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as is otherwise set forth with appropriate Section references in
the Disclosure Memorandum attached as Exhibit 2 (the "Disclosure Memorandum"),
and in order to induce Xxxxxx.xxx and the Purchaser to enter into and perform
this Agreement and the other agreements and certificates that are required to be
executed pursuant to this Agreement (collectively, the "Operative Documents"),
the Company represents and warrants to Xxxxxx.xxx and the Purchaser as of the
date of this Agreement and as of the Closing as follows in this Article II.
-10-
17
2.1 ORGANIZATION
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to carry on its business as now conducted and as currently proposed
to be conducted, and to enter into and perform its obligations under this
Agreement and the other Operative Documents to which the Company is a party, and
to consummate the transactions contemplated hereby and thereby. The Company is
duly qualified and licensed as a foreign corporation to do business and is in
good standing in each jurisdiction in which the character of the Company's
properties occupied, owned or held under lease or the nature of the business
conducted by the Company makes such qualification or licensing necessary, except
where the failure to be so qualified or in good standing would not have a
Company Material Adverse Effect. For purposes of this Agreement, the term
"Company Material Adverse Effect" shall mean any change, event or effect that is
or is reasonably likely to be materially adverse to the Company's business,
operations, assets, liabilities, condition (financial or otherwise) or
prospects; provided, however, that a Company Material Adverse Effect shall not
include any change, event or effect that relates to or results from (i) the
announcement or other disclosure or consummation of the transactions
contemplated by this Agreement; (ii) a general economic downturn; or (iii) an
economic downturn in the Company's industry which does not disproportionately
affect the Company.
2.2 ENFORCEABILITY
The Company has full corporate power and authority to execute, deliver
and perform its obligations under this Agreement and each of the other Operative
Documents to which it is a party and each of the certificates, instruments and
documents executed or delivered by it pursuant to the terms of this Agreement.
All corporate action on the part of the Company and its officers, directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Agreement and the other Operative Documents to which the
Company is a party, the consummation of the Merger, and the performance of all
the Company's obligations under this Agreement and the other Operative Documents
to which the Company is a party has been taken or will be taken as of or prior
to the Effective Time. All such corporate action on the part of the Company's
Board of Directors has been taken. This Agreement has been, and each of the
other Operative Documents to which the Company is a party at the Closing will
have been, duly executed and delivered by the Company, and this Agreement is,
and each of the other Operative Documents to which the Company is a party will
be at the Closing, a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
-11-
18
to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities.
2.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock and 9,202,400 shares of preferred stock, all of
which shares are designated as Series A Preferred Stock.
(b) As of the date of this Agreement, the issued and outstanding capital
stock of the Company consists solely of 7,236,740 shares of Company Common Stock
and 9,031,600 shares of Company Series A Stock, all of which shares are held of
record on the date of this Agreement and, to the knowledge of the Company,
beneficially by the Shareholders as set forth on Schedule 2.3(b) to the
Disclosure Memorandum. Schedule 2.3(b) to the Disclosure Memorandum also
separately indicates the number of shares of Company Common Stock into which the
outstanding Company Series A Stock is convertible. Such outstanding shares are,
and immediately prior to the Closing will be (and immediately prior to the
Closing all shares of Company Common Stock issued upon the conversion of
outstanding Company Series A Stock will be), duly authorized and validly issued,
fully paid and nonassessable, and issued in compliance with all applicable
federal and state securities laws. True and correct copies of the stock records
of the Company, showing all issuances and transfers of shares of capital stock
of the Company since inception, have been provided to Xxxxxx.xxx or its counsel.
(c) As of the date of this Agreement, other than (i) Options to purchase
up to 1,798,250 shares of Company Common Stock which have been granted under the
Company Plan, (ii) a warrant to purchase 170,800 shares of Company Series A
Stock or (iii) other Stock Purchase Rights set forth on Schedule 2.3(c) to the
Disclosure Memorandum, there are no outstanding rights of first refusal or
offer, preemptive rights, Stock Purchase Rights or other agreements, either
directly or indirectly, for the purchase or acquisition from the Company or any
of its shareholders of any shares of Company Capital Stock or any securities
convertible into or exchangeable for shares of Company Capital Stock. Schedule
2.3(c) to the Disclosure Memorandum accurately reflects the number of such
Options and other Stock Purchase Rights outstanding as of the date of this
Agreement, the grant or issue dates, vesting schedules and exercise or
conversion prices thereof, and, in each case, the identities of the holders and
an indication of their relationships to the Company (if any exist other than as
a security
-12-
19
holder). The Company has delivered to Xxxxxx.xxx or its counsel true and correct
copies of the Company Plan, the stock option agreements relating to Options
granted thereunder, all other agreements with respect to Stock Purchase Rights,
and all material deviations therefrom. Schedule 2.3(c) to the Disclosure
Memorandum also identifies all Options or Stock Purchase Rights that have been
offered in connection with any employee or consulting agreement but that, as of
the date hereof, have not been issued or granted.
(d) Except as set forth on Schedule 2.3(d) to the Disclosure Memorandum,
the Company is not a party or subject to any agreement or understanding, and, to
the knowledge of the Company, there is no agreement or understanding between any
Persons that affects or relates to the voting or giving of written consents with
respect to any securities of the Company or the voting by any director of the
Company. Except as set forth on Schedule 2.3(d) of the Disclosure Memorandum, no
Shareholder or any affiliate thereof is indebted to the Company, and the Company
is not indebted to any Shareholder or any affiliate thereof. Except as set forth
on Schedule 2.3(d) to the Disclosure Memorandum, the Company is not under any
contractual or other obligation to register any of its presently outstanding
securities or any of its securities that may hereafter be issued.
(e) All rights of refusal, co-sale rights and registration rights
granted by the Company with respect to the Company Capital Stock or Stock
Purchase Rights of the Company are described on Schedule 2.3(e) to the
Disclosure Memorandum.
(f) All Options and Stock Purchase Rights have been granted or issued at
fair market value, as determined by the Company's Board of Directors at the date
of grant or issuance.
2.4 SUBSIDIARIES AND AFFILIATES
Except as set forth in Schedule 2.4 to the Disclosure Memorandum, the
Company does not own and has not in the past owned, directly or indirectly, any
ownership, equity, or voting interest in, or otherwise control or controlled,
any corporation, partnership, limited liability company, joint venture or other
entity, and has no agreement or commitment to purchase any such interest. The
Company is, directly or indirectly, the record and beneficial owner of all of
the outstanding shares of capital stock or other equity securities, as the case
may be, of each of the entities listed on Schedule 2.4 to the Disclosure
Memorandum (collectively, the "Company Subsidiaries"), no equity securities of
any Company Subsidiary are or may become required to be issued by reason of any
options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible
-13-
20
into or exchangeable or exercisable for, shares of any capital stock of any
Company Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which the Company or any Company Subsidiary is or may be bound
to either sell any outstanding securities of any Company Subsidiary or issue
additional shares of capital sock of any Company Subsidiary or securities
convertible into or exchangeable or exercisable for any such shares. All of such
shares so owned by the Company are duly authorized and validly issued, fully
paid and nonassessable and are owned free and clear of any liens, mortgages,
pledges, security interests, encumbrances, claims or charges of any kind.
2.5 NO APPROVALS; NO CONFLICTS
Except as set forth in Schedule 2.5 to the Disclosure Memorandum, the
execution, delivery and performance by the Company of this Agreement and the
other Operative Documents to which the Company is a party and the consummation
of the transactions contemplated hereby and thereby will not (a) constitute a
violation (with or without the giving of notice or lapse of time, or both) of
any provision of law or any judgment, decree, order, regulation or rule of any
court or other governmental authority applicable to the Company, (b) require any
consent, approval or authorization of, or declaration, filing or registration
with, any person, corporation, partnership, joint venture, association,
organization, other entity or governmental or regulatory authority (a "Person"),
except (i) compliance with applicable securities laws, (ii) the filing of all
documents necessary to consummate the Merger with the Delaware Secretary of
State and the California Secretary of State, (iii) the approval by the
Shareholders of the transactions contemplated hereby, as provided under
California Law and the Articles of Incorporation and Bylaws of the Company, (iv)
the notification requirements of the Xxxx-Xxxxx-Xxxxxx Act (as defined below),
and (v) the filing of all documents necessary to roll-up each Company
Subsidiary, (c) result in a default (with or without the giving of notice or
lapse of time, or both) under, or acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
any agreement, lease, note or other restriction, encumbrance, obligation or
liability to which the Company is a party or by which it is bound or to which
any assets of the Company are subject, (d) result in the creation of any
Encumbrance (as defined in Section 2.9(d)) upon any material assets of the
Company or, to the knowledge of the Company, upon any outstanding shares or
other securities of the Company, (e) conflict with or result in a breach of or
constitute a default under any provision of the Articles of Incorporation or
Bylaws of the Company, or (f) invalidate or adversely affect any permit, license
or authorization currently material to the conduct of the business of the
Company.
-14-
21
2.6 FINANCIAL STATEMENTS
The Company has delivered to Xxxxxx.xxx (a) unaudited balance sheets and
statements of income and expense of the Company as of or for the fiscal years
ended December 31, 1997 and 1998, and (b) an unaudited balance sheet, statement
of income and expense and statement of cash flow of the Company as of and for
the three-month period ended March 31, 1999. All the foregoing financial
statements are herein referred to as the "Financial Statements." The balance
sheet of the Company as of March 31, 1999 is herein referred to as the "Company
Balance Sheet." Except as set forth in Schedule 2.6 to the Disclosure
Memorandum, the Financial Statements have been prepared in conformity with
generally accepted accounting principles in the United States ("GAAP") on a
basis consistent with prior accounting periods and fairly present the financial
position, results of operations and changes in financial position of the Company
as of the dates and for the periods indicated. The Company has no liabilities or
obligations of any nature (absolute, contingent or otherwise) that are not fully
reflected or reserved against in the Company Balance Sheet and that would be
required under GAAP to be reflected or reserved, except liabilities or
obligations incurred since the date of the Company Balance Sheet in the ordinary
course of business and consistent with past practice that are not in excess of
$50,000 in the aggregate or $20,000 individually. The Company maintains standard
systems of accounting that are adequate for its business. The Company is not a
guarantor, indemnitor, surety or other obligor of any indebtedness of any other
Person. The Company's practices with respect to capitalizing software
development costs, as reflected in the Financial Statements, are reasonable, in
accordance with industry standards and consistent with the advice of the
Company's independent accountants.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except (i) as set forth in Schedule 2.7 to the Disclosure Memorandum and
(ii) for transactions specifically contemplated in this Agreement, since the
date of the Company Balance Sheet, neither the Company nor any of its officers
or directors in their representative capacities on behalf of the Company have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of the
Company's business as currently conducted and as proposed to be conducted;
(b) forgiven or canceled any indebtedness or waived any claims or
rights of material value (including, without limitation, any indebtedness owing
by any shareholder, officer, director, employee or affiliate of the Company);
-15-
22
(c) granted, other than in the ordinary course of business and
consistent with past practice, any increase in the compensation of directors,
officers, employees or consultants who already held such positions at that time
(including any such increase pursuant to any employment agreement or bonus,
pension, profit-sharing, lease payment or other plan or commitment) or any
increase in the compensation payable or to become payable to any director,
officer, employee or consultant;
(d) suffered any change having or reasonably likely to have a
Company Material Adverse Effect;
(e) borrowed or agreed to borrow any funds, incurred or become
subject to, whether directly or by way of assumption or guarantee or otherwise,
any obligations or liabilities (absolute, accrued, contingent or otherwise)
individually in excess of $20,000 or in excess of $50,000 in the aggregate,
except liabilities and obligations (i) that are incurred in the ordinary course
of business and consistent with past practice or (ii) that would not be required
to be reflected or reserved against in a balance sheet prepared in accordance
with GAAP, or increased, or experienced any change in any assumptions underlying
or methods of calculating, any bad debt, contingency or other reserves;
(f) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the Company Balance Sheet or incurred in the
ordinary course of business and consistent with past practice since the date of
the Company Balance Sheet, or prepaid any obligation having a fixed maturity of
more than 90 days from the date such obligation was issued or incurred;
(g) knowingly permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge,
except in the ordinary course of business and consistent with past practice;
(h) purchased or sold, transferred or otherwise disposed of any
of its material properties or assets (real, personal or mixed, tangible or
intangible);
(i) disposed of or permitted to lapse any rights to the use of
any trademark, trade name, patent or copyright, or disposed of or disclosed to
any Person without obtaining an appropriate confidentiality agreement from any
such Person any
-16-
23
trade secret, formula, process or know-how not theretofore a matter of public
knowledge;
(j) made any single capital expenditure or commitment in excess
of $20,000 for additions to property, plant, equipment or intangible capital
assets or made aggregate capital expenditures in excess of $50,000 for additions
to property, plant, equipment or intangible capital assets;
(k) made any change in accounting methods or practices or
internal control procedure;
(l) issued any capital stock or other securities, or declared,
paid or set aside for payment any dividend or other distribution in respect of
its capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company, or
otherwise permitted the withdrawal by any of the holders of Company Capital
Stock of any cash or other assets (real, personal or mixed, tangible or
intangible), in compensation, indebtedness or otherwise, other than payments of
compensation in the ordinary course of business and consistent with past
practice;
(m) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets (real, personal or mixed, tangible or
intangible) to any of the Company's shareholders, officers, directors or
employees or any affiliate of any of the Company's shareholders, officers,
directors or employees, except compensation paid to officers and employees at
rates not exceeding the rates of compensation paid during the fiscal year last
ended and except for advances for travel and other business-related expenses; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 2.7.
