EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROGRESS SOFTWARE CORPORATION,
NOBLE ACQUISITION CORP.
AND
NEON SYSTEMS, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE 1 The Offer............................................................. 1
1.1 Certain Definitions........................................... 1
1.2 The Offer..................................................... 3
1.3 Company Action................................................ 6
1.4 Directors..................................................... 6
1.5 Top-Up Option................................................. 8
ARTICLE 2 The Merger............................................................ 9
2.1 The Merger.................................................... 9
2.2 Effective Time; Closing....................................... 9
2.3 Effect of the Merger.......................................... 10
2.4 Certificate of Incorporation; Bylaws.......................... 10
2.5 Directors and Officers........................................ 10
2.6 Effect on Capital Stock....................................... 10
2.7 Options....................................................... 11
2.8 Warrants...................................................... 11
2.9 Adjustments to Merger Consideration........................... 12
2.10 Payment for Company Common Stock, In-the-Money Options and
In-the-Money Warrants......................................... 12
2.11 Taking of Necessary Action; Further Action.................... 15
2.12 Dissenters' Rights............................................ 15
ARTICLE 3 Representations and Warranties of the Company......................... 16
3.1 Organization; Subsidiaries.................................... 16
3.2 Company Capitalization........................................ 17
3.3 Obligations With Respect to Capital Stock..................... 18
3.4 Authority; Non-Contravention; Consents and Approvals.......... 19
3.5 SEC Filings; Company Financial Statements..................... 20
3.6 Absence of Certain Changes or Events.......................... 21
3.7 Taxes......................................................... 22
3.8 Title to Properties........................................... 23
3.9 Intellectual Property......................................... 24
3.10 Compliance with Laws.......................................... 27
3.11 Litigation.................................................... 28
3.12 Employee Benefit Plans........................................ 28
3.13 Environmental Matters......................................... 33
3.14 Certain Agreements............................................ 34
3.15 Brokers' and Finders' Fees.................................... 36
3.16 Insurance..................................................... 36
3.17 Disclosure Documents.......................................... 36
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TABLE OF CONTENTS
CONTINUED
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3.18 Customers..................................................... 37
3.19 Board Approval................................................ 37
3.20 Fairness Opinion.............................................. 37
3.21 Accounting System............................................. 37
3.22 Information to be Supplied.................................... 38
3.23 Transaction Expenses.......................................... 38
ARTICLE 4 Representations and Warranties of Parent and Merger Sub............... 38
4.1 Organization of Parent and Merger Sub......................... 38
4.2 Authority; Non-Contravention.................................. 38
4.3 Litigation.................................................... 39
4.4 Disclosure Documents.......................................... 39
4.5 Availability of Funds......................................... 40
4.6 No Company Shares............................................. 40
4.7 Merger Sub.................................................... 40
4.8 Brokers' and Finders' Fees.................................... 40
ARTICLE 5 Conduct Prior to the Appointment Time................................. 40
5.1 Conduct of Business by the Company............................ 40
ARTICLE 6 Additional Agreements................................................. 43
6.1 Stockholders Meeting.......................................... 43
6.2 Antitrust and Other Filings................................... 45
6.3 Confidentiality; Access to Information........................ 46
6.4 No Solicitation............................................... 46
6.5 Public Disclosure............................................. 47
6.6 Reasonable Efforts; Notification.............................. 47
6.7 Third Party Consents.......................................... 49
6.8 Indemnification............................................... 49
6.9 Takeover Statutes............................................. 50
6.10 Prior Service Credit.......................................... 50
6.11 401(k) Plan................................................... 50
6.12 Treasury Stock................................................ 50
6.13 Merger Without Stockholders Meeting........................... 50
6.14 Prohibition on Acquiring Shares............................... 51
6.15 Section 16 Matters............................................ 51
6.16 Merger Sub Compliance......................................... 51
ARTICLE 7 Conditions to the Merger.............................................. 51
7.1 Conditions to Obligations of Each Party to Effect the Merger.. 51
ARTICLE 8 Termination, Amendment and Waiver..................................... 52
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TABLE OF CONTENTS
CONTINUED
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8.1 Termination................................................... 52
8.2 Notice of Termination; Effect of Termination.................. 53
8.3 Fees and Expenses............................................. 53
8.4 Amendment..................................................... 55
8.5 Extension; Waiver............................................. 55
ARTICLE 9 General Provisions.................................................... 55
9.1 Non-Survival of Representations and Warranties................ 55
9.2 Notices....................................................... 55
9.3 Interpretation................................................ 56
9.4 Counterparts.................................................. 56
9.5 Entire Agreement; Third Party Beneficiaries................... 56
9.6 Severability.................................................. 57
9.7 Other Remedies; Specific Performance; Fees.................... 57
9.8 Governing Law; Submission to Jurisdiction..................... 57
9.9 Rules of Construction......................................... 58
9.10 Assignment.................................................... 58
9.11 Waiver of Jury Trial.......................................... 58
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of December 19, 2005, by and among Progress Software Corporation, a
Massachusetts corporation ("PARENT"), Noble Acquisition Corp., a Delaware
corporation and a wholly owned direct subsidiary of Parent ("MERGER SUB"), and
NEON Systems, Inc., a Delaware corporation (the "COMPANY").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement and declared advisable a transaction
whereby Merger Sub will commence a tender offer to acquire all of the
outstanding shares of Company Common Stock (as defined in Section 1.2(a)) and
thereafter will merge with and into the Company, upon the terms and subject to
the conditions of this Agreement and in accordance with the General Corporation
Law of the State of Delaware ("DELAWARE LAW").
B. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
stockholders of the Company are entering into Voting and Tender Agreements with
Parent in the form of Exhibit A (the "VOTING AGREEMENTS").
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
ARTICLE 1
THE OFFER
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "BENEFICIALLY OWNED" shall mean, with respect to any Company
Common Stock held by any person, that such person is the beneficial owner of
such Company Common Stock as defined in Rule 13d-3 promulgated under the
Exchange Act.
(b) "BUSINESS DAY" shall mean any day except a Saturday, Sunday or
other day on which commercial banks in Boston, Massachusetts and Houston, Texas
are authorized or required by law to close.