2.8 TAXES
(a) (i) All Tax Returns (as defined below) required to be filed by or on
behalf of the Company have been filed on a timely basis with the appropriate
governmental authority in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns were (at the time they were
filed) true, correct and complete in all material respects; (ii) all Taxes (as
defined below) of the Company (whether or not reflected on any Tax Return) have
been fully and timely paid; (iii) no waivers of statutes of limitation have been
given or requested with respect to the Company in connection with any Tax
Returns covering the Company with respect to
-17-
24
any Taxes payable by it; (iv) no taxing authority in a jurisdiction where the
Company does not file Tax Returns has made a claim, assertion, or threat to the
Company that the Company is or may be subject to taxation by such jurisdiction;
(v) the Company has duly and timely withheld from employee salaries, wages and
other compensation and paid over to the appropriate governmental authority all
amounts required to be so withheld and paid over for all periods under all
applicable laws; and no amounts have been or would be required to be withheld
with respect to the lapse of restrictions on Company Capital Stock; (vi) there
are no liens with respect to Taxes on any of the Company's property or assets
other than liens for current Taxes not yet payable; (vii) there are no Tax
rulings, requests for rulings, or closing agreements relating to the Company
which could affect the liability for Taxes or the amount of taxable income of
the Company for any period (or portion of a period) after the date hereof; and
(viii) any adjustment of Taxes of the Company made by the IRS in any examination
which is required to be reported to the appropriate state, local or foreign
taxing authorities has been reported, and any additional Taxes due with respect
thereto have been paid.
(b) Neither the Company nor any other Person on behalf of the Company
(i) has filed a consent pursuant to 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 such term is defined in Section 341(f)(4) of the Code) owned by the Company;
(ii) has executed or entered into a closing agreement pursuant to Section 7121
of the Code or any predecessor provision thereof or any similar provision of
state, local or foreign law; or (iii) has agreed to or is required to make any
adjustments pursuant to Section 481 (a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or has notice that a governmental authority has proposed any such
adjustment or change in accounting method.
(c) There is no dispute or claim concerning any Tax liability of the
Company either (i) claimed or raised by any authority in writing or (ii) as to
which any of the directors and officers (and employees responsible for Tax
matters) of the Company have knowledge based on contact or correspondence with
any agent of such authority. Schedule 2.8(c) to the Disclosure Memorandum lists
all Tax Returns filed with respect to the Company for taxable periods ended on
or after the Company's inception or the inception of any predecessor that have
been audited, and indicates those Tax Returns that currently are the subject of
audit. The Company has delivered to Xxxxxx.xxx or its counsel correct and
complete copies of all Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since the Company's
inception.
-18-
25
(d) Except as set forth on Schedule 2.8(d) to the Disclosure Memorandum,
the Company has not made any payments, is not obligated to make any payments and
is not a party to any agreement that under certain circumstances could obligate
it to make any payments that will not be deductible under Section 280G of the
Code (or any similar provision of state, local or foreign law).
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of a Tax Group (as defined
below) filing a consolidated income Tax Return under Section 1501 of the Code
(or any similar provision of state, local or foreign law) and (ii) does not have
any liability for Taxes of any Person under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor by contract or otherwise.
(g) Except as set forth on Schedule 2.8(g), the unpaid Taxes of the
Company (i) did not, as of March 31, 1999, exceed the reserve for Tax liability
set forth on the face (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) of the Company Balance
Sheet and (ii) do not exceed that reserve as adjusted for the passage of time
and operations in the ordinary course of business through the Closing Date.
(h) Except as set forth on Schedule 2.8(h), there has been no ownership
change, as defined in Section 382(g) of the Code (or any comparable provision of
state, local or foreign law), with respect to the Company during or after any
taxable period in which the Company incurred a net operating loss. The
Disclosure Memorandum sets forth the maximum amount of any net operating loss at
the time of any such ownership change.
(i) All Options that the Company has treated as incentive stock options
under Section 421 of the Code meet the requirements of Section 422 of the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"Taxes" means all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties, and other assessments, including, but
not limited to, any income, alternative minimum or add-on tax, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise,
-19-
26
registration, title, license, capital, paid-up capital, profits, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, real
property, recording, personal property, federal highway use, commercial rent,
environmental (including, but not limited to, taxes under Section 59A of the
Code) or windfall profit tax, custom, duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest, penalties or additions to tax; and "Tax" means any of the foregoing
Taxes.
"Tax Group" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"Tax Returns" means any return, declaration, report, claim or refund,
information return, statement, or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
2.9 PROPERTY
(a) The Company owns no real property other than the leasehold interests
described on Schedule 2.9(a) to the Disclosure Memorandum, which contains a
complete and accurate list of all real property owned, leased or currently being
used by the Company (the "Real Property"). The Company has delivered to
Xxxxxx.xxx or its counsel true and complete copies of all written leases,
subleases, rental agreements, contracts of sale, tenancies or licenses relating
to the Real Property and written summaries of the terms of any oral leases,
subleases, rental agreements, contracts of sale, tenancies or licenses to which
the Real Property is subject.
(b) Schedule 2.9(b) to the Disclosure Memorandum contains a complete and
accurate list of each item of personal property having a value in excess of
$20,000 which is owned, leased, rented or used by the Company (the "Personal
Property"); provided that such list need not describe the Technology or the IP
Rights (as defined in Sections 2.14.2 and 2.14.5, respectively) listed on
Schedule 2.14 to the Disclosure Memorandum. The Company has delivered to
Xxxxxx.xxx or its counsel true and complete copies of all leases, subleases,
rental agreements, contracts of sale, tenancies or licenses to which the
Personal Property is subject.
(c) The Real Property and the Personal Property include all the
properties and assets (whether real, personal or mixed, tangible or intangible)
(other than, in the case of the Personal Property, property rights with an
individual value of less than $20,000 and the Technology and IP Rights)
reflected in the Company Balance Sheet (except for such properties or assets
sold since the date of the Company Balance Sheet
-20-
27
in the ordinary course of business and consistent with past practice) and all
the properties and assets purchased by the Company since the date of the Company
Balance Sheet (other than, in the case of the Personal Property, property rights
with an individual value of less than $20,000 and the Technology and the IP
Rights). The Real Property and the Personal Property include all material
property used in the business of the Company, other than the Technology and IP
Rights. The Company's offices and other structures and its Personal Property are
of a quality consistent with industry standards, are in good operating condition
and repair, normal wear and tear excepted, are adequate for the uses to which
they are being put, and comply in all material respects with applicable safety
and other laws and regulations.
(d) The Company's leasehold interest in each parcel of the Real Property
is free and clear of all liens, mortgages, pledges, deeds of trust, security
interests, charges, encumbrances and other adverse claims or interests of any
kind (each, an "Encumbrance"), except for Encumbrances related to Taxes not yet
due and payable. Each lease of any portion of the Real Property is valid,
binding and enforceable in accordance with its terms against the parties thereto
and, to the Company's knowledge, any other Person with an interest in such Real
Property, the Company has performed in all material respects all obligations
imposed upon it thereunder, and neither the Company nor, to the Company's
knowledge, any other party thereto is in default thereunder, nor is there any
event which with notice or lapse of time, or both, would constitute a default
thereunder by the Company or, to the Company's knowledge, by any other party.
The Company has not granted any lease, sublease, tenancy or license of, or
entered into any rental agreement or contract of sale with respect to, any
portion of the Real Property.
(e) The Personal Property is free and clear of all Encumbrances, and,
other than leased Personal Property which is so noted on Schedule 2.9(b) to the
Disclosure Memorandum, the Company owns such Personal Property. Each lease,
license, rental agreement, contract of sale or other agreement to which the
Personal Property is subject is valid, binding and enforceable in accordance
with its terms against the parties thereto, the Company has performed in all
material respects all obligations imposed upon it thereunder, and neither the
Company nor, to the Company's knowledge, any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default by the Company or, to the Company's knowledge, any
other party thereunder. The Company has not granted any lease, sublease, tenancy
or license of any portion of the Personal Property, except in the ordinary
course of business.
-21-
28
2.10 CONTRACTS
2.10.1 MATERIAL CONTRACTS
Schedule 2.10.1 to the Disclosure Memorandum contains a complete and
accurate list (other than the IP Rights listed on Schedule 2.14 to the
Disclosure Memorandum) of all contracts, agreements and understandings, oral or
written, to which the Company is currently a party or by which the Company is
currently bound providing for potential payments by or to the Company in excess
of $20,000, including, without limitation, security agreements, license
agreements, software development agreements, distribution agreements, joint
venture agreements, reseller agreements, credit agreements and instruments
relating to the borrowing of money (collectively, the "Material Contracts"). All
Material Contracts are valid, binding and enforceable in accordance with their
terms against the Company and, to the Company's knowledge, each other party
thereto (except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (c) the enforceability of provisions requiring indemnification in connection
with the offering, issuance or sale of securities), and are in full force and
effect, the Company has performed in all material respects all obligations
imposed on it thereunder, and neither the Company nor, to the Company's
knowledge, any other party thereto is in default thereunder, nor to the
Company's knowledge is there any event which with notice or lapse of time, or
both, would constitute a default by the Company or, to the Company's knowledge,
any other party thereunder. True and complete copies of each written Material
Contract (or written summaries of the terms of any oral Material Contract) have
been delivered to Xxxxxx.xxx or its counsel by the Company. Except as set forth
on Schedule 2.10.1 to the Disclosure Memorandum, the Company has no
(a) contracts with directors, officers, shareholders, employees,
agents, consultants, advisors, salespeople, sales representatives, distributors
or dealers that cannot be canceled by the Company within 30 days' notice without
liability, penalty or premium, any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings, or any
compensation agreement or arrangement affecting or relating to former employees
of the Company;
(b) employment agreement, whether express or implied, or any
other agreement for services that contains severance or termination pay
liabilities or obligations;
-22-
29
(c) noncompetition agreement or other arrangement that would
prevent the Company from carrying on its business anywhere in the world;
(d) notice that any party to a Material Contract intends to
cancel, terminate or refuse to renew such contract (if such contract is
renewable);
(e) material dispute with any of its suppliers, customers,
distributors, licensors or licensees;
(f) product distribution agreement, development agreement, or
license agreement as licensor or licensee (except for standard nonexclusive
software licenses granted to end-user customers in the ordinary course of
business, the form of which has been provided to Xxxxxx.xxx, or standard
licenses purchased by the Company for off-the-shelf software);
(g) joint venture contract or arrangement or any other agreement
that involves a sharing of profits with other persons;
(h) instrument evidencing indebtedness for borrowed money by way
of a direct loan, sale of debt securities, purchase money obligation,
conditional sale or guarantee, or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Financial Statements; and
(i) agreements or commitments to provide indemnification.
2.10.2 REQUIRED CONSENTS
The execution and delivery of this Agreement and the performance of the
obligations of the Company hereunder will not constitute a default under any
Material Contract and do not require the consent of any other party to any
Material Contract, except for those consents listed on Schedule 2.10.2 to the
Disclosure Memorandum, all of which will be obtained on or prior to the Closing.
2.11 CLAIMS AND LEGAL PROCEEDINGS
Except as set forth on Schedule 2.11 to the Disclosure Memorandum, there
are no claims, actions, suits, arbitrations, investigations or proceedings
pending or involving or, to the Company's knowledge, threatened against the
Company before or by any court or governmental or nongovernmental department,
commission, board, bureau, agency or instrumentality, or any other Person.
Except as set forth on Schedule 2.11 to the Disclosure Memorandum, to the
Company's knowledge, there is no valid basis for any claim, action, suit,
arbitration, proceeding or investigation before
-23-
30
or by any Person. There are no outstanding or unsatisfied judgments, orders,
decrees or stipulations to which the Company is a party. Schedule 2.11 to the
Disclosure Memorandum sets forth a description of any material disputes that
have been settled or resolved by litigation or arbitration since the Company's
inception.
2.12 LABOR AND EMPLOYMENT MATTERS
There are no material labor disputes, employee grievances or
disciplinary actions pending or, to the Company's knowledge, threatened against
or involving the Company or any of its present or former employees. The Company
has complied with all provisions of law relating to employment and employment
practices, terms and conditions of employment, wages and hours. The Company is
not engaged in any unfair labor practice and has no liability for any arrears of
wages or Taxes or penalties for failure to comply with any such provisions of
law. There is no labor strike, dispute, slowdown or stoppage pending or, to the
Company's knowledge, threatened against or affecting the Company, and the
Company has not experienced any work stoppage or other labor difficulty since
its incorporation. No collective bargaining agreement is binding on the Company.
The Company has no knowledge of any organizational efforts presently being made
or threatened by or on behalf of any labor union with respect to employees of
the Company. Each employee, officer and consultant of the Company has executed a
nondisclosure agreement substantially in the form provided to Xxxxxx.xxx. To the
Company's knowledge, no employee (or person performing similar functions) of the
Company is in material violation of any such agreement or any employment
agreement, noncompetition agreement, patent disclosure agreement, invention
assignment agreement, proprietary information agreement or other contract or
agreement relating to the relationship of such employee with the Company or any
other party. Schedule 2.12 to the Disclosure Memorandum lists (a) the names and
current compensation amounts of all directors and officers of the Company; (b)
the names of and wage rates for all nonsalaried and nonofficer salaried
employees of the Company by classification, and all union contracts (if any);
(c) all group insurance programs in effect for employees of the Company; and (d)
the names and current compensation packages of all independent contractors and
consultants of the Company. The Company is not in default with respect to any of
its obligations referred to in clause (b) above and has no, and will not incur
any, material obligation or liability for severance or back pay owed through or
by virtue of the Merger. Except as disclosed on Schedule 2.12 to the Disclosure
Memorandum, all employees of the Company are employed on an "at will" basis.