(c) "COMPANY MATERIAL ADVERSE EFFECT" shall mean any change, event,
circumstance or effect (whether or not such change, event, circumstance or
effect constitutes a breach of a representation, warranty or covenant made by
the Company in this Agreement) that is or is reasonably likely to be materially
adverse to the business, assets (including intangible assets), capitalization,
financial condition, operations, revenues or liabilities of the Company taken as
a whole with its subsidiaries, and excluding any change, event, circumstance or
effect that is proximately caused by (A) changes in general economic conditions
or changes generally affecting the industry in which the Company operates
(provided that such changes do not affect the Company
in a materially disproportionate manner), (B) changes, effects or events
resulting from the announcement or pendency of the Offer or the Merger or from
the taking of any action required by this Agreement (including any cancellations
of or delays in customer orders, any reduction in sales, any disruption in
supplier, distributor, partner or similar relationships, any loss of employees
and actions by competitors, or any action required to be taken under Legal
Requirements (as defined in Section 3.2(c)) applicable to the transactions
contemplated by this Agreement), (C) any actions taken or announced by Parent or
Merger Sub or taken or announced by the Company at the request or direction of
Parent or Merger Sub, or any inaction or failure to act by Parent or Merger Sub
or by the Company at the request or direction of Parent or Merger Sub, or (D)
war, terrorism, hostilities or civil unrest. Any change in the price at which
the shares of Company Common Stock are traded or any failure of the Company to
meet internal, published or other estimates, predictions, projections or
forecasts of revenues, net income or any other measure of financial performance
shall not, in and of itself, constitute a Company Material Adverse Effect, in
the absence of an underlying change, effect or event that has caused or
contributed to such change or failure and which is or is reasonably likely to be
materially adverse to the business, assets (including intangible assets)
capitalization, operations, revenues or liabilities of the Company taken as a
whole with its subsidiaries (it being understood that any such underlying
change, effect, or event may be deemed to constitute, or be taken into account
in determining whether there has been a Company Material Adverse Effect). The
Company shall be required to sustain, with respect to the foregoing clauses (B)
and (C), the burden of demonstrating that any such change, event, circumstance
or effect was proximately caused by the circumstances described in such clause.
(d) "COMPANY OPTION" shall mean each outstanding unexercised option
to purchase Company Common Stock, whether or not then vested or fully
exercisable, granted to any current or former employee, consultant or director
of the Company or any subsidiary of the Company or any other person under any
Company Option Plan or other similar plan of the Company or in connection with
any employment, consulting or other agreement or other arrangement approved by
the Company's Board of Directors with the Company or any subsidiary of the
Company.
(e) "COMPANY OPTION PLAN" shall mean the Company's 1993 Stock Plan,
1999 Long-Term Incentive Plan, Stock Option Plan for Non-Employee Directors,
2002 Stock Plan and 2002 Director Option Plan.
(f) "COMPANY WARRANT" shall mean each outstanding warrant or other
right to purchase Company Common Stock other than Company Options.
(g) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
(h) "HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
(i) "IN-THE-MONEY OPTIONS" shall mean all Company Options with an
exercise price per share less than the Offer Price (as defined in Section
1.2(a)), whether or not vested or fully exercisable.
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(j) "IN-THE-MONEY WARRANTS" shall mean all Company Warrants which
are exercisable, as of immediately prior to the Appointment Time, at an exercise
price per share less than the Offer Price.
(k) "KNOWLEDGE" shall mean, with respect to any fact, circumstance,
event or other matter in question, the actual knowledge of such fact,
circumstance, event or other matter of (i) an individual, if used in reference
to an individual or (ii) any executive officer or director of such party, if
used in reference to a person that is not an individual. Any such individual
will be deemed to have actual knowledge of a particular fact, circumstance,
event or other matter if such knowledge could be obtained after reasonable
inquiry of the persons employed by such party charged with supervisory
responsibility for such matters for such party.
(l) "PERSON" shall mean any individual, corporation (including any
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
(m) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(n) "SUBSIDIARY" shall mean, with respect to a specified entity, any
corporation, partnership, limited liability company, joint venture or other
legal entity of which the specified entity (either alone or through or together
with any other subsidiary) owns, directly or indirectly, 50% or more of the
stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
(o) "TRANSACTION EXPENSES" shall mean (i) any termination payments,
severance payments, bonuses and other awards and payments to employees that are
or will become due as a direct result of the consummation of the Offer or the
Merger or the change of control of the Company (whether pursuant to agreements
described in Section 3.14 of this Agreement or otherwise), (ii) fees and
disbursements of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to the Company, and
of KPMG LLP, the Company's independent public accountants, in each case, that
are directly attributable to the negotiation and/or consummation of the
transactions contemplated by this Agreement and (iii) amounts paid or payable to
Jefferies Broadview on or after November 13, 2005 pursuant to that certain
letter dated September 13, 2005.
1.2 THE OFFER.
(a) As promptly as practicable after the date hereof, but in no
event later than December 30, 2005, Merger Sub shall commence (within the
meaning of Rule 14d-2(a) under the Exchange Act) an offer (the "OFFER") to
purchase any and all of the outstanding shares of common stock, par value $0.01
per share, of the Company ("COMPANY COMMON STOCK"), at a price of $6.20 per
share, net to the seller in cash, subject to adjustment as set forth in Section
1.2(h) (the "OFFER PRICE") and subject to reduction for any applicable
withholding taxes and, if such payment is to be made other than to the
registered holder of any such shares, any applicable stock transfer taxes
payable by such holder. The Offer shall be subject to the condition that there
shall be validly
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tendered in accordance with the terms of the Offer, prior to the expiration date
of the Offer, and not withdrawn, a number of shares of Company Common Stock
that, together with any shares of Company Common Stock then owned by Parent or
any of its subsidiaries, represents at least a majority of the sum of (i) the
outstanding shares of Company Common Stock as of the date of the expiration of
the Offer, and (ii) the number of shares of Company Common Stock issuable
pursuant to Company Options and Company Warrants that are vested and exercisable
as of the Termination Date (as defined in Section 8.1(c)) (the "MINIMUM
CONDITION"), and Merger Sub shall not be required to accept for payment or pay
for any shares of Company Common Stock, and may terminate the Offer, if, on the
expiration date of the Offer (as extended in accordance with this Section 1.2),
(i) the Minimum Condition has not been met or (ii) the other conditions set
forth in Annex A hereto have not been satisfied.
(b) Merger Sub expressly reserves the right to waive any of the
conditions to the Offer and to make any change in the terms or conditions of the
Offer; provided, however, that no change or waiver may be made that, without the
prior written consent of the Company, amends or waives the Minimum Condition,
changes the form of consideration to be paid, decreases the price per share or
the number of shares of Company Common Stock sought in the Offer, imposes
conditions to the Offer in addition to those set forth in Annex A, amends the
conditions to the Offer set forth in Annex A so as to broaden the scope of such
conditions, extends the Offer other than as set forth in Section 1.2(c), is
otherwise adverse to the holders of Company Common Stock in the good faith
determination of the Company, or waives the condition that by the Determination
Time (as defined in Annex A hereto) any applicable waiting period under the HSR
Act or any other antitrust or competition laws, rules or regulations the parties
reasonably agree are applicable has expired or been terminated.
(c) Subject to the terms and conditions of the Offer and this
Agreement, the Offer shall expire at midnight, New York Time, on the date that
is twenty (20) business days (calculated in accordance with Section 14d-1(g)(3)
under the Exchange Act) after the date the Offer is commenced (within the
meaning of Rule 14d-2 under the Exchange Act); provided however, that (i) Merger
Sub shall extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission ("SEC") or
its staff, or of the Nasdaq Stock Market, Inc. ("NASDAQ"), that is applicable to
the Offer, and (ii) in the event that any of the conditions to the Offer set
forth in Annex A are not satisfied or waived as of any then scheduled expiration
date of the Offer, Merger Sub shall extend the Offer for successive extension
periods of not more than ten (10) business days each, until such time as either
(A) all of the conditions to the Offer are satisfied or waived, or (B) this
Agreement is terminated pursuant to the terms of Article 8; provided however,
that if at any time after two (2) such successive extensions of the Offer by
Merger Sub in accordance with the foregoing clause (ii) of this Section 1.2(c),
Parent or Merger Sub reasonably concludes that a condition set forth in Annex A
will not be satisfied prior to the Termination Date, then Merger Sub shall not
be required to further extend the Offer; provided further, that notwithstanding
the foregoing clauses (i) and (ii) of this Section 1.2(c), in no event shall
Merger Sub be required to extend the Offer beyond the Termination Date.
(d) Subject to the terms and conditions of the Offer and this
Agreement, Merger Sub shall (and Parent shall cause Merger Sub to) accept for
payment, and pay for, all shares of Company Common Stock validly tendered and
not withdrawn pursuant to the Offer, as promptly as
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practicable after the expiration date of the Offer (as it may be extended in
accordance with Section 1.2(c)).
(e) Merger Sub may (but shall not be required to), and the Offer
Documents shall reserve the right to, extend the Offer for a subsequent offering
period (within the meaning of Rule 14d-11 under the Exchange Act) of not less
than three (3) nor more than ten (10) business days immediately following the
expiration of the Offer if the number of shares of Company Common Stock validly
tendered and not withdrawn is less than ninety percent (90%). Subject to the
terms and conditions of the Offer and this Agreement, Merger Sub shall (and
Parent shall cause Merger Sub to) accept for payment, and pay for, all shares of
Company Common Stock validly tendered and not withdrawn pursuant to the Offer as
so extended by such subsequent offering period, as promptly as practicable after
any such shares of Company Common Stock are tendered during such subsequent
offering period.
(f) The Company will not tender in response to the Offer any shares
of Company Common Stock that are held in treasury by the Company or that are
owned, directly or indirectly, by the Company or any of its subsidiaries.
(g) As soon as reasonably practicable on the date of commencement of
the Offer, Merger Sub and Parent shall file with the SEC a Tender Offer
Statement on Schedule TO (the "SCHEDULE TO") with respect to the Offer, which
will contain the offer to purchase and form of the related letter of transmittal
and summary advertisement (such Schedule TO and such documents included therein
pursuant to which the Offer will be made, together with any supplements or
amendments thereto, the "OFFER DOCUMENTS"). The Offer Documents will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by Parent or Merger Sub with respect to information supplied by the Company
in writing for inclusion in the Offer Documents. Parent, Merger Sub and the
Company each agrees promptly to correct any information provided by it for use
in the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect. Parent and Merger Sub each
agrees to take all steps necessary to cause the Schedule TO as so corrected to
be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Company Common Stock, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given an opportunity to review and comment on the Offer
Documents (and any amendments thereto) prior to their being filed with the SEC
or disseminated to the holders of Company Common Stock. Parent and Merger Sub
shall provide the Company and its counsel with any written comments or other
communications that Parent, Merger Sub or their counsel may receive from time to
time from the SEC or its staff with respect to the Offer Documents as soon as
reasonably practicable after receipt of such comments or other communications.
In the event that this Agreement has been terminated pursuant to Section 8.1,
Parent and Merger Sub shall promptly terminate the Offer without accepting any
shares of Company Common Stock for payment.
(h) Without limiting any other provision of this Agreement, the
Offer Price shall be adjusted, at any time and from time to time, to reflect
fully the effect of any stock split, reverse
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split, stock dividend (including any dividend or distribution of securities
convertible into Company Common Stock), reorganization, recapitalization or
other like change, if permitted by the terms of Section 5.1, with respect to
Company Common Stock occurring after the date of this Agreement and prior to the
commencement of the Offer.
1.3 COMPANY ACTION.
(a) The Company hereby consents to the Offer and agrees to promptly
furnish Parent with a list of its stockholders, mailing labels and any available
listing or computer file containing the names and addresses of all record
holders of Company Common Stock and lists of securities positions of Company
Common Stock held in stock depositories, in each case true, correct and complete
as of the most recent practicable date, and will provide to Parent such
additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Parent may reasonably request in connection with the Offer. Except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger (as defined in Section 2.1) in
accordance with applicable law, Parent and Merger Sub and each of their
affiliates, associates, employees, agents and representatives shall hold in
confidence the information contained in any such lists, labels, listings or
files in accordance with the terms of the Confidentiality Agreement (as defined
in Section 6.3(a)) and shall otherwise comply with the requirements of such
agreement.
(b) As promptly as practicable after the time that the Offer is
commenced, the Company shall file with the SEC and disseminate to holders of
Company Common Stock, in each case as and to the extent required by applicable
federal securities laws, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with any amendments or supplements thereto, the "SCHEDULE
14D-9") that shall reflect the recommendations of the Company's Board of
Directors referred to in Section 3.19, subject to Section 6.1. The Schedule
14D-9 will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, shall not contain
any untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
supplied by Parent or Merger Sub in writing for inclusion in the Schedule 14D-9.
The Company, Merger Sub and Parent each agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect. The
Company agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to holders of Company
Common Stock, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given an opportunity to review
and comment on the Schedule 14D-9 prior to its being filed with the SEC. The
Company agrees to provide to Parent and its counsel any comments or other
communications which the Company or its counsel may receive from the staff of
the SEC with respect to the Schedule 14D-9 promptly after receipt thereof.
Parent, Merger Sub and the Company each hereby agree to provide promptly such
information necessary to prepare the exhibits and schedules to the Schedule
14D-9 and the Offer Documents as the respective party responsible therefore may
reasonably request.