-24-
31
2.13 EMPLOYEE BENEFIT PLANS
2.13.1 EMPLOYEE BENEFIT PLAN LISTING
Schedule 2.13.1 to the Disclosure Memorandum accurately lists and
describes all retirement, pension, profit sharing, deferred compensation,
savings, bonus, incentive, cafeteria, flexible benefits, medical, dental,
vision, hospitalization, life insurance, group insurance, medical expense
reimbursement, dependent care assistance, tuition reimbursement, disability,
accident, sick pay, holiday, vacation, severance, stock purchase, stock option,
stock appreciation rights, fringe benefit and other employee benefit plans,
funds, policies, programs, contracts, arrangements and payroll practices
(including, but not limited to, all "employee benefit plans," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all employment, consulting and personal service contracts and
agreements (a) sponsored, maintained or contributed to by the Company, (b)
covering or benefiting any current or former officer, employee, agent, director
or independent contractor of the Company (or any dependent or beneficiary of any
such individual), or (c) with respect to which the Company has (or could have)
any obligation or liability (such plans, funds, policies, programs, contracts,
arrangements and payroll practices are hereinafter referred to collectively as
"Employee Benefit Plans" and each individually as an "Employee Benefit Plan").
The Company does not have any agreement, arrangement, commitment or obligation
to create (or contribute to) any additional employee benefit plan, fund, policy,
program, contract, arrangement or payroll practice or to modify or amend any
existing Employee Benefit Plan. There has been no amendment, written
interpretation or announcement (whether or not written) by the Company relating
to, or change in participation or coverage under, any Employee Benefit Plan
that, either alone or together with other such items or events, could materially
increase the expense of maintaining the Employee Benefit Plans above the level
of expense incurred with respect thereto for the most recent fiscal year
included in the Financial Statements.
2.13.2 DOCUMENTS PROVIDED
The Company has delivered to Xxxxxx.xxx or its counsel true, correct and
complete copies (or, in the case of unwritten Employee Benefit Plans,
descriptions) of all Employee Benefit Plans (and all amendments thereto), along
with, to the extent applicable to the particular Employee Benefit Plan, the
following information: (a) copies of the last three annual reports (Form 5500
series) filed with respect to such Employee Benefit Plan; (b) copies of the
summary plan descriptions, summaries of material modifications and all material
employee manuals or communications filed or distributed with respect to such
Employee Benefit Plan during the last three years;
-25-
32
(c) copies of all contracts (and any amendments thereto) relating to such
Employee Benefit Plan, including, but not limited to, service provider
agreements, administrative service agreements, insurance contracts, annuity
contracts, investment management agreements and record-keeping agreements; and
(d) the most recent determination, opinion, notification or advisory letter
issued by the IRS with respect to such Employee Benefit Plan.
2.13.3 COMPLIANCE
With respect to each Employee Benefit Plan, (a) such Employee Benefit
Plan is, and at all times since its inception has been, maintained, administered
and operated in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
and all requirements prescribed thereby, including, but not limited to, ERISA
and the Code; (b) all amendments and actions required to bring such Employee
Benefit Plan into conformity with the applicable provisions of ERISA, the Code
and other applicable laws and regulations have been made or taken within the
time prescribed by law, except to the extent that such amendments or actions are
not required by law to be made or taken until after the Closing Date; (c) the
Company, each fiduciary of such Employee Benefit Plan and all other Persons
have, at all times, properly performed all obligations, whether arising by
operation of law or by contract, required to be performed by each of them in
connection with such Employee Benefit Plan; (d) all returns, reports and other
disclosures relating to such Employee Benefit Plan required to be filed with any
governmental entity or agency or furnished to any participant or beneficiary
have been properly completed or prepared and timely filed or furnished in
accordance with applicable law; (e) neither the Company nor any other fiduciary
of such Employee Benefit Plan has engaged in any transaction or acted or failed
to act in a manner that violates the fiduciary requirements of ERISA or any
other applicable law; and (f) no event has occurred or is threatened or about to
occur that constitutes or could constitute a nonexempt prohibited transaction
under Section 406 or 407 of ERISA or under Section 4975 of the Code. Each
Employee Benefit Plan that constitutes a "group health plan," as defined in
Section 607(1) or 733(a)(1) of ERISA or Section 4980B(g)(2) of the Code, has
been maintained, administered and operated at all times since its inception in
compliance in all material respects with (and the Company has never violated, in
any material respect, any of) the requirements of Parts 6 and 7 of Subtitle B of
Title I of ERISA, Section 4980B(f) of the Code, any regulations under such ERISA
and Code sections and any other applicable federal, state, local or foreign law
regarding the provision or continuation of health insurance coverage or other
welfare benefits (within the meaning of Section 3(1) of ERISA). Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of
-26-
33
the Code is, and at all times since its inception has been, so qualified and its
related trust or annuity contract is, and at all times since its inception has
been, exempt from taxation under Section 501(a) of the Code, and each such
Employee Benefit Plan (and its related trust(s) and/or annuity contract(s)) is
the subject of an unrevoked favorable determination, opinion, notification or
advisory letter from the IRS to that effect or has remaining a period of time
under applicable Treasury regulations or IRS pronouncements in which to apply
for such a letter and to make any amendments necessary to obtain it. Nothing has
occurred since the most recent favorable determination, opinion, notification or
advisory letter issued with respect to each such Employee Benefit Plan, and no
circumstances exist or are reasonably expected by the Company to occur, that
could cause the Company (or such Employee Benefit Plan) to lose its ability to
rely on such determination letter or could cause the IRS to revoke such
determination letter. No event or omission has occurred, or is reasonably
expected by the Company to occur (including, but not limited to, any of the
transactions contemplated in or by this Agreement), with respect to any Employee
Benefit Plan that has or could subject, directly or indirectly, the Company or
any other Person to a tax under Chapter 43 of Subtitle D of the Code or a
penalty under Part 5 of Subtitle B of Title I of ERISA.
2.13.4 CONTRIBUTIONS AND PREMIUM PAYMENTS
All contributions, premiums and other payments due or required to be
made to each Employee Benefit Plan under the terms of such Employee Benefit
Plan, ERISA, the Code or other applicable law have been timely paid, or, if not
yet due, have been properly recorded on the books of the Company.
2.13.5 RELATED EMPLOYERS
The Company is not, and has never been, a member of (a) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (b) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (c) an affiliated service group, within the meaning
of Section 414(m) of the Code, or (d) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
2.13.6 MULTIEMPLOYER AND TITLE IV PLANS
The Company does not maintain or contribute to, and has never maintained
or contributed to (or been obligated to contribute to), any multiemployer plan
as defined in Section 3(37) or Section 4001(a)(3) of ERISA or 414(f) of the
Code, any multiple employer plan within the meaning of Section 4063 or 4064 of
ERISA or
-27-
34
Section 413(c) of the Code, or any employee benefit plan, fund, program,
contract or arrangement that is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA.
2.13.7 POST-TERMINATION WELFARE BENEFITS
Except as set forth on Schedule 2.13.7 to the Disclosure Memorandum,
neither the Company nor any Employee Benefit Plan provides or has any obligation
to provide (or contribute toward the cost of) health, severance or any other
welfare benefits (within the meaning of Section 3(1) of ERISA) with respect to
any current or former officer, employee, agent, director or independent
contractor of the Company or any other entity beyond such individual's
retirement or other termination of service, other than continuation coverage
mandated by Sections 601 through 608 of ERISA or Section 4980B(f) of the Code.
2.13.8 SUITS, CLAIMS AND INVESTIGATIONS
There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the Company's knowledge, threatened with respect to (or
against the assets of) any Employee Benefit Plan, nor, to the Company's
knowledge, is there a basis for any such action, suit or claim. No Employee
Benefit Plan is currently under investigation, audit or review, directly or
indirectly, by the IRS, the Department of Labor (the "DOL") or any other
governmental entity or agency, and, to the Company's knowledge, no such action
is contemplated or under consideration by the IRS, the DOL or any other
governmental entity or agency.
2.13.9 PAYMENTS RESULTING FROM TRANSACTIONS
Neither the execution and delivery of this Agreement or any of the other
Operative Documents nor the consummation of the transactions contemplated in (or
by) this Agreement or any of the other Operative Documents will (a) entitle any
current or former officer, employee, agent, director or independent contractor
of the Company to severance pay, unemployment compensation or any other payment
from the Company or any other Person, or otherwise increase the amount of
compensation due to any such individual, or (b) result in any benefit or right
becoming established or increased, or accelerate the time of payment or vesting
of any benefit, under any Employee Benefit Plan, whether or not some other
subsequent action or event would be required to trigger any of the items
specified in (a) or (b) above.
-28-
35
2.14 INTELLECTUAL PROPERTY
2.14.1 GENERAL
The Company owns or is licensed or otherwise possesses the right to use
the following as required to conduct its business as now conducted and as
proposed to be conducted except where the failure to own, license or possess the
right to use would not have a Company Material Adverse Effect, individually or
in the aggregate: (a) all products, tools, computer programs, specifications,
source code, object code, graphics, devices, techniques, algorithms, methods,
processes, procedures, packaging, trade dress, formulae, drawings, designs,
improvements, discoveries, concepts, user interfaces, "look and feel," software,
development and other tools, content, inventions (whether or not patentable or
copyrightable and whether or not reduced to practice), designs, logos, themes,
know-how, concepts and other technology that are now, or during the two years
prior to the date of this Agreement have been, developed, produced, used,
marketed or sold by the Company (collectively, the "Technology-Related Assets");
and (b) all intellectual property and other proprietary rights in the
Technology-Related Assets, including, without limitation, all trade names,
trademarks, domain names, service marks, logos, brand names and other
identifiers, trade secrets, copyrights, and domestic and foreign letters patent,
and the registrations, applications, renewals, extensions and continuations (in
whole or in part) thereof, all goodwill associated therewith, and all rights and
causes of action for infringement, misappropriation, misuse, dilution or unfair
trade practices associated therewith.
2.14.2 COMPANY TECHNOLOGY
Schedule 2.14.2 to the Disclosure Memorandum sets forth a list that is
complete in all material respects of all products and tools developed, produced,
used, marketed or sold by the Company during the two years prior to the date of
this Agreement (collectively, the "Products"). Except for the Third Party
Technologies (as defined in Section 2.14.3), the Company owns all right, title
and interest in and to the following technology used to conduct its business as
currently conducted or as proposed to be conducted (collectively, the
"Technology"), free and clear of all Encumbrances (other than interests in
licenses granted by the Company, all of which are either disclosed in the
Disclosure Memorandum or, under the terms of this Agreement, are not required to
be so disclosed): (a) the Products, together with any and all codes, techniques,
software tools, formats, designs, user interfaces, content and "look and feel"
embodied therein prior to the date of Closing; (b) any and all updates,
enhancements, corrections, modifications, improvements and new releases
developed or obtained by or for the Company to the items set forth in clause (a)
above prior to the date of Closing; (c) any and all technology and work in
progress developed or obtained by or for the Company
-29-
36
related to the items set forth in clauses (a) and (b) above prior to the date of
Closing; and (d) all inventions, discoveries, processes, designs, trade secrets,
know-how and other confidential or proprietary information developed or obtained
by or for the Company related to the items set forth in clauses (a), (b) and (c)
above prior to the date of Closing. The Technology, excluding the Third Party
Technologies, is sometimes referred to herein as the "Company Technology."
2.14.3 THIRD PARTY TECHNOLOGY
Schedule 2.14.3 to the Disclosure Memorandum sets forth a list that is
complete in all material respects, subject to the exception(s) set forth
therein, of all Technology used in the Company's business as currently conducted
or as proposed to be conducted for which the Company does not own all right,
title and interest (collectively, the "Third Party Technologies"), and all
material license agreements or other material contracts pursuant to which the
Company has the right to use (in the manner used by the Company in its business
as currently conducted or as proposed to be conducted) the Third Party
Technologies (the "Third Party Licenses"), indicating, with respect to each of
the Third Party Technologies listed therein, the licensor thereof, if any, and
the Third Party License applicable thereto. The Company has the right to use (to
the full extent permitted by the terms of such licenses) all Third Party
Technology that is used in the Company's business as currently conducted or as
proposed to be conducted. All Third Party Licenses are in full force and effect
and are valid and binding against the Company and, to the Company's knowledge,
are valid and binding against each other party thereto (but, with respect to
such other parties only, subject to bankruptcy and similar laws, general
principles of equity or similar legal theories of unenforceability), and the
Company and, to the Company's knowledge, each other party thereto have performed
in all material respects their obligations thereunder as required as of the date
of the Closing, and neither the Company nor, to the Company's knowledge, any
other party thereto is in material default thereunder, nor to the Company's
knowledge has there occurred any event or circumstance which with notice or
lapse of time or both would constitute a material default or material event of
default on the part of the Company or, to the Company's knowledge, any other
party thereto or give to any other party thereto the right to terminate or
modify any Third Party License for default, except where the failure to have the
right to use the Third Party Technology or the failure of any Third Party
License to be in full force and effect, valid, or binding, or the occurrence of
any event of default or other event giving the other party the right to
terminate or modify any Third Party License for default would not have a Company
Material Adverse Effect, individually or in the aggregate. The Company has not
received notice that any party to any Third Party License intends to cancel,
terminate or elect not to renew (if renewable by its terms) such Third Party
License, except
-30-
37
where the occurrence of such cancellation, termination or non-renewal would not
have a Company Material Adverse Effect, individually or in the aggregate.