1.4 DIRECTORS.
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(a) Effective upon the acceptance for payment pursuant to the Offer
of a number of shares of Company Common Stock that satisfies the Minimum
Condition (the "APPOINTMENT TIME"), Parent shall be entitled to designate the
number of directors, rounded up to the next whole number, on the Board of
Directors of the Company that equals the product of (i) the total number of
directors on the Board of Directors of the Company and (ii) the percentage that
the number of shares of Company Common Stock Beneficially Owned by Parent
(including shares of Company Common Stock accepted for payment) bears to the
total number of outstanding shares of Company Common Stock, and the Company
shall take all action necessary to cause Parent's designees to be elected or
appointed to the Company's Board of Directors, including using its best efforts
to seek and obtain resignations of a sufficient number of members of the
Company's Board of Directors in order to effectuate the provisions of this
Section 1.4(a), subject to Section 1.4(b). At such time, the Company will also
use its best efforts to cause individuals designated by Parent to constitute the
number of members, rounded up to the next whole number, on each committee of the
Board other than the committee of Independent Directors described in Section
1.4(d) that represents the same percentage as such individuals represent on the
Board. Each member of the Company's Board of Directors as of the date of this
Agreement shall, concurrently with the execution of this Agreement, tender his
or her resignation from the Company's Board of Directors to be effective as of
the Appointment Time or the Effective Time, as the case may be, in furtherance
of effectuating the terms and provisions of this Section 1.4(a).
(b) Anything to the contrary contained herein notwithstanding, if
Parent's designees are appointed or elected to the Company's Board of Directors,
until the Effective Time (as defined in Section 2.2) the Company's Board of
Directors shall have two (2) directors who are directors on the date hereof and
who are neither officers or employees of the Company nor officers, stockholders,
affiliates or associates (within the meaning of the Securities Act and the
Exchange Act) of Parent or persons having any other material relationship with
Parent (one or more such directors being referred to as the "INDEPENDENT
DIRECTORS"); provided that if one (1) Independent Director remains, then the one
remaining Independent Director shall designate a person who meets the foregoing
criteria to fill the vacancy created by the resignation of the other Independent
Director, and such person shall be deemed to be an Independent Director for
purposes of this Agreement; provided further that if no Independent Directors
remain, the other directors shall designate persons to fill the vacancies who
meet the foregoing criteria, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement.
(c) The Company's obligations to appoint Parent's designees to the
Company's Board of Directors shall be subject to Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions, and shall include in the Schedule 14D-9 such information with respect
to the Company and its officers and directors, as Section 14(f) and Rule 14f-1
require in order to fulfill its obligations under this Section. Parent shall
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.
(d) Following the election or appointment of Parent's designees
pursuant to Section 1.4(a) and until the Effective Time, the approval of a
majority of the Independent Directors, acting as a committee of the Company's
Board of Directors, shall be required to authorize (and such authorization shall
constitute the authorization of the Company's Board of Directors and no other
action on the part of the Company, including any action by any other director of
the Company, shall
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be required to authorize) any termination of this Agreement by the Company, any
amendment of this Agreement requiring action by the Company, any extension of
time for performance of any obligation or action hereunder by Parent or Merger
Sub, any waiver of compliance with any of the agreements or conditions contained
herein for the benefit of the Company, any action as to which the consent or
agreement of the Company is required under this Agreement, the assertion or
enforcement of the Company's rights under this Agreement to object to (i)
failure to consummate the Merger or (ii) a termination of this Agreement, or any
determination with respect to any action to be taken or not be taken by or on
behalf of the Company relating to this Agreement or the transactions
contemplated hereby.
1.5 TOP-UP OPTION.
(a) The Company hereby grants to Merger Sub an irrevocable option
(the "TOP-UP OPTION"), such Top-Up Option to be exercisable only on or after the
Appointment Time, to purchase that number of shares of Company Common Stock (the
"TOP-UP OPTION SHARES") equal to the lowest number of shares of Company Common
Stock that, when added to the number of shares of Company Common Stock owned by
Merger Sub at the time of such exercise, shall constitute one share more than
ninety percent (90%) of the shares of Company Common Stock then outstanding
(assuming the issuance of the Top-Up Option Shares and the exercise of all
outstanding Company Options and Company Warrants with an exercise price less
than the Offer Price), at a price per share equal to the Offer Price; provided,
however, that the Top-Up Option shall not be exercisable unless immediately
after such exercise Merger Sub would own more than ninety percent (90%) of the
shares of Company Common Stock then outstanding; provided, further, that in no
event shall the Top-Up Option be exercisable for a number of shares in excess of
the Company's then authorized but unissued Company Common Stock (giving effect
to Company Common Stock reserved for issuance under Company Option Plans as
though they were outstanding).
(b) Merger Sub may exercise the Top-Up Option, in whole but not in
part, at any one time after the occurrence of a Top-Up Exercise Event (as
defined in Section 1.5(c)) and prior to the Top-Up Termination Date. The "TOP-UP
TERMINATION DATE" will occur upon the earliest to occur of the following: (i)
the Effective Time; (ii) the termination of this Agreement pursuant to its
terms, and (iii) ten (10) Business Days after the occurrence of a Top-Up
Exercise Event.
(c) For purposes of this Agreement, a "TOP-UP EXERCISE EVENT" shall
occur only upon Merger Sub's acceptance for payment pursuant to the Offer of
Company Common Stock or acquisition of Company Common Stock constituting at
least eighty percent (80%) of the Company Common Stock then outstanding.
(d) In the event Merger Sub wishes to exercise the Top-Up Option,
Merger Sub shall so notify the Company, in writing, and shall set forth in such
notice (i) the number of shares of Company Common Stock that are expected to be
owned by Merger Sub immediately preceding the purchase of the Top-Up Option
Shares and (ii) the place and time for the closing of the purchase of the Top-Up
Option Shares (the "TOP-UP CLOSING"). At the Top-Up Closing, Merger Sub shall
pay the Company the aggregate price required to be paid for the Top-Up Option
Shares and the Company shall cause to be issued to Merger Sub a certificate
representing the Top-Up Option Shares.
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(e) The obligation of the Company to deliver Top-Up Option Shares
upon the exercise of the Top-Up Option is subject to the following conditions:
(i) no provision of any applicable law or regulation and no judgment,
injunction, or decree shall prohibit the exercise of the Top-Up Option or the
delivery of the Top-Up Option Shares in respect of any such exercise; and (ii)
neither the grant of the Top-Up Option nor the delivery of the Top-Up Option
Shares would require the approval of the Company's stockholders pursuant to the
rules and regulations of Nasdaq.
(f) Parent and Merger Sub understand that the Company Common Stock
which Merger Sub may acquire upon exercise of the Top-Up Option will not be
registered under the Securities Act and will be issued in reliance upon an
exemption thereunder for transactions not involving a public offering. Merger
Sub is, or will be upon the purchase of the Top-Up Option Shares, an Accredited
Investor, as defined in Rule 501 of Regulation D promulgated under the
Securities Act. Merger Sub agrees that the Top-Up Option and the Top-Up Option
Shares to be acquired upon exercise of the Top-Up Option are being and will be
acquired by Merger Sub for the purpose of investment and not with a view to or
for resale in connection with any distribution thereof within the meaning of the
Securities Act.
(g) Certificates evidencing Top-Up Option Shares delivered hereunder
may, at the Company's election, contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR ANY EXEMPTION
THEREFROM.
ARTICLE 2
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement and the applicable provisions of Delaware Law, at the Effective Time,
Merger Sub shall be merged with and into the Company (the "MERGER"), the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation of the Merger (the "SURVIVING
CORPORATION").
2.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger consistent with this Agreement with the Secretary of State
of the State of Delaware in accordance with the relevant provisions of Delaware
Law (the "CERTIFICATE OF MERGER"), the time of such filing (or such later time
as may be agreed in writing by the Company and Parent and specified in the
Certificate of Merger) being the "EFFECTIVE TIME", as soon as practicable on or
after the Closing Date (as defined in this Section 2.2). The closing of the
Merger (the "CLOSING") shall take place at the offices of Xxxxx Xxxx LLP,
Seaport World Trade Center West, 000 Xxxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxxxxx,
at a time and date to be specified by the parties, which shall be no later than
the second Business Day after the satisfaction or waiver of the conditions set
forth in Article 7, or at such other time, date and location as the parties
hereto agree in writing (the "CLOSING DATE").
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2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, at the Effective Time,
all the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) The Certificate of Merger shall provide that, at the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be in
the form of the Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time; provided, however, that as of the
Effective Time, Article I of the Certificate of Incorporation of the Surviving
Corporation shall read: "The name of the corporation is NEON Systems, Inc."
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
2.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
2.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, the Company or the holders of any of the following
securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than any shares of Company Common
Stock to be canceled pursuant to Section 2.6(b) and any "DISSENTING SHARES" (as
defined, and to the extent provided in Section 2.12(a)), will be canceled and
extinguished and automatically converted into the right to receive the Offer
Price in cash, without interest, subject to adjustment as set forth in Section
2.9 (the "MERGER CONSIDERATION").
(b) Each share of Company Common Stock held by the Company as
treasury stock or owned by the Company, any subsidiary of the Company, Merger
Sub, Parent or any subsidiary of Parent immediately prior to the Effective Time
shall cease to be outstanding, as applicable, and shall be canceled and
extinguished without any conversion thereof.
(c) Each share of common stock, par value $0.001 per share, of
Merger Sub ("MERGER SUB COMMON STOCK"), issued and outstanding immediately prior
to the Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, $0.001 par value per share, of the
Surviving Corporation. Following the Effective Time, each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
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2.7 OPTIONS.
(a) Promptly following the execution of this Agreement, the Company
shall use commercially reasonable efforts to ensure that at the Appointment
Time, all Company Options shall be canceled, in each case, in accordance with
and pursuant to the terms of the Company Option Plans under which such Company
Options were granted. In consideration of such cancellation, each holder of an
In-the-Money Option that has not been exercised immediately prior to the
Appointment Time and is canceled in accordance with this Section 2.7(a)
(including, for the avoidance of doubt, In-the-Money Options which are not
vested immediately prior to the execution of this Agreement and In-the-Money
Options which pursuant to the terms of the Company Option Plans would not vest
or become exercisable in connection with the Offer or the Merger) will be
entitled to receive in settlement of such In-the-Money Option, as promptly as
practicable following the Appointment Time, a cash payment from the Payment Fund
(as defined in Section 2.10(a)), subject to any required withholding of taxes,
equal to the product of (i) the total number of shares of Company Common Stock
issuable pursuant to such In-the-Money Option and (ii) the excess of the Offer
Price over the applicable exercise price per share of Company Common Stock
issuable pursuant to such In-the-Money Option (the "IN-THE-MONEY OPTION
CONSIDERATION"); provided, however, that with respect to any person subject to
Section 16(a) of the Exchange Act, any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act. For the avoidance of doubt, the
Company shall use commercially reasonable efforts to cancel all Company Options
that are not In-the-Money Options without payment of any consideration and
without any further liability to the Company or the Surviving Corporation, and
the holders of Company Options shall be entitled to the In-the-Money Option
Consideration pursuant to this Section 2.7 only to the extent such Company
Options are In-the-Money Options (whether or not any such In-the-Money Option is
vested immediately prior to the execution of this Agreement or which pursuant to
the terms of the Company Option Plans would vest or become exercisable in
connection with the Offer or the Merger).
(b) The Company shall, in accordance with and pursuant to the terms
of the Company Option Plans, cause to be provided to each holder of a Company
Option notice of the proposed Offer and Merger and treatment of Company Options
under this Agreement. The Company shall use commercially reasonable efforts to
cause each holder of a Company Option to execute a written acknowledgment of
such holder that (i) the payment of the In-the-Money Option Consideration, if
any, will satisfy in full the Company's obligation to such person pursuant to
such Company Option and (ii) subject to the payment of the In-the-Money Option
Consideration, if any, such Company Option held by such holder shall, without
any action on the part of the Company or the holder, be deemed terminated,
canceled, void and of no further force and effect as between the Company and the
holder and neither party shall have any further rights or obligations with
respect thereto and (iii) that the portion of any Company Option held by such
holder that is not an In-the-Money Option shall be canceled without payment of
any consideration and without any further liability to the Company or the
Surviving Corporation. Such written acknowledgment shall be substantially in the
form attached hereto as Exhibit B.
2.8 WARRANTS.
(a) Promptly following the execution of this Agreement, the Company
shall use commercially reasonable efforts to ensure that at the Appointment
Time, all Company Warrants
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shall be terminated. In consideration of such termination, each holder of an
In-the-Money Warrant terminated in accordance with this Section 2.8 will be
entitled to receive in settlement of such In-the-Money Warrant, as promptly as
practicable following the Appointment Time, a cash payment from the Payment
Fund, subject to any required withholding of taxes, equal to the product of (i)
the total number of shares of Company Common Stock otherwise issuable upon
exercise of such In-the-Money Warrant and (ii) the excess of the Offer Price
over the applicable exercise price per share of Company Common Stock otherwise
issuable upon exercise of such In-the-Money Warrant (the "IN-THE-MONEY WARRANT
CONSIDERATION"); provided, however, that with respect to any person subject to
Section 16(a) of the Exchange Act, any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act. For the avoidance of doubt, all
Company Warrants that are not In-the-Money Warrants shall be terminated without
payment of any consideration and without any further liability to the Company or
the Surviving Corporation and shall not be accelerated, and the holders of
Company Warrants shall be entitled to the In-the-Money Warrant Consideration
pursuant to this Section 2.8 only to the extent such Company Warrants are
In-the-Money Warrants.