2.14.4 TRADEMARKS
Schedule 2.14.4 to the Disclosure Memorandum sets forth a list that is
complete in all material respects of (a) all trademarks, trade names, brand
names, service marks, logos or other identifiers used on or in connection with
Products or otherwise used by the Company in its business as currently conducted
or as proposed to be conducted and which are owned or claimed to be owned by the
Company (collectively, the "Company Marks"), and (b) all trademarks, trade
names, brand names, service marks, logos or other identifiers used on or in
connection with Products or otherwise used by the Company in its business as
currently conducted or as proposed to be conducted and which are not owned or
claimed to be owned by the Company (the "Licensed Marks"). The Company has full
legal and beneficial ownership, free and clear of any Encumbrances (other than
interests in licenses granted by the Company, all of which are either disclosed
in the Disclosure Memorandum or, under the terms of this Agreement, are not
required to be so disclosed), of all rights conferred by use of the Company
Marks in connection with the Products or otherwise in the Company's business as
currently conducted and, as to those Company Marks that have been registered by
or for the Company in the United States Patent and Trademark Office, by federal
registration of the Company Marks, except where the failure to own or be free
and clear of Encumbrances would not have a Company Material Adverse Effect,
individually or in the aggregate. The Company has the right to use the Licensed
Marks as required to conduct its business as now conducted, except where the
failure to have such right would not have a Company Material Adverse Effect,
individually or in the aggregate.
2.14.5 INTELLECTUAL PROPERTY RIGHTS
Schedule 2.14.5 to the Disclosure Memorandum sets forth all patents,
patent applications, copyright registrations (and applications therefor) and
trademark registrations (and applications therefor) filed or obtained by or for
the Company with respect to the Company Technology and the Company Marks
(collectively, the "IP Registrations"). The Company owns all right, title and
interest, free and clear of any Encumbrances (other than interests in licenses
granted by the Company, all of which are either disclosed in the Disclosure
Memorandum or, under the terms of this Agreement, are not required to be so
disclosed), in and to the IP Registrations, and the Company owns all right,
title and interest, or otherwise possesses sufficient legally enforceable rights
to conduct its business as currently conducted and as proposed to be conducted,
free and clear of any Encumbrances (other than interests in licenses granted
-31-
38
by the Company, all of which are either disclosed in the Disclosure Memorandum
or, under the terms of this Agreement, are not required to be so disclosed) in
and to any other rights in or to any copyrights (registered or unregistered),
rights in the Company Marks (registered or unregistered), trade secret rights
and other intellectual property rights (including, without limitation, rights of
enforcement) contained or embodied in the Company Technology and the Company
Marks (collectively, the "IP Rights").
2.14.6 MAINTENANCE OF RIGHTS
Except as set forth on Schedule 2.14.6 to the Disclosure Memorandum,
without any implication that Company shall have had or have any obligation to
file or maintain any registrations or applications of IP Rights, the Company has
not conducted its business, and has not used or enforced (or, to its knowledge,
failed to use or enforce) the IP Rights, in a manner that has resulted or will
result in the abandonment, cancellation or unenforceability of any material item
of the IP Rights or the IP Registrations, and to the Company's knowledge the
Company has not taken (or, to its knowledge, failed to take) any action that has
resulted or will result in the forfeiture or relinquishment of any material item
of the IP Rights or IP Registrations, except where such abandonment,
cancellation, unenforceability, forfeiture or relinquishment would not have a
Company Material Adverse Effect, individually or in the aggregate. Except as set
forth in Schedule 2.14.6 of the Disclosure Memorandum, the Company has not
entered into any material agreements granting to any third party any rights or
permissions to use any of the Technology or the IP Rights. To the Company's
knowledge, except pursuant to a written nondisclosure agreement or other
reasonably prudent safeguards, (a) no third party has received from the Company
any information maintained or required to be maintained as confidential by the
Company relating to the Technology or the IP Rights, and (b) the Company is not
under any contractual or other obligation to disclose to any third party any
information maintained or required to be maintained as confidential by the
Company relating to the Company Technology.
2.14.7 THIRD PARTY INFRINGEMENT
Except as set forth on Schedule 2.14.7 to the Disclosure Memorandum, (a)
no claim has been made (whether written, oral or otherwise) challenging the
Company's ownership or rights in any material item of the Company Technology or
the IP Rights or claiming that any other person or entity has any legal or
beneficial ownership with respect thereto; (b) all the IP Rights are legally
valid and enforceable without any material qualification, limitation or
restriction on their use (to the fullest extent permitted by law and except for
licenses granted by the Company which are either disclosed in the Disclosure
Memorandum or, under the terms of this Agreement, are not required to be so
disclosed) and no claim has been made (whether written, oral or
-32-
39
otherwise) challenging the validity or enforceability of any material item of
the IP Rights; and (c) to the Company's knowledge, no other person or entity is
infringing or misappropriating any part of the IP Rights or otherwise making any
unauthorized use of the Company Technology.
2.14.8 INFRINGEMENT BY THE COMPANY
Except as set forth on Schedule 2.14.8 to the Disclosure Memorandum, (a)
the use of any of the Company Technology in the Company's business as currently
conducted or as proposed to be conducted does not and will not infringe, violate
or constitute a misappropriation of any right, title or interest (including,
without limitation, any patent, copyright, trademark or trade secret right) held
by any other person or entity, and no claims have been made with respect
thereto; (b) the use of any of the Company Marks, and other IP Rights in the
Company's business as currently conducted or as proposed to be conducted does
not and will not infringe, violate or constitute a misappropriation of any
right, title or interest (including, without limitation, any patent, copyright,
trademark or trade secret right) held by any other person or entity, and no
claims have been made with respect thereto; and (c) no claims have been made
(whether written, oral or otherwise) regarding any infringement,
misappropriation, misuse, or abuse of, or other interference with, any third
party intellectual property or proprietary rights (including, without
limitation, infringement of any patent, copyright, trademark or trade secret
right of any third party) by the Company, the Company Technology, the Company
Marks, the IP Rights, or the Company's use of the Licensed Marks or claiming
that any other entity has any claim of infringement with respect thereto.
2.14.9 CONFIDENTIALITY
Except as set forth on Schedule 2.14.9 to the Disclosure Memorandum, (a)
the Company has not disclosed any source code regarding the Technology to any
person or entity other than an employee of the Company or under a written
nondisclosure agreement; (b) the Company has at all times maintained and
diligently enforced commercially reasonable procedures to protect all
information maintained or required to be maintained as confidential by Company
relating to the Technology, and the Company's use of the Company Technology in
its business as currently conducted or proposed to be conducted does not and
will not breach any agreement between the Company and a third party to maintain
information as confidential; (c) neither the Company nor any escrow agent is
under any contractual or other obligation to disclose the source code or any
other information maintained or required to be maintained as confidential by the
Company included in or relating to the Technology, except, as to such
confidential information only, where such disclosure of confidential information
-33-
40
is made pursuant to written nondisclosure agreements or covenants entered in the
ordinary course of its business and which are disclosed in Section 2.14.6 of the
Disclosure Memorandum or, under the terms of this Agreement, are not required to
be so disclosed therein; and (d) the Company has not deposited any source code
relating to the Technology into any source code escrows or similar arrangements.
If, as disclosed on Schedule 2.14.9, the Company has deposited any source code
to the Technology into source code escrows or similar arrangements, no event has
occurred that has formed or could reasonably form the basis for a release of
such source code from such escrows or arrangements.
2.14.10 WARRANTY AGAINST DEFECTS
Except as set forth in Schedule 2.14.10 to the Disclosure Memorandum or
as otherwise set forth in this Section 2.14.10, and except where such failure to
conform would not have a Company Material Adverse Effect, individually or in the
aggregate, and solely with respect to the Company Technology, the Company has
used reasonable commercial efforts to design the Technology to substantially
conform to the specifications set forth in such Schedule ("Specifications"), but
the Technology is not functionally complete and has not been tested or operated
in a production or pre-production environment, and there can be no assurance the
Technology conforms to the specifications in whole or in part, or that the
Technology will function in whole or in part when tested or operated in a
production or pre-production environment. THE COMPANY TECHNOLOGY IS NEWLY
DEVELOPED AND UNTESTED AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, THE TECHNOLOGY IS PROVIDED ON AN AS-IS BASIS WITH ALL DEFECTS AND
WITHOUT ANY EXPRESS OR IMPLIED WARRANTY, AND COMPANY EXPRESSLY DISCLAIMS ANY
IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR
OTHERWISE. WITHOUT LIMITING THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY SET
FORTH IN THIS AGREEMENT, THE COMPANY DOES NOT WARRANT THAT THE TECHNOLOGY IS
FREE FROM DEFECTS OR OTHER DEFICIENCIES, INCLUDING WITHOUT LIMITATION DESIGN
DEFECTS, THAT THE TECHNOLOGY WILL FUNCTION WITHOUT ERROR OR INTERRUPTION, OR AT
ALL, OR IN COMBINATION WITH THIRD-PARTY SOFTWARE, HARDWARE OR SYSTEMS, INCLUDING
WITHOUT LIMITATION THIRD-PARTY BANKING, PAYMENT AND/OR RISK ASSESSMENT SYSTEMS,
THAT THE TECHNOLOGY CONFORMS TO ANY APPLICABLE REGULATORY OR LEGAL REQUIREMENTS;
OR THAT THE TECHNOLOGY WILL OPERATE IN ANY PRE-PRODUCTION OR PRODUCTION
ENVIRONMENT OR AT ANY
-34-
41
VOLUME LEVELS OR BE SUITABLE FOR SURVIVING CORPORATION'S PURPOSES.
2.14.11 DOMAIN NAMES
Schedule 2.14.11 to the Disclosure Memorandum sets forth a list of all
Internet domain names used by the Company in its business as presently conducted
or proposed to be conducted (collectively, the "Domain Names"). The Company has
a valid registration with the domain name authority or authorities with which
the Domain Names are registered, and to the Company's knowledge, after the date
of the Closing the Surviving Corporation will have, subject to any transfer
requirements or restrictions imposed by InterNIC or any other domain name
registration authorities having jurisdiction, and the payment of any fees and
execution of all transfer documents as required by such authorities, and subject
to the transferability or nontransferability of any agreement with such
authorities relating to the Domain Names, a valid registration with the domain
name authority or authorities with which the Domain Names are registered.
2.14.12 YEAR 2000
Except as set forth in Schedule 2.14.10 to the Disclosure Memorandum or
as otherwise set forth in this Section 2.14.12, and except where such failure to
conform would not have a Company Material Adverse Effect, individually or in the
aggregate, to the extent Year 2000 Compliance of the Company Technology is
expressly set forth in the Specifications, and solely with respect to the
Company Technology, the Company has used reasonable commercial efforts to design
the Company Technology to substantially conform to the Specifications for the
Company Technology for Year 2000 Compliance, but the Technology is not
functionally complete and has not been tested or operated in a production or
pre-production environment, and there can be no assurance the Technology
conforms to the specifications regarding Year 2000 Compliance in whole or in
part, or that the Technology will function in whole or in part in a manner that
is in Year 2000 Compliance when tested or operated in a production or
pre-production environment. As used herein, "Year 2000 Compliance" means: (i)
accurately process date data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the twentieth and twenty-first
centuries, including, without limitation, leap year calculations, without a
material decrease in the functionality of the Software due to the processing of
such date-related data, (ii) use prior to, during and after the calendar year
2000 and will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century; (iii) not abnormally end or provide invalid or
-35-
42
incorrect results as a result of date data, specifically including date data
which represents or references different centuries or more than one century;
(iv) accommodate date data century recognition, calculations which accommodate
same century and multi-century formulas and date values, and date data interface
values that reflect the century; and (v) manage and manipulate data involving
dates, including single century formulas and multicentury formulas, and will not
cause an abnormally ending scenario within the application or generate incorrect
values or invalid results involving such dates; (vi) provide that all
date-related user interface functionalities and data fields include the
indication of century; and (viii) provide that all date-related data interface
functionalities include the indication of century. THE COMPANY TECHNOLOGY IS
NEWLY DEVELOPED AND UNTESTED AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT THE TECHNOLOGY IS PROVIDED ON AN AS-IS BASIS WITH ALL YEAR 2000
COMPLIANCE DEFECTS AND OTHER DEFECTS AND WITHOUT ANY EXPRESS OR IMPLIED
WARRANTY, AND COMPANY EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF FITNESS FOR
A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE. WITHOUT LIMITING THE
FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
COMPANY DOES NOT WARRANT THAT THE TECHNOLOGY IS FREE FROM YEAR 2000 COMPLIANCE
DEFECTS OR OTHER YEAR 2000 COMPLIANCE DEFICIENCIES, INCLUDING WITHOUT LIMITATION
DESIGN DEFECTS, THAT THE TECHNOLOGY AS PERTAINING TO YEAR 2000 COMPLIANCE WILL
FUNCTION WITHOUT ERROR OR INTERRUPTION, OR AT ALL, OR IN COMBINATION WITH
THIRD-PARTY SOFTWARE, HARDWARE OR SYSTEMS, INCLUDING WITHOUT LIMITATION
THIRD-PARTY BANKING, PAYMENT AND/OR RISK ASSESSMENT SYSTEMS, THAT THE TECHNOLOGY
AS PERTAINING TO YEAR 2000 COMPLIANCE CONFORMS TO ANY APPLICABLE REGULATORY OR
LEGAL REQUIREMENTS; OR THAT THE TECHNOLOGY AS PERTAINING TO YEAR 2000 COMPLIANCE
WILL OPERATE IN ANY PRE-PRODUCTION OR PRODUCTION ENVIRONMENT OR AT ANY VOLUME
LEVELS OR BE SUITABLE FOR SURVIVING CORPORATION'S PURPOSES.