(b) The Company shall use commercially reasonable efforts to cause
each holder of a Company Warrant to execute a written acknowledgment of such
holder that (i) the payment of the In-the-Money Warrant Consideration, if any,
will satisfy in full the Company's obligation to such person pursuant to such
Company Warrant and (ii) subject to the payment of the In-the-Money Warrant
Consideration, if any, such Company Warrant held by such holder shall, without
any action on the part of the Company or the holder, be deemed terminated,
canceled, void and of no further force and effect as between the Company and the
holder and neither party shall have any further rights or obligations with
respect thereto and (iii) that any Company Warrant held by such holder that is
not an In-the-Money Warrant shall be canceled without payment of any
consideration and without any further liability to the Company or the Surviving
Corporation. Such written acknowledgment shall be substantially in the form
attached hereto as Exhibit C.
2.9 ADJUSTMENTS TO MERGER CONSIDERATION. Without limiting any other
provision of this Agreement, the Merger Consideration shall be adjusted, at any
time and from time to time, to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution of
securities convertible into Company Common Stock), reorganization,
recapitalization or other like change, if permitted by the terms of Section 5.1,
with respect to Company Common Stock occurring after the date of this Agreement
and prior to the Effective Time.
2.10 PAYMENT FOR COMPANY COMMON STOCK, IN-THE-MONEY OPTIONS AND
IN-THE-MONEY WARRANTS.
(a) Prior to the Appointment Time, Parent shall appoint a commercial
bank or trust company reasonably acceptable to the Company to act as exchange
and paying agent, registrar and transfer agent (the "AGENT") for the purpose of
(i) paying as promptly as practicable after the expiration date of the Offer (as
it may be extended in accordance with Section 1.2(c)) for all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer, (ii)
exchanging certificates representing, immediately prior to the Effective Time,
Company Common Stock for the applicable Merger Consideration, (iii) making
payment as promptly as practicable following the Appointment Time of the
aggregate In-the-Money Option Consideration in exchange
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for the cancellation of all In-the-Money Options and (iv) making payment as
promptly as practicable following the Appointment Time of the aggregate
In-the-Money Warrant Consideration in exchange for termination of all
In-the-Money Warrants; provided, however, in the case of In-the-Money Options
and In-the-Money Warrants held by employees of the Company, Parent shall have
the option of making payment of the applicable In-the-Money Option Consideration
and the applicable In-the-Money Warrant Consideration to such employees through
the Company's payroll, in lieu of the Agent. Within two (2) Business Days after
the Appointment Time, Parent shall deposit, or cause to be deposited, in trust
with the Agent for the benefit of the tendering holders of Company Common Stock
and the holders of In-the-Money Options and In-the-Money Warrants, as
applicable, cash in an amount equal to the sum of (i) the product of (A) the
number of shares of Company Common Stock accepted for payment by Merger Sub
pursuant to the Offer and (B) the Offer Price, (ii) the aggregate In-the-Money
Option Consideration then payable, and (iii) the aggregate In-the-Money Warrant
Consideration then payable, such amount subject to Parent's option to make
payment through the Company's payroll as set forth in the immediately preceding
sentence (such amount being hereinafter referred to as the "OPTION PAYMENT
FUND"). Within two (2) Business Days after the Effective Time, Parent shall
deposit, or cause to be deposited, in trust with the Agent for the benefit of
the holders of shares of Company Common Stock cash in an amount equal to the
product of (x) the Merger Consideration, and (y) the number of shares of Company
Common Stock then outstanding (together with the Option Payment Fund, all such
amounts being hereinafter referred to as the "PAYMENT FUND"). For purposes of
determining the aggregate amount of cash to be deposited by Parent pursuant to
this Section 2.10(a), Parent shall assume that no holder of shares of Company
Common Stock will perfect their right to appraisal of their shares of Company
Common Stock under Delaware Law. The Agent shall, pursuant to instructions
provided by Parent, make the payments provided for in Sections 2.6, 2.7 and 2.8
of this Agreement, as applicable, out of the Payment Fund (it being understood
that any and all interest earned on funds made available to the Agent pursuant
to this Agreement shall be turned over to the party depositing such funds with
the Agent). The Payment Fund shall not be used for any other purpose except as
provided in this Agreement.
(b) Promptly after the Effective Time but in no event more than
three (3) Business Days after the Effective Time, Parent or the Surviving
Corporation shall cause the Agent to mail to each holder of record of a
certificate or certificates ("CERTIFICATES") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock that were
converted into the right to receive Merger Consideration under Section 2.6 and
to each holder of Dissenting Shares (i) a notice of the effectiveness of the
Merger, (ii) a letter of transmittal in customary form (that shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Agent and shall
contain such other provisions as Parent or the Surviving Corporation may
reasonably specify), (iii) instructions for use in surrendering such
Certificates and receiving the applicable Merger Consideration in respect
thereof and (iv) such notification as may be required under Delaware Law to be
given to the holders of Dissenting Shares. Upon surrender to the Agent of a
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive, in exchange therefor, cash in an
amount equal to the product of (i) the number of shares of Company Common Stock
formerly represented by such Certificate and (ii) the Merger Consideration,
which amounts shall be paid by Agent by check or wire transfer in accordance
with the instructions provided by such holder. No interest or dividends will be
paid or accrued on the consideration payable upon the surrender of any
Certificate. If the consideration provided for herein is to be delivered in the
name of a person
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other than the person in whose name the Certificate surrendered is registered,
it shall be a condition of such delivery that the Certificate so surrendered
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such delivery shall pay any transfer or other taxes required
by reason of such delivery to a person other than the registered holder of the
Certificate, or that such person shall establish to the reasonable satisfaction
of the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section 2.10(b),
each Certificate (other than Certificates representing Dissenting Shares or
shares of Company Common Stock to be canceled pursuant to Section 2.6(b)) shall
represent, for all purposes, only the right to receive an amount in cash equal
to the Merger Consideration multiplied by the number of shares of Company Common
Stock formerly evidenced by such Certificate without any interest or dividends
thereon.
(c) The consideration issued upon the surrender of Certificates in
accordance with this Agreement shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock
formerly represented thereby. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided in this Article 2.
(d) Any portion of the Payment Fund (including any amounts that may
be payable to the former stockholders of the Company in accordance with the
terms of this Agreement) which remains unclaimed by the former stockholders of
the Company upon the 180th day immediately following the Closing Date shall be
returned to the Surviving Corporation, upon demand, and any former stockholders
of the Company who have not theretofore complied with this Article 2 shall,
subject to the remainder of this Section 2.10(d), thereafter look to the
Surviving Corporation only as general unsecured creditors thereof for payment of
any Merger Consideration, without any interest or dividends thereon, that may be
payable in respect of each share of Company Common Stock held by such
stockholder. Following the Closing, the Agent shall retain the right to invest
and reinvest the Payment Fund on behalf of the Surviving Corporation in
securities listed or guaranteed by the United States government or certificates
of deposit of commercial banks that have, or are members of a group of
commercial banks that has, consolidated total assets of not less than
$500,000,000 and the Surviving Corporation shall receive the interest earned
thereon. None of Merger Sub, the Company or Agent shall be liable to a holder of
Certificates or any other person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered upon the seventh anniversary
of the Closing Date (or immediately prior to such earlier date on which any
Merger Consideration, dividends (whether in cash, stock or property) or other
distributions with respect to shares of Company Common Stock in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.2(c)) any such shares, cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interests of any person previously entitled
thereto.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit (in form and substance acceptable to
the Surviving Corporation) of that fact by the person (who shall be the record
owner of such Certificate) claiming such Certificate to be lost,
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stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such amount as the Surviving Corporation may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
(f) Each of the Agent, the Surviving Corporation and Parent shall be
entitled to deduct and withhold from any consideration otherwise payable to any
former holder of shares of Company Common Stock, In-the-Money Options or
In-the-Money Warrants pursuant to this Agreement such amounts as may be required
to be deducted or withheld with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "CODE"), or any applicable
provision of state, local or foreign tax law. To the extent that amounts are so
deducted or withheld and paid over to the appropriate taxing authority by Agent,
the Surviving Corporation or Parent, such amounts shall be treated for all
purposes of this Agreement as having been paid to the person to whom such
amounts would otherwise have been paid.
2.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Surviving Corporation shall take all such lawful and necessary action on behalf
of the Company or Merger Sub. Parent shall cause Merger Sub and the Surviving
Corporation to perform all of its obligations relating to this Agreement and the
transactions contemplated hereby, including causing Merger Sub to vote the
Company Common Stock acquired on or after the Appointment Time in favor of the
Merger, if required under Delaware Law.
2.12 DISSENTERS' RIGHTS.
(a) Notwithstanding any provision of this Agreement to the contrary
other than Section 2.12(b), any shares of Company Common Stock held by a holder
who has demanded and perfected appraisal rights for such shares in accordance
with Delaware Law and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal or dissenters' rights ("DISSENTING SHARES"),
shall not be converted into or represent a right to receive Merger Consideration
pursuant to Section 2.6, but instead shall be converted into the right to
receive only such consideration as may be determined to be due with respect to
such Dissenting Shares under the laws of the State of Delaware. From and after
the Effective Time, a holder of Dissenting Shares shall not be entitled to
exercise any of the voting rights or other rights of a stockholder of the
Surviving Corporation.
(b) Notwithstanding the provisions of Section 2.6(a), if any holder
of shares of Company Common Stock who demands appraisal of such shares under
Delaware Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall no longer be
Dissenting Shares and shall automatically be converted into and represent only
the right to receive the Merger Consideration as provided in Section 2.6(a),
without interest thereon, upon surrender of the certificate representing such
shares pursuant to Section 2.10.
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(c) Prior to the Appointment Time, the Company shall give Parent (i)
prompt notice of any written demands for appraisal of any shares of Company
Common Stock, withdrawals of such demands, and any other instruments served
pursuant to Delaware Law and received by the Company which relate to any such
demand for appraisal and (ii) the opportunity to participate in all negotiations
and proceedings which take place with respect to demands for appraisal under
Delaware Law. Prior the Appointment Time, the Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisal of Company Common Stock or offer to settle or settle
any such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date of this Agreement and as of the Appointment Time, the
Company represents and warrants to Parent and Merger Sub, subject to any
exceptions expressly stated in the disclosure schedule delivered by the Company
to Parent dated as of the date hereof (the "COMPANY DISCLOSURE SCHEDULE"), which
exception shall specifically identify the representation to which it relates, as
follows:
3.1 ORGANIZATION; SUBSIDIARIES.
(a) The Company and each of its subsidiaries (which subsidiaries are
identified on Part 3.1 of the Company Disclosure Schedule) (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized; (ii) has the corporate or other power and
authority to own, lease and operate all of its assets and properties and to
carry on its business as now being conducted; and (iii) is duly qualified or
licensed to do business in each jurisdiction where (A) the nature of the
business or activities conducted by it or the character or location of the
properties and assets owned, leased or operated by it makes such qualification
or licensing necessary and (B) the failure to be so qualified would result in a
Company Material Adverse Effect.
(b) Other than the corporations identified in Part 3.1 of the
Company Disclosure Schedule, neither the Company nor any of the other
corporations identified in Part 3.1 of the Company Disclosure Schedule owns any
capital stock of, or any equity interest of any nature in, any corporation,
partnership, joint venture arrangement or other business entity, other than the
entities identified in Part 3.1 of the Company Disclosure Schedule. The Company
owns, directly or indirectly, all of the issued and outstanding shares of
capital stock or other equity ownership interests of each subsidiary of the
Company, free and clear of all Encumbrances, and all of such shares or equity
ownership interests are duly authorized and validly issued and are fully paid,
nonassessable and free of all preemptive rights, with no personal liability
attaching to the ownership thereof. Neither the Company nor any of its
subsidiaries has agreed or is obligated to make, or is bound by any written or
oral agreement, contract, lease, instrument, note, option, warranty, purchase
order, license, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature, as in effect as of the date hereof or as may
hereinafter be in effect under which it may become obligated to make any future
investment in or capital contribution to any other entity. Neither the Company,
nor any of its subsidiaries, has, at any time, been a general partner of any
general partnership, limited partnership or other entity. Part 3.1 of the
Company Disclosure Schedule
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indicates the jurisdiction of organization of each entity listed therein and the
Company's direct or indirect equity interest therein.
(c) The Company has delivered or made available to Parent true,
correct and complete copies of the Certificate of Incorporation and Bylaws of
the Company and similar governing instruments of each of its subsidiaries, each
as amended to date (collectively, the "COMPANY CHARTER DOCUMENTS"), and each
such instrument is in full force and effect. Neither the Company nor any of its
subsidiaries is in violation of any of the provisions of the Company Charter
Documents. The Company has delivered or made available to Parent all proposed or
considered amendments to the Company Charter Documents.