2.14.13 INDEMNIFICATION
Except as set forth in Schedule 2.14.6 of the Disclosure Memorandum, the
Company has not entered into any agreement to indemnify any Person (other than
shareholders, directors and/or officers of the Company) against any claim of
infringement by the Technology or IP Rights or any other third party
intellectual property right relating to the Technology. Except as set forth in
Schedule 2.14.6 of the
-36-
43
Disclosure Memorandum, the Company has not entered into any material agreement
granting any Person the right to bring any infringement action with respect to,
or otherwise to enforce, any of the Technology or IP Rights.
2.14.14 RESTRICTIONS ON INTELLECTUAL PROPERTY
To the Company's knowledge, except in their capacity on behalf of the
Company, none of the Company's officers or employees has entered into any
agreement inconsistent with the Company's rights to the Company Technology
regarding know-how, trade secrets, assignment of rights in inventions, or
prohibition or restriction of competition or solicitation of customers, or any
other similar restrictive agreement or covenant, inconsistent with the Company's
rights to the Company Technology, whether written or oral, with any Person other
than the Company during the period in which such officer or employee was
employed with or engaged by the Company.
2.15 CORPORATE BOOKS AND RECORDS
Except as set forth on Schedule 2.15 to the Disclosure Memorandum, the
Company has furnished to Xxxxxx.xxx or its representatives for their examination
true and complete copies of (a) the Articles of Incorporation and Bylaws of the
Company as currently in effect, including all amendments thereto, (b) the minute
books of the Company, and (c) the stock transfer books of the Company. Such
minutes reflect all meetings of the Company's shareholders, Board of Directors
and any committees thereof since the Company's inception, and such minutes
accurately reflect in all material respects the events of and actions taken at
such meetings. Such stock transfer books accurately reflect all issuances and
transfers of shares of capital stock of the Company since its inception.
2.16 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Except as identified on Schedules 2.1 and 2.5 to the Disclosure
Memorandum, the Company has received all currently required governmental
approvals, authorizations, consents, licenses, orders, registrations and permits
of all agencies, whether federal, state, local or foreign, the failure to obtain
of which would have a Company Material Adverse Effect. The Company has not
received any notifications of any asserted present failure by it to have
obtained any such governmental approval, authorization, consent, license, order,
registration or permit, or past and unremedied failure to obtain such items.
-37-
44
2.17 COMPLIANCE WITH LAWS
Except as described on Schedule 2.17 to the Disclosure Memorandum, the
Company is in compliance with all federal, state, local and foreign laws, rules,
regulations, ordinances, decrees and orders applicable to it, to its employees
or to the Real Property and the Personal Property, including, without
limitation, all such laws, rules, regulations, ordinances, decrees and orders
relating to intellectual property protection, antitrust matters, consumer
protection, currency exchange, environmental protection, equal employment
opportunity, health and occupational safety, pension and employee benefit
matters, securities and investor protection matters, labor and employment
matters and trading-with-the-enemy matters, except where the failure of the
Company to so comply would not have a Company Material Adverse Effect. The
Company has not received any notification of any asserted present or past
unremedied failure by the Company to comply with any of such laws, rules,
regulations, ordinances, decrees or orders.
2.18 INSURANCE
Schedule 2.18 to the Disclosure Memorandum sets forth a true and correct
list of all insurance policies maintained by the Company. The Company maintains
commercially reasonable levels of (a) insurance on its property (including
leased premises) that insures against loss or damage by fire or other casualty
and (b) insurance against liabilities, claims and risks of a nature and in such
amounts as are normal and customary in the Company's industry for companies of
similar size and financial condition. All insurance policies of the Company are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date this representation is made have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy or binder. Such policies or binders are sufficient for compliance with
all requirements of law currently applicable to the Company and of all
agreements to which the Company is a party, will remain in full force and effect
through the respective expiration dates of such policies or binders without the
payment of additional premiums, and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. The Company has not been refused any insurance with respect to its
assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance.
2.19 BROKERS OR FINDERS
The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by or on behalf of the Company, any
liability for brokerage
-38-
45
or finders' fees or agents' commissions or any similar charges in connection
with the Merger, this Agreement or any transaction contemplated hereby.
2.20 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor any director, officer, agent, employee or other
Person acting on behalf of the Company has used any Company funds for improper
or unlawful contributions, payments, gifts or entertainment, or made any
improper or unlawful expenditures relating to political activity to domestic or
foreign government officials or others. The Company has reasonable financial
controls to prevent such improper or unlawful contributions, payments, gifts,
entertainment or expenditures. Neither the Company nor any current director,
officer, agent, employee or other Person acting on behalf of the Company has
accepted or received any improper or unlawful contributions, payments, gifts or
expenditures. The Company has at all times complied, and is in compliance, in
all respects with the Foreign Corrupt Practices Act and all foreign laws and
regulations relating to prevention of corrupt practices and similar matters.
2.21 BANK ACCOUNTS
Schedule 2.21 to the Disclosure Memorandum sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes or
accounts of any nature and the names of all Persons authorized to draw thereon,
make withdrawals therefrom or have access thereto.
2.22 INSIDER INTERESTS
Except as set forth on Schedule 2.22 to the Disclosure Memorandum, no
Shareholder or officer or director of the Company has any interest (other than
as a Shareholder) (a) in any Real Property, Personal Property, Technology or IP
Rights used in or pertaining to the business of the Company, including, without
limitation, inventions, patents, trademarks or trade names, or (b) in any
agreement, contract, arrangement or obligation relating to the Company, its
present or prospective business or its operations. Except as set forth on
Schedule 2.22 to the Disclosure Memorandum, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, shareholders, affiliates or any affiliate thereof. The
Company and its officers and directors and, to the knowledge of the Company, its
shareholders have no interest, either directly or indirectly, in any entity,
including, without limitation, any corporation, partnership, joint venture,
proprietorship, firm, licensee, business or association (whether as an employee,
officer,
-39-
46
director, shareholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (i) provides any services, produces
and/or sells any products or product lines, or engages in any activity that is
the same, similar to or competitive with any activity or business in which the
Company is now engaged or proposes to engage; (ii) is a supplier, customer or
creditor; or (iii) has any direct or indirect interest in any asset or property,
real or personal, tangible or intangible, of the Company or any property, real
or personal, tangible or intangible, that is necessary or desirable for the
present or currently anticipated future conduct of the Company's business.
2.23 COMPLIANCE WITH ENVIRONMENTAL LAWS
Neither the Company nor, to the Company's knowledge, any other Person
(including, without limitation, any previous owner, lessee or sublessee) has
treated, stored or disposed of any material amounts of petroleum products,
hazardous waste, hazardous substances, pollutants or contaminants on the Real
Property, or any real property previously owned, leased, subleased or used by
the Company in the operation of its business, in violation of any applicable
foreign, federal, state or local statutes, regulations or ordinances, or common
law, in each case as in existence at or prior to the Closing. To the Company's
knowledge, there have been no releases of any material amounts of petroleum,
petroleum products, hazardous waste, hazardous substances, pollutants or
contaminants on, at or from any assets or properties, including, without
limitation, the Real Property, owned, leased, subleased or used by the Company
in the operation of its business during the time such assets or properties were
owned, leased, subleased or used by the Company (or, to the Company's knowledge,
prior to such time), including, without limitation, any releases of any material
amounts of petroleum, petroleum products, hazardous waste, hazardous substances,
pollutants or contaminants in violation of any law.
2.24 FULL DISCLOSURE
Except as set forth in Schedule 2.24 of the Disclosure Memorandum, no
information furnished by the Company to Xxxxxx.xxx or its representatives in
connection with this Agreement (including, but not limited to, the Financial
Statements and all information in the Disclosure Memorandum and the other
Exhibits hereto) or the other Operative Documents contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements so made or information so delivered not misleading.
-40-
47
2.25 XXXX-XXXXX-XXXXXX
The Company is its own ultimate parent entity as defined under the rules
and regulations promulgated under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "Xxxx-Xxxxx-Xxxxxx Act"). The Company is not a $10
million person as defined thereunder.
2.26 EMPLOYMENT OF REQUIRED EMPLOYEES
Each of the Required Employees (as defined in Section 4.11) has agreed
to accept the Parent's offer of employment pursuant to Section 6.13, which
employment will be effective as of the Closing.
2.27 VOTING AGREEMENTS
As of the date hereof, holders of not less than two-thirds of the
outstanding shares of Company Series A Stock and not less than a majority of the
outstanding shares of Company Common Stock have executed and delivered to
Xxxxxx.xxx a voting agreement, substantially in the form attached hereto as
Exhibit 2.27 (the "Voting Agreement").
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
XXXXXX.XXX AND THE PURCHASER
In order to induce the Company to enter into and perform this Agreement
and the other Operative Documents, Xxxxxx.xxx and the Purchaser jointly and
severally represent and warrant to the Company as follows in this Article III:
3.1 ORGANIZATION
Xxxxxx.xxx is a corporation duly organized validity existing and in good
standing under the laws of the state of Delaware. The Purchaser is a corporation
validly existing and in good standing under the laws of the State of Delaware.
Each of Xxxxxx.xxx and the Purchaser has all requisite corporate power and
authority to own, operate and lease its respective properties and assets, to
carry on its respective business as now conducted, and as proposed to be
conducted and to enter into and perform its obligations under this Agreement and
the other applicable Operative Documents to which Xxxxxx.xxx or the Purchaser is
a party, and to consummate the transactions contemplated hereby and thereby.
Each of Xxxxxx.xxx and the Purchaser is duly qualified and licensed as a foreign
corporation to do business and is in good standing in each jurisdiction in which
the character of properties occupied, owned or held under lease by Xxxxxx.xxx or
the Purchaser, as applicable, or the nature of the business
-41-
48
conducted by Xxxxxx.xxx or the Purchaser, as applicable, makes such
qualification or licensing necessary, except where the failure to be so
qualified or in good standing would not have a material adverse effect on the
business, operations, assets, liabilities, condition (financial or other) or
prospects of Xxxxxx.xxx (an "Xxxxxx.xxx Material Adverse Effect"); provided,
however, that a Xxxxxx.xxx Material Adverse Effect shall not include any change,
event or effect that relates to or results from (i) the announcement or other
disclosure or consummation of the transactions contemplated by this Agreement,
(ii) a general economic downturn, (iii) an economic downturn in Xxxxxx.xxx's
industry which does not disproportionately affect Xxxxxx.xxx, or (iv) changes in
the trading prices of Xxxxxx.xxx Common Stock. Each of Xxxxxx.xxx and the
Purchaser has full corporate power and authority to execute, deliver and perform
this Agreement and the other Operative Documents to which it is a party, and to
carry out the transactions contemplated hereby and thereby. All the issued and
outstanding shares of capital stock of the Purchaser are held of record and
beneficially by Xxxxxx.xxx.
3.2 ENFORCEABILITY
Xxxxxx.xxx and the Purchaser each have full corporate power and
authority to execute, deliver and perform their obligations under this Agreement
and each of the other Operative Documents to which they are a party and each of
the certificates, instruments and documents executed or delivered by them
pursuant to the terms of this Agreement. All corporate action on the part of
Xxxxxx.xxx and the Purchaser and their respective officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the other applicable Operative Documents to
which Xxxxxx.xxx or the Purchaser is a party, the consummation of the Merger and
the performance of all of their respective obligations under this Agreement and
the other applicable Operative Documents to which Xxxxxx.xxx or the Purchaser is
a party has been taken or will be taken prior to the Effective Time. This
Agreement has been, and each of the other Operative Documents to which
Xxxxxx.xxx is a party will have been at the Closing, duly executed and delivered
by Xxxxxx.xxx, and this Agreement is, and each of the other Operative Documents
to which Xxxxxx.xxx is a party will be at the Closing, a legal, valid and
binding obligation of Xxxxxx.xxx, enforceable against Xxxxxx.xxx in accordance
with its terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, (b) rules of
law governing specific performance, injunctive relief and other equitable
remedies, and (c) the enforceability of provisions requiring indemnification in
connection with the offering, sale or issuance of securities. This Agreement has
been, and each of the other Operative Documents to which the Purchaser is a
party will have been at the Closing,
-42-
49
duly executed and delivered by the Purchaser, and this Agreement is, and each of
the other Operative Documents to which the Purchaser is a party will be at the
Closing, a legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as to the effect, if
any, of (i) applicable bankruptcy and other similar laws affecting the rights of
creditors generally, (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies, and (iii) the enforceability of
provisions requiring indemnification in connection with the offering, sale or
issuance of securities.
3.3 SECURITIES
The Xxxxxx.xxx Common Stock to be issued pursuant to this Agreement has
been, or will be prior to the Effective Time, duly authorized for issuance, and
such Xxxxxx.xxx Common Stock, when issued and delivered to the Shareholders
pursuant to this Agreement, shall be validly issued, fully paid and
nonassessable.
3.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the other
Operative Documents by the Purchaser and Xxxxxx.xxx, as applicable, and the
consummation by them of the transactions contemplated hereby and thereby will
not (a) constitute a violation (with or without the giving of notice or lapse of
time, or both) of any provision of law applicable to Xxxxxx.xxx or the
Purchaser; (b) require any consent, approval or authorization of any Person,
except (i) compliance with applicable securities laws, (ii) the filing of all
documents necessary to consummate the Merger with the Delaware Secretary of
State and the California Secretary of State and (iii) the notification
requirements of the Xxxx-Xxxxx-Xxxxxx Act; (c) result in a default (with or
without the giving of notice or lapse of time, or both) under, or acceleration
or termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any agreement, lease, note or other restriction,
encumbrance, obligation or liability to which Xxxxxx.xxx or the Purchaser is a
party or by which it is bound or to which any assets of Xxxxxx.xxx or the
Purchaser are subject; or (d) conflict with or result in a breach of or
constitute a default under any provision of the Certificate of Incorporation or
Bylaws of Xxxxxx.xxx or of the Purchaser.
3.5 CAPITALIZATION
The authorized capital stock of Xxxxxx.xxx consists of 300,000,000
shares of Xxxxxx.xxx Common Stock, of which 161,371,398 shares were issued and
outstanding as of March 31, 1999, and 10,000,000 shares of preferred stock, par
value $0.01 per share, none of which is issued or outstanding. Such issued and
outstanding
-43-
50
shares of Xxxxxx.xxx Common Stock are validly issued, fully paid and
nonassessable.
3.6 SEC DOCUMENTS
Xxxxxx.xxx has furnished the Shareholders with true and complete copies
of its Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
all Forms 8-K filed after the date of such Form 10-K, and its Proxy Statement
relating to its 1999 Annual Meeting of Shareholders (collectively, the "SEC
Documents"). As of their respective filing dates, each of the SEC Documents
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder.
3.7 ABSENCE OF CERTAIN CHANGES
Since the December 31, 1998 financial statements included in the SEC
Documents, there has not been any change which by itself or in conjunction with
all other such changes, has had or could reasonably be expected to have an
Xxxxxx.xxx Material Adverse Effect, except as disclosed in the SEC Documents.
3.8 INFORMATION SUPPLIED BY XXXXXX.XXX
None of the information supplied or to be supplied by Xxxxxx.xxx for
inclusion in the proxy statement to be delivered to the Shareholders in
connection with any written consent by or meeting of such Shareholders
(collectively, "Shareholder Materials"), including the SEC Documents, at the
date such information was supplied prior to the time the Shareholders were
requested to approve the Merger at either a special meeting of shareholders or
by executing a written consent, contained or will contain any untrue statement
of a material fact or omitted 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 materially misleading;
provided, however, that Xxxxxx.xxx makes no representations or warranties
regarding information furnished by or related to the Company.
3.9 FULL DISCLOSURE
No information furnished by Xxxxxx.xxx or the Purchaser to the Company
or its representatives in connection with this Agreement or the other Operative
Documents contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements so made or information
so delivered not misleading.
-44-
51
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS
OF XXXXXX.XXX AND THE PURCHASER
The obligations of Xxxxxx.xxx and the Purchaser to perform and observe
the covenants, agreements and conditions hereof to be performed and observed by
them at or before the Closing shall be subject to the satisfaction of the
following conditions, which may be expressly waived only in writing signed by
Xxxxxx.xxx:
4.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained herein
(including, without limitation, applicable Exhibits or Schedules to the
Disclosure Memorandum) and in the other Operative Documents shall have been true
and correct in all material respects when made and, except (a) for changes
contemplated by this Agreement and the other Operative Documents and (b) to the
extent that such representations and warranties speak as of an earlier date,
shall be true and correct as of the Closing Date in all material respects as
though made on that date.
4.2 PERFORMANCE OF AGREEMENTS
The Company shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement or any other Operative Document to be
performed and complied with by it at or prior to the Closing.
4.3 OPINION OF COUNSEL FOR THE COMPANY
Xxxxxx.xxx shall have received the opinion letter of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx PC, counsel for the Company, dated the Closing Date,
substantially in the form of Exhibit 4.3.
4.4 COMPLIANCE CERTIFICATE
Xxxxxx.xxx shall have received a certificate of the President and the
Chief Financial Officer of the Company, dated the Closing Date, in form and
substance satisfactory to Xxxxxx.xxx, certifying that the conditions to the
obligations of Xxxxxx.xxx and the Purchaser in Sections 4.1, 4.2 and 4.5 have
been fulfilled.
4.5 APPROVALS AND CONSENTS
All transfers of material permits or material licenses and all material
approvals of or notices to public agencies, federal, state, local or foreign,
the granting or delivery
-45-
52
of which is necessary for the consummation of the transactions contemplated
hereby and by the other Operative Documents, or for the continued operation of
the Company as now operated, shall have been obtained, and all waiting periods
specified by law shall have passed. All consents listed on Schedules 2.5 and
2.10.2 to the Disclosure Memorandum required in connection with a reverse
triangular merger shall have been obtained and delivered.
4.6 PROCEEDINGS AND DOCUMENTS; SECRETARY'S CERTIFICATE
Xxxxxx.xxx shall have received a certificate of the Secretary of the
Company, in form and substance satisfactory to Xxxxxx.xxx, as to the
authenticity and effectiveness of the actions of the Board of Directors and
Shareholders authorizing the Merger and the transactions contemplated by this
Agreement and the other Operative Documents. Copies of the Company's Articles of
Incorporation, certified by the California Secretary of State, and Bylaws,
certified by the Secretary of the Company, shall be attached to such
certificate.
4.7 NONFOREIGN AFFIDAVIT
Xxxxxx.xxx shall have received from the Company, pursuant to Section
1445 of the Code, a Foreign Investment in Real Property Tax Act Affidavit,
substantially in the form of Exhibit 4.7.
4.8 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement and
the other Operative Documents shall be legally permitted by all laws and
regulations to which Xxxxxx.xxx, the Purchaser or the Company is subject.
4.9 SHAREHOLDER APPROVAL
The principal terms of this Agreement shall have been approved by the
Company's shareholders as required by the Company's Articles of Incorporation
and applicable law.
4.10 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of the transactions
contemplated by this Agreement or any other Operative Document, and no
litigation, investigation or administrative proceeding shall be pending which
would enjoin, restrain, condition or
-46-
53
prevent consummation of the transactions contemplated by this Agreement or any
other Operative Document.
4.11 EMPLOYMENT AND NONCOMPETITION ARRANGEMENTS
Each of the individuals listed on Exhibit 1.7.1 as "Required Employees"
(the "Required Employees") shall have remained employees of the Surviving
Corporation subsequent to the Merger in accordance with Section 6.13 and shall
have executed the Xxxxxx.xxx standard form of Confidentiality, Noncompetition
and Invention Assignment Agreement, in the form attached hereto as Exhibit 4.11.
4.12 AFFILIATE LETTERS
The Company shall have delivered or caused to be delivered to Xxxxxx.xxx
an Affiliate Letter substantially in the form of Exhibit 4.12 from each of those
Persons who were, on the date on which the requisite number of consents or votes
has been obtained to approve the Merger, "affiliates" of the Company within the
meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act.
4.13 TERMINATION OF CERTAIN AGREEMENTS
Any and all rights of refusal, co-sale rights and registration rights,
if any, for the benefit of the holders of Company Capital Stock or Stock
Purchase Rights of the Company shall have terminated.
4.14 EXERCISE OF STOCK PURCHASE RIGHTS; CONVERSION OF CONVERTIBLE SECURITIES
Any and all Stock Purchase Rights and any and all securities and notes
convertible at any time into Company Common Stock, vested and unvested, and
regardless of restrictions on exercise or conversion, shall have been exercised
or converted, as the case may be, for shares of Company Capital Stock prior to
the Effective Time, except for Options assumed by Xxxxxx.xxx pursuant to Section
1.7.2.
4.15 DISSENTER RIGHTS
No holders of Company Series A Stock shall have delivered to the Company
before the Effective Time timely written notice of such holder's intent to
demand payment for such shares in accordance with California Law, unless such
holder shall have withdrawn or otherwise lost his, her or its right to such
payment as a dissenting shareholder. Holders of not more than 10% of the
outstanding shares of Company Common Stock shall have not voted in favor of the
Merger or not consented thereto in
-47-
54
writing and shall have delivered before the Effective Time timely written notice
of such holders' intent to demand payment as dissenting shareholders for such
shares in accordance with California Law.
4.16 TRANSMITTAL LETTERS
All holders of the Company Series A Stock and holders of at least 90% of
the outstanding shares of Company Common Stock shall have executed Letters of
Transmittal in the form attached hereto as Exhibit 1.7.4.
4.17 AMENDMENT OF OPTIONS AND RESTRICTED STOCK AGREEMENTS
All holders of Options or shares of Company Common Stock subject to a
restricted stock purchase agreement with the Company (collectively, the
"Restricted Stock Agreements") who will be employed by the Surviving Corporation
or an affiliate of Xxxxxx.xxx after the Closing shall have entered into
amendments to, or waived in writing applicable provisions of, (i) the option
agreements related to their respective Options to provide that the vesting of
such Options and (ii) the respective Restricted Stock Agreements to provide that
the vesting of the shares of Company Common Stock subject to such Restricted
Stock Agreements, shall not be accelerated or become immediately exercisable at
the Closing.
4.18 ESCROW AGREEMENT
The Shareholder Representative, on behalf of the Shareholders, and the
Escrow Agent shall have executed and delivered the Escrow Agreement to
Xxxxxx.xxx.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
The obligations of the Company to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by them at or
before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived only in writing signed by the Company.
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Xxxxxx.xxx and the Purchaser
contained herein and in the other Operative Documents shall have been true and
correct in all material respects when made and, except for (a) changes
contemplated by this Agreement and the other Operative Documents and (b) to the
extent that such
-48-
55
representations and warranties speak as of an earlier date, shall be true and
correct in all material respects as of the Closing Date as though made on that
date.
5.2 PERFORMANCE OF AGREEMENTS
Xxxxxx.xxx and the Purchaser shall have performed in all material
respects all obligations and agreements and complied in all material respects
with all covenants contained in this Agreement or any other Operative Document
to be performed and complied with by them at or prior to the Closing.
5.3 OPINION OF COUNSEL
The Company shall have received the opinion letter of Xxxxxxx Coie LLP,
counsel for Xxxxxx.xxx and the Purchaser, dated the Closing Date, substantially
in the form of Exhibit 5.3.
5.4 COMPLIANCE CERTIFICATE
The Company shall have received a certificate of an officer of
Xxxxxx.xxx, dated the Closing Date, substantially in form and substance
reasonably satisfactory to the Company, certifying that the conditions to the
obligations of the Company in Sections 5.1, 5.2, 5.6 and 5.7 have been
fulfilled.
5.5 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of the transactions
contemplated by this Agreement or any other Operative Document, and no
litigation, investigation or administrative proceeding shall be pending which
would enjoin, restrain, condition or prevent consummation of the transactions
contemplated by this Agreement or any other Operative Document.
5.6 APPROVALS AND CONSENTS
All transfers of material permits or material licenses and all material
approvals of or notices to public agencies, federal, state, local or foreign,
the granting or delivery of which is necessary for the consummation of the
transactions contemplated hereby and by the other Operative Documents or for the
continued operation of the Company as now operated, shall have been obtained,
and all waiting periods specified by law shall have passed. All consents listed
on Schedules 2.5 and 2.10.2 to the Disclosure Memorandum required in connection
with a reverse triangular merger shall have been obtained and delivered.
-49-
56
5.7 COMPLIANCE WITH LAWS
The consummation of the transactions contemplated by this Agreement and
the other Operative Documents shall be legally permitted by all laws and
regulations to which Xxxxxx.xxx, the Purchaser or the Company is subject.
5.8 ESCROW AGREEMENT
The Escrow Agreement shall have been executed and delivered by
Xxxxxx.xxx and the Escrow Agent.
ARTICLE VI - COVENANTS
Between the date of this Agreement and the Effective Time, or such later
period as set forth in Sections 6.5, 6.8 and 6.9, the parties covenant and agree
as set forth in this Article VI.
6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Unless Xxxxxx.xxx shall otherwise agree in writing, the business of the
Company shall be conducted in and only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice and in accordance with applicable law; and the Company shall
use commercially reasonable efforts to preserve intact the business organization
of the Company, to keep available the services of the current officers,
employees and consultants of the Company and to preserve the current
relationships of the Company with, and the goodwill of, customers, suppliers and
other Persons with which the Company has significant business relations. By way
of amplification and not limitation, except as otherwise contemplated by this
Agreement, the Company shall not, between the date of this Agreement and the
Effective Time, directly or indirectly do any of the following without the prior
written consent of Xxxxxx.xxx:
(a) amend or otherwise change its Articles of Incorporation or
Bylaws, other than to effect a change in the Company's corporate name;
(b) except for the issuance of shares of Company Capital Stock
upon the exercise or conversion of currently outstanding Stock Purchase Rights,
issue, sell, contract to issue or sell, pledge, dispose of, grant, encumber or
authorize the issuance, sale, pledge, disposition, grant or Encumbrance of (i)
any assets of the Company, except in the ordinary course of business and in a
manner consistent with past practice, (ii) any shares of capital stock of any
class of the Company, or (iii) any options, warrants, convertible securities or
other rights of any kind to acquire any shares of
-50-
57
such capital stock, or any other ownership interest (including, without
limitation, any phantom interest) of the Company;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or other securities, property or otherwise,
with respect to any of its capital stock;
(d) reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, any obligations of any Person, or make any loans or
advances, except in the ordinary course of business and consistent with past
practice; (iii) enter into any contract or agreement other than in the ordinary
course of business, consistent with past practice; (iv) authorize any single
capital expenditure which is in excess of $20,000 or capital expenditures which
are, in the aggregate, in excess of $50,000 for the Company taken as a whole;
(v) enter into any agreement in which the obligation of the Company exceeds
$10,000 or which shall not terminate or be subject to termination for
convenience within 30 days following execution; (vi) license any Technology or
IP Rights; or (vii) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this subsection (e);
(f) enter into or amend any employment, consulting or agency
agreement, or increase the compensation payable or to become payable to any of
its officers, employees, agents or consultants, or grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of the Company, or establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance, benefit, Employee Benefit Plan
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee; provided, however, that the Company shall
terminate prior to any enrollment thereunder and prior to the Closing Date its
Code section 401(k) plan;
(g) take any action, other than reasonable and usual actions in
the ordinary course of business and consistent with past practice, with respect
to
-51-
58
accounting methods, policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection of
accounts receivable);
(h) make any Tax election or settle or compromise any Tax
liability;
(i) pay, discharge or satisfy 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 and
consistent with past practice;
(j) take any action that would or is reasonably likely to result
in any of the representations or warranties of the Company set forth in this
Agreement being untrue in any material respect, or in any covenant of the
Company set forth in this Agreement being breached, or in any of the conditions
to the Merger specified in Article IV hereof not being satisfied; or
(k) agree to do any of the foregoing.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY
From the date hereof to the Effective Time, the Company shall, and shall
cause the officers, directors, employees and agents of the Company to, afford
the officers, employees and agents of Xxxxxx.xxx access at all reasonable times
to the officers, employees, agents, properties, offices, plants and other
facilities, books and records of the Company and shall furnish Xxxxxx.xxx with
all financial, operating and other data and information as Xxxxxx.xxx, through
its officers, employees or agents, may reasonably request. From the date hereof
until the Effective Time, the Company shall provide Xxxxxx.xxx with monthly and
other financial statements of the Company as they become available internally at
the Company, all of which financial statements shall fairly present the
financial position and results of operations of the Company as of the dates and
for the periods therein specified. No investigation pursuant to this Section 6.2
shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. The parties
shall continue to comply with and to perform their respective obligations under
the Mutual Nondisclosure Agreement between Xxxxxx.xxx and the Company entered
into as of December 11, 1998.
6.3 NO ALTERNATIVE TRANSACTIONS
Unless this Agreement shall have been terminated in accordance with its
terms, the Company shall not, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from
-52-
59
any Person relating to any acquisition or purchase of all or any material
portion of the assets of, or any equity interest in, the Company or any business
combination with the Company or participate in any negotiations regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate or negotiate in any way with, or assist or participate in, facilitate
or encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. The Company shall notify Xxxxxx.xxx promptly if any such proposal or
offer, or any inquiry or contact with any Person with respect thereto, is made
and shall, in any such notice to Xxxxxx.xxx, indicate in reasonable detail the
identity of the Person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. The Company
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement (e.g. agreement not to invest in or seek
change of control of the Company) to which the Company is a party.
6.4 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the other parties of (a) the
occurrence or nonoccurrence of any event which would be likely to cause any
representation or warranty made by such party contained in this Agreement to be
untrue or inaccurate in any material respect and (b) any material failure by
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such party hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.4 shall not limit or otherwise
affect the rights or remedies available to the parties hereunder.
6.5 FURTHER ACTION; COMMERCIALLY REASONABLE EFFORTS
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use commercially reasonable efforts to take, or cause to be taken,
all appropriate action, and to do, 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, including, without limitation,
using its commercially reasonable efforts to obtain all waivers, licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and of other Persons as are necessary for the
consummation of the transactions contemplated hereby and to fulfill the
conditions to the Merger. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or the other Operative Documents, each party to this Agreement shall
use commercially reasonable efforts to promptly take all such action. After the
Closing, each party hereto, at the request of and without any further cost or
expense to the other parties, will take any further actions necessary or
desirable to carry out the purposes of this Agreement or
-53-
60
any other Operative Document, to vest in the Surviving Corporation full title to
all properties, assets and rights of the Company, and to effect the issuance of
the Xxxxxx.xxx Common Stock to the Shareholders pursuant to the terms and
conditions hereof.
6.6 SHAREHOLDER APPROVAL
The Company will seek the approval at a special meeting of its
shareholders or the written consent of such shareholders at the earliest
practicable date approving this Agreement, the other Operative Documents, the
Merger and related matters, which approval will be recommended by the Board of
Directors of the Company.
6.7 PROXY STATEMENT
The Company will send the Shareholder Materials to the Shareholders, in
a timely manner, for the purposes of considering approval of the Merger, either
at a special meeting of such Shareholders or by their execution of a written
consent. The Company and Xxxxxx.xxx each will promptly provide all information
relating to its respective business or operations necessary for inclusion in the
Shareholder Materials to satisfy all requirements of applicable state and
federal securities laws. The Company and Xxxxxx.xxx each shall be solely
responsible for any statement, information or omission in the Shareholder
Materials relating to it or its affiliates based on written information
furnished by it. The Company and Xxxxxx.xxx will not provide or publish to the
Shareholders any material concerning them or their affiliates that violates the
Securities Act or the Exchange Act with respect to the transactions contemplated
hereby.
6.8 XXXXXX.XXX COMMON STOCK
Xxxxxx.xxx agrees to authorize for listing on the Nasdaq National Market
the shares comprising the Merger Consideration, and those required to be
reserved for issuance upon exercise of Options assumed in connection with the
Merger, by filing with the Nasdaq National Market a Notification of Listing of
Additional Shares (or such other form as may be required by the Nasdaq National
Market) in a timely manner prior to the Closing or otherwise in accordance with
the rules and regulations of the Nasdaq National Market.
6.9 SECURITIES ACT COMPLIANCE
Xxxxxx.xxx represents and warrants that the issuance of the shares
comprising the Merger Consideration will have been registered, on or prior to
the Closing under the Securities Act, pursuant to a registration statement on
Form S-4, which shall be
-54-
61
effective as of the Closing. As a result, the shares of Xxxxxx.xxx Common Stock
issuable in the Merger will be freely tradable, without restriction under the
Securities Act, other than those restrictions imposed on affiliates of the
Company pursuant to Rule 145 under the Securities Act and those restrictions
imposed on affiliates of Xxxxxx.xxx pursuant to Rule 144 under the Securities
Act. Xxxxxx.xxx agrees to use commercially reasonable efforts to cause such
registration statement with respect to the shares comprising the Merger
Consideration to remain effective as of the Effective Date, and to prepare and
file with the Commission such amendments to such registration statements and
amendments or supplements to the prospectuses used in connection therewith as
may be necessary to comply with the provisions of the Securities Act with
respect to the sale of Xxxxxx.xxx Common Stock at the Closing. For so long as
any shares of Xxxxxx.xxx Common Stock issued in connection with the Merger
remain subject to Rule 145 of the Securities Act, Xxxxxx.xxx agrees to use
commercially reasonable efforts to timely file all required reports under the
Exchange Act, and otherwise satisfy the requirements of Rule 144(c) under the
Securities Act.
6.10 DISSENTING SHARES
Prior to the Closing Date, the Company shall furnish Xxxxxx.xxx with the
name and address of each Shareholder who, prior to the Closing, has requested
appraisal rights pursuant to California Law and the number of Dissenting Shares
owned by such Shareholder.
6.11 PUBLICITY
No party hereto shall issue any press release or otherwise make any
statements to any third party with respect to this Agreement or the transactions
contemplated hereby, other than the issuance by Xxxxxx.xxx and the Company of a
joint press release announcing this Agreement and the transactions contemplated
hereby or as required by law.
6.12 OPTION SHARES; REGISTRATION
Xxxxxx.xxx shall take all corporate action necessary to reserve for
issuance a sufficient number of Xxxxxx.xxx Common Stock for delivery upon
exercise of the Options assumed in accordance with Section 1.7.2. Xxxxxx.xxx
shall use commercially reasonable efforts to cause to be filed with respect to
Xxxxxx.xxx Common Stock subject to such Options a registration statement on Form
S-8 (or any successor form) with respect to those shares eligible to be
registered on a primary basis on such form to be effective within 10 business
days of the date on which the
-55-
62
requirements of Items 2, 5 and 7 of Form 8-K have been satisfied and the
responsive Current Report on Form 8-K, as it may be amended, with respect to the
Merger has been filed with the Commission. Xxxxxx.xxx shall use all commercially
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Options remain outstanding.
6.13 EMPLOYEE MATTERS
Xxxxxx.xxx, on behalf of the Surviving Corporation, shall offer
continued employment to each Required Employee, Primary Key Employee and
Secondary Key Employee and, as Surviving Corporation or Xxxxxx.xxx may elect in
their sole discretion, to such other employees of the Company, such employment
to commence as soon as is practically possible but in any event primarily in
Seattle, Washington within two weeks after the Closing and fully in Seattle,
Washington within six weeks after the Closing. The Required Employees, Primary
Key Employees and Secondary Key Employees and any other employees offered
continued employment pursuant to this Section 6.13 shall evidence acceptance of
Surviving Corporation's employment offer by executing the Xxxxxx.xxx standard
form of Confidentiality, Noncompetition and Inventions Agreement, in the form
attached hereto as Exhibit 4.12.
6.14 AUDITED FINANCIAL STATEMENTS
At least 10 business days prior to the Closing Date, the Company shall
deliver to Xxxxxx.xxx an audited balance sheet, an audited statement of income
and expenses, an audited statement of cash flow and an audited statement of
shareholders equity of the Company as of and for the fiscal year ended December
31, 1998. Except as set forth on Schedule 2.6 to the Disclosure Memorandum,
these audited financial statements shall not reflect any material adverse change
from the Financial Statements as, at and for the same periods.
6.15 REPAYMENT OF INDEBTEDNESS TO COMPANY
The Company shall cause the employees listed on Schedule 2.3(d) under
"Indebtedness" to repay the amounts owed to the Company under the promissory
notes set forth opposite their names on such Schedule within 10 business days
after the sale of any of their respective shares of Xxxxxx.xxx Common Stock
received in the Merger.
-56-
63
6.16 REAL PROPERTY
Prior to the Closing Date, the Company shall use commercially reasonable
efforts to terminate the leases related to the Real Property; provided, however,
that the Company shall not, without the prior written consent of Xxxxxx.xxx,
enter into any agreement in connection with any such termination that would
obligate the Company or Xxxxxx.xxx to pay any amount over $5,000 with respect to
any such lease, other than those amounts arising under such lease prior to the
time of termination.
6.17 SUBSIDIARY ROLL-UP
At the request of Purchaser, which request must occur, if at all, within
a reasonable time prior to the Closing Date, the Company shall effect a roll-up
of each Company Subsidiary, resulting in the termination, dissolution and
winding-up of all such Company Subsidiaries.
6.18 RELEASE OF LIENS
Prior to the Closing, the Company shall use commercially reasonable
efforts to cause AT&T Ventures Fund, L.P. to release all Encumbrances in its
favor with respect to any of the Company's assets.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the Shareholders):
(a) by mutual written consent;
(b) by either the Company or Xxxxxx.xxx, if the Merger has not
been consummated by June 30, 1999; provided, however, that the right to
terminate this Agreement under this subsection (b) shall not be available to any
party (i) whose failure to fulfill or cause to be fulfilled any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date or (ii) for a period of 10
business days after the expiration by its terms of any temporary restraining
order ("TRO") prohibiting or enjoining the Merger or a ruling on any preliminary
injunction motion relating to such TRO;
-57-
64
(c) by either the Company or Xxxxxx.xxx, if there shall be any
law or regulation that makes consummation of the Merger illegal or if any
judgment, injunction, order or decree enjoining Xxxxxx.xxx, the Purchaser or the
Company from consummating the Merger is entered and such judgment, injunction,
order or decree shall become final and nonappealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this subsection (c)
shall have used all reasonable efforts to remove such judgment, injunction,
order or decree;
(d) by the Company, in the event of a material breach by
Xxxxxx.xxx of any representation, warranty or agreement contained herein which
has not been cured or is not curable by June 30, 1999;
(e) by Xxxxxx.xxx, (i) in the event of a material breach by the
Company of any representation, warranty or agreement contained herein which has
not been cured or is not curable by June 30, 1999 or (ii) in the event
acceptance of the Surviving Corporation's offer of continued employment pursuant
to Section 6.13 is terminated by any Required Employee prior to the Effective
Time.
7.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section
7.1 hereof, there shall be no further obligation on the part of any party
hereto, except that nothing herein shall relieve any party from liability for
any willful breach hereof.
7.3 AMENDMENT
This Agreement may not be amended except by an instrument in writing
signed by Xxxxxx.xxx, the Purchaser and the Company; provided, however, that
after approval of this Agreement by the Company's shareholders, no amendment
will be made which by applicable law requires the further approval of the
Company's shareholders without obtaining such further approval.
7.4 WAIVER
At any time prior to the Effective Time, Xxxxxx.xxx may (a) extend the
time for the performance of any obligation or other act of the Company , (b)
waive any inaccuracy in the representations and warranties of the Company
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance with any agreement of the Company or any condition to the obligations
of Xxxxxx.xxx and the Purchaser contained herein. At any time prior to the
Effective Time, the Company may (a) extend the time for the performance of any
obligation or other act of Xxxxxx.xxx or the Purchaser, (b) waive any inaccuracy
in the representations and warranties of
-58-
65
Xxxxxx.xxx or the Purchaser contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any agreement of Xxxxxx.xxx or the
Purchaser or any condition to the obligations of the Company contained herein.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party or parties to be bound thereby.
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL
All representations and warranties contained in this Agreement or in the
other Operative Documents or in any certificate delivered pursuant hereto or
thereto shall survive the Closing for a period of 12 months after the Effective
Time (the "Survival Period"), and shall not be deemed waived or otherwise
affected by any investigation made or any knowledge acquired with respect
thereto, or by any notice delivered pursuant to Section 6.4 hereof; provided,
however, that any claim based on fraud shall survive the Closing indefinitely.
The covenants and agreements contained in this Agreement or in the other
Operative Documents shall survive the Closing and shall continue until all
obligations with respect thereto shall have been performed or satisfied or shall
have been terminated in accordance with their terms. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification or any other remedy based on such representations, warranties,
covenants and obligations.
8.2 INDEMNIFICATION BY THE HOLDERS OF COMPANY CAPITAL STOCK
Subject to the limitations set forth in this Article VIII, from and
after the Closing, each Shareholder shall indemnify and hold Xxxxxx.xxx, its
officers, directors and affiliates (as "affiliate" is defined in Rule 12b-2 of
the Exchange Act) (the "Indemnified Parties") harmless from and against, and
shall reimburse the Indemnified Parties for, any and all losses, damages, debts,
liabilities, obligations, judgments, orders, awards, writs, injunctions,
decrees, fines, penalties, Taxes, costs or expenses (including, but not limited
to, any reasonable legal or accounting fees or expenses and any Taxes or other
costs or damages arising under, caused by or related to Section 280G of the Code
or any comparable provision of state, local or foreign law) ("Losses") arising
out of (i) any inaccuracy or misrepresentation in, or breach of, any
representation or warranty made by the Company or such Shareholder in this
Agreement or in any other Operative Document or (ii) any failure by the Company
or such Shareholder to perform or comply, in whole or in part, with any covenant
or agreement in this Agreement or in any other Operative Document.
-59-
66
8.3 THRESHOLD AND LIMITATIONS; ADJUSTMENT OF MERGER CONSIDERATION
(a) The Indemnified Parties shall not be entitled to receive any
indemnification payment with respect to any claims for indemnification under
this Article VIII ("Claims") until the aggregate Losses for which the
Indemnified Parties would otherwise be entitled to receive indemnification
exceed $100,000 (the "Threshold"); provided, however, that once such aggregate
Losses exceed the Threshold, the Indemnified Parties shall be entitled to
indemnification for the aggregate amount of all Losses without regard to the
Threshold.
(b) (i) Except for Losses based upon a claim of fraud, the obligation of
the Shareholders to indemnify the Indemnified Parties under Section 8.2 shall be
the Indemnified Parties' sole remedy under this Agreement or under any other
Operative Document against the Shareholders. Except as otherwise provided in
Sections 8.3(b)(ii) and 8.3(b)(iii) such indemnity obligations shall be limited
to 10% of the Base Amount in the aggregate (the "Initial Loss Limit"), and at no
time shall such indemnity obligations of any Shareholder exceed such
Shareholder's pro rata portion of the Escrow Shares constituting the Initial
Loss Limit (as determined in accordance with Section 8.3(d) below).
(ii) Notwithstanding any other provision of this Agreement to the
contrary, the indemnity obligations of the Shareholders under Section 8.2 for
Losses (A) based upon claims arising in connection with Section 2.14 and (B)
relating to any third party with whom the Company has executed a nondisclosure
or similar agreement shall be limited to the Escrow Shares, and at no time shall
any Shareholder's indemnity obligations under Section 8.2 exceed such
Shareholder's pro rata portion of the Escrow Shares (as determined in accordance
with Section 8.3(d) below).
(iii) Notwithstanding any other provision of this Agreement to
the contrary, the indemnity obligations of the Shareholders under Section 8.2
for Losses based upon claims of fraud shall not be limited.
(c) An indemnifying party shall not be obligated to defend and hold
harmless an Indemnified Party, or otherwise be liable to such party, with
respect to any claims made by the Indemnified Party after the expiration of the
applicable time period as set forth in Section 8.1 hereof. Notwithstanding the
foregoing, indemnity may be sought after the expiration of the Survival Period
pursuant to this Article VIII if a Claim Notice (as defined in Section 8.4(a)
hereof) shall have been delivered to the Shareholder Representative prior to the
expiration of the Survival Period.
-60-
67
(d) The indemnification obligations of the Shareholders under this
Article VIII shall be satisfied by means of the release from escrow to
Xxxxxx.xxx of Escrow Shares in accordance with the provisions of the Escrow
Agreement. The number of Escrow Shares to be released from escrow to Xxxxxx.xxx
in payment of any Claims shall be determined by dividing (x) the aggregate
dollar amount of such Claims by (y) the Closing Price. The aggregate value of
Claims paid by means of such release to Xxxxxx.xxx of Escrow Shares shall be
deemed to reduce the total Merger Consideration otherwise payable to the
Shareholders pursuant to Section 1.7 of this Agreement. Any such Claims shall be
deemed to reduce the Escrow Shares, pro rata with respect to each Shareholder,
as determined by reference to the number of shares comprising the Merger
Consideration such Shareholder is entitled to receive in the Merger as compared
to all other Shareholders; provided, however, that any Claims paid with respect
to any Loss related to any representation, warranty, covenant or agreement of a
Shareholder shall not result in a pro rata reduction of the Escrow Shares but
shall reduce only the Escrow Shares of such Shareholder.
8.4 PROCEDURE FOR INDEMNIFICATION
(a) An Indemnified Party shall give written notice (the "Claim Notice")
of any Claim for indemnification under this Article VIII to the Shareholder
Representative, on behalf of the indemnifying party, reasonably promptly after
the assertion against an Indemnified Party of any claim by a third party (a
"Third Party Claim") or, if such Claim is not in respect of a Third Party Claim,
reasonably promptly after the discovery of facts upon which the Indemnified
Party intends to base a Claim for indemnification pursuant to this Article VIII;
provided, however, that the failure or delay to so notify the Shareholder
Representative shall not relieve the indemnifying party of any obligation or
liability that the indemnifying party may have to the Indemnified Party except
to the extent that the indemnifying party demonstrates that his, her or its
ability to defend or resolve such Claim is adversely affected thereby. Any such
Claim Notice shall describe the items set forth in the Escrow Agreement.
(b) The procedures to be followed by the Shareholder Representative with
respect to contesting whether a Claim is an indemnifiable Claim shall be as set
forth in the Escrow Agreement.
(c) (i) Subject to the rights of or duties to any insurer or other third
party having potential liability therefor, the Shareholder Representative, on
behalf of the indemnifying party, shall have the right, upon written notice
given by the Shareholder Representative to the Indemnified Party within 30 days
after receipt by the Shareholder Representative of the notice from the
Indemnified Party of any Third Party Claim, to assume the defense or handling of
such, Third Party Claim, at the indemnifying party's
-61-
68
sole expense, in which case the provisions of Section 8.4(c)(ii) hereof shall
govern; provided, however, that, notwithstanding the foregoing, Xxxxxx.xxx may
elect to assume the defense and handle any such Third Party Claim if it
determines in good faith that the resolution of such Third Party Claim could
result in an adverse impact on the business, operations, assets, liabilities
(absolute, accrued, contingent or otherwise), condition (financial or otherwise)
or prospects of Xxxxxx.xxx, in which case the provisions of Section 8.4(d)(ii)
hereof shall govern.
(ii) The Shareholder Representative, on behalf of the
indemnifying party, shall select counsel reasonably acceptable to the
Indemnified Party in connection with conducting the defense or handling of such
Third Party Claim, and the Shareholder Representative shall defend or handle the
same in consultation with the Indemnified Party and shall keep the Indemnified
Party timely apprised of the status of such Third Party Claim. The Shareholder
Representative shall not, without the prior written consent of the Indemnified
Party, agree to a settlement of any Third Party Claim, unless (A) the settlement
provides an unconditional release and discharge of the Indemnified Party and the
Indemnified Party is reasonably satisfied with such discharge and release and
(B) the Indemnified Party shall not have reasonably objected to any such
settlement on the ground that the circumstances surrounding the settlement could
result in an adverse impact on the business, operations, assets, liabilities
(absolute, accrued, contingent or otherwise), condition (financial or otherwise)
or prospects of the Indemnified Party. The Indemnified Party shall cooperate
with the Shareholder Representative and shall be entitled to participate in the
defense or handling of such Third Party Claim with its own counsel and at its
own expense.
(d) (i) If (A) the Shareholder Representative does not give written
notice to the Indemnified Party pursuant to Section 8.4(c)(i) within 30 days
after receipt of the notice from the Indemnified Party of any Third Party Claim
of the Shareholder Representative's election to assume the defense or handling
of such Third Party Claim or (B) Xxxxxx.xxx elects to assume the defense and the
handling of such Third Party Claim pursuant to Section 8.4(c)(i), the provisions
of Section 8.4(d)(ii) hereof shall govern.
(ii) The Indemnified Party may, at the indemnifying party's
expense (which shall be paid from time to time by the Shareholder
Representative, on behalf of the indemnifying party, as such expenses are
incurred by the Indemnified Party), select counsel, after consultation with the
Shareholder Representative, in connection with conducting the defense or
handling of such Third Party Claim and defend or handle such Third Party Claim
in such manner as the Indemnified Party may deem appropriate; provided, however,
that the Indemnified Party shall keep the Shareholder Representative timely
apprised of the status of such Third Party Claim and shall not
-62-
69
settle such Third Party Claim without the prior written consent of the
Shareholder Representative, which consent shall not be unreasonably withheld. If
the Indemnified Party defends or handles such Third Party Claim, the Shareholder
Representative shall cooperate with the Indemnified Party and shall be entitled
to participate in the defense or handling of such Third Party Claim with its own
counsel and at its own expense.
8.5 REMEDIES; SPECIFIC PERFORMANCE
Except as otherwise provided, the indemnification provisions of this
Article VIII are the sole and exclusive remedy of any party to this Agreement
for a breach of any representation, warranty or covenant contained herein.
Notwithstanding the preceding sentence, each of the parties acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties hereto shall be entitled to an injunction
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof (including the
indemnification provisions hereof) in any competent court having jurisdiction
over the parties, in addition to any other remedy to which they may be entitled
at law or in equity.
ARTICLE IX - GENERAL
9.1 EXPENSES
Regardless of whether the transactions contemplated by this Agreement
are consummated, each party shall pay its own fees and expenses (including,
without limitation, legal and accounting fees and expenses) incident to the
negotiation, preparation and execution of this Agreement and the other Operative
Documents; provided, however, that all fees and expenses incurred by or on
behalf of the Company in excess of $250,000 in connection with the transactions
contemplated by this Agreement or the other Operative Documents (the
"Transaction Expenses") shall be the sole responsibility of the Shareholders on
a joint and several basis; and, provided further, that, should any action be
brought hereunder, the attorneys' fees and expenses of the prevailing party
shall be paid by the other party to such action.
9.2 NOTICES
Any notice, request or demand desired or required to be given hereunder
shall be in writing given by personal delivery, confirmed facsimile
transmission, or overnight courier service, in each case addressed as
respectively set forth below or to
-63-
70
such other address as any party shall have previously designated by such a
notice. The effective date of any notice, request or demand shall be the date of
personal delivery, the date on which successful facsimile transmission is
confirmed or the date actually delivered by a reputable overnight courier
service, as the case may be, in each case properly addressed as provided herein
and with all charges prepaid.
TO XXXXXX.XXX OR THE PURCHASER:
Xxxxxx.xxx
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Legal
with a copy to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
TO THE COMPANY:
Xxxxxx.xxx Financial Services Corporation
0 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: President
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxxxx
9.3 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and
-64-
71
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
9.4 ENTIRE AGREEMENT
This Agreement, the Mutual Nondisclosure Agreement and the other
Operative Documents constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and thereof.
9.5 ASSIGNMENT
This Agreement shall not be assigned prior to the Closing by operation
of law or otherwise; provided, however, that the Purchaser's rights and
obligations may be assigned to and assumed by any other corporation wholly owned
(directly or through intermediate wholly-owned subsidiaries) by Xxxxxx.xxx.
9.6 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their respective successors, heirs, legal representatives
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
9.7 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Washington applicable to contracts executed in and to
be performed in that state. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any Washington state
or federal court.
-65-
72
9.8 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. To expedite the process of entering into this Agreement,
the parties acknowledge that Transmitted Copies of this Agreement will be
equivalent to original documents until such time as original documents are
completely executed and delivered. "Transmitted Copies" will mean copies that
are reproduced or transmitted via photocopy, facsimile or other process of
complete and accurate reproduction and transmission.
9.10 WAIVER OF JURY TRIAL
Each of Xxxxxx.xxx, the Company and the Purchaser hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement, the transactions contemplated hereby or the actions of such
parties in the negotiation, administration, performance and enforcement hereof.
-66-
73
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement and Plan of Merger as of the date and year first above written.
XXXXXX.XXX
By /s/ Xxxxx Xxxxxxx
-------------------------------
Xxxxx Xxxxxxx,
Treasurer and Vice President
of Corporate Development
ADC ACQUISITIONS, INC.
By /s/ Xxxxx Xxxxxxx
-------------------------------
Xxxxx Xxxxxxx, Treasurer
XXXXXX.XXX FINANCIAL SERVICES CORPORATION
By /s/ Xxxxxx X. Xxxxxx
-------------------------------
Its President and CEO
-------------------------------
S-1