3.2 COMPANY CAPITALIZATION.
(a) The authorized capital stock of the Company consists solely of
30,000,000 shares of Company Common Stock, of which there were 9,569,041 shares
issued and outstanding as of the close of business on December 16, 2005, and
10,000,000 shares of preferred stock, par value $0.01 per share, of which no
shares are issued or outstanding. All outstanding shares of Company Common Stock
are duly authorized, validly issued, fully paid and nonassessable and are not
subject to any preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement or document to which the
Company is a party or by which it is bound. As of the date of this Agreement,
there are 913,400 shares of Company Common Stock held in treasury by the Company
("TREASURY STOCK"), which Treasury Stock shall be canceled by the Company as of
immediately prior to the Effective Time in accordance with Section 6.12 hereof.
(b) As of the close of business on December 16, 2005, (i) 3,006,446
shares of Company Common Stock are subject to issuance pursuant to outstanding
Company Options for an aggregate exercise price of $16,011,073, (ii) 3,278,475
shares of Company Common Stock are reserved for future issuance under Company
Option Plans and (iii) 1,125,000 shares of Company Common Stock are subject to
issuance pursuant to outstanding Company Warrants. Part 3.2(b) of the Company
Disclosure Schedule sets forth the following information with respect to each
Company Option and each Company Warrant outstanding as of the date of this
Agreement: (i) the name of the optionee or warrant holder; (ii) the number of
shares of Company Common Stock subject to such Company Option or Company
Warrant; (iii) the exercise price of such Company Option or Company Warrant;
(iv) the date on which such Company Option or Company Warrant was granted or
assumed; (v) the date on which such Company Option or Company Warrant expires,
(vi) the Company Option Plan pursuant to which such Company Option was granted,
and (vii) whether the exercisability of such Company Option or Company Warrant
will be accelerated in any way by the transactions contemplated by this
Agreement, and indicates the extent of any such acceleration. The Company has
delivered or made available to Parent accurate and complete copies of the
Company Option Plans and each form of stock option agreement evidencing any
Company Options and an accurate and complete copy of each Company Warrant. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Part 3.2(b) of the Company Disclosure
Schedule, there are no commitments or agreements of any character to which the
Company is bound obligating the Company to accelerate the vesting of any Company
Option or Company Warrant as a result of the Offer or the Merger.
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(c) All outstanding shares of Company Common Stock, all outstanding
Company Options, all outstanding Company Warrants and all outstanding shares of
capital stock of each subsidiary of Company have been issued and granted in
compliance with (i) all applicable securities laws and other applicable material
Legal Requirements and (ii) all material requirements set forth in applicable
agreements or instruments. For the purposes of this Agreement, "LEGAL
REQUIREMENTS" means any federal, state, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any federal, state or foreign court, administrative agency or commission or
other governmental authority or instrumentality (each, a "GOVERNMENTAL ENTITY").
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in Part
3.3 of the Company Disclosure Schedule, there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of the Company, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests of the Company, issued, reserved for issuance or
outstanding. Except for securities the Company owns free and clear of all claims
and Encumbrances (as defined in this Section 3.3), directly or indirectly
through one or more subsidiaries, and except for shares of capital stock or
other similar ownership interests of certain subsidiaries of the Company that
are owned by certain nominee equity holders as required by the applicable law of
the jurisdiction of organization of such subsidiaries, as of the date of this
Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Part 3.2 or
Part 3.3 of the Company Disclosure Schedule, there are no subscriptions,
options, warrants, equity securities, convertible debt, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of its
subsidiaries is a party or by which it is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend, accelerate
the vesting of, otherwise modify or amend or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement. Except
as contemplated by this Agreement or as set forth in Part 3.3 of the Company
Disclosure Schedule, there are no registration rights, and there is no voting
trust, proxy, rights agreement, "poison pill" anti-takeover plan or other
agreement or understanding to which the Company is a party or by which it is
bound with respect to any equity security of any class of the Company or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
For purposes of this Agreement, "ENCUMBRANCES" means any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
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3.4 AUTHORITY; NON-CONTRAVENTION; CONSENTS AND APPROVALS.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the Company
Stockholder Approval (as defined in this Section 3.4(a)), if required under
Delaware Law, and the filing of the Certificate of Merger pursuant to Delaware
Law. The affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock entitled to vote at the Stockholders Meeting (as defined
in Section 6.1(a)) (the "COMPANY STOCKHOLDER APPROVAL") is sufficient for the
Company's stockholders to approve and adopt this Agreement and approve the
Merger, unless the Merger may be consummated in accordance with Section 253 of
Delaware Law in which case no such vote of the Company's stockholders is
required, and no other approval of any holder of any securities of the Company
is required in connection with the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws affecting the rights of creditors
generally and general principles of equity.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company and the consummation
of the Offer and the Merger will not, (i) conflict with or violate any of the
Company Charter Documents, (ii) subject to obtaining the Company Stockholder
Approval and compliance with the requirements set forth in Section 3.4(c),
conflict with or violate any Legal Requirements applicable to the Company or any
of its subsidiaries or by which the Company or any of its subsidiaries or any of
their respective material properties is bound or affected, or (iii) except as
set forth in Part 3.4(b) of the Company Disclosure Schedule, result in any
material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or
impair the Company's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or result in a material loss of benefits
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of the Company or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, concession, or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective material properties are bound
or affected.
(c) Except as set forth in Part 3.4 of the Company Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity or other person, is required
to be obtained or made by the Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (ii) the filing of a Notification and Report Form under the HSR Act,
and the termination or expiration of the waiting period under the HSR Act and
any other antitrust or competition laws, rules or regulations the parties
reasonably agree are applicable, (iii) the filing of the Schedule 14D-9 with the
SEC in accordance with the
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Exchange Act and compliance with applicable federal securities laws in
connection therewith, (iv) the filing of the Proxy Statement (as defined in
Section 6.1(a)) with the SEC in accordance with the Exchange Act, to the extent
the Company Stockholder Approval is required under Delaware Law, (v) the
approval and adoption of this Agreement and the approval of the Merger by the
Company's stockholders, if required, in accordance with Delaware Law, and the
Company Charter Documents, (vi) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable Legal Requirements, the securities laws of any foreign country and
any antitrust or competition laws, rules or regulations the parties reasonably
agree are applicable, and (vii) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not have a
Company Material Adverse Effect or have a material adverse effect on the ability
of the parties hereto to consummate the Offer and the Merger.
3.5 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents required
to be filed by the Company with the SEC and has made available to Parent such
forms, reports and documents in the form filed with the SEC (if and to the
extent such forms, reports and documents are not available on XXXXX). All such
required forms, reports and documents (including those that the Company may file
subsequent to the date hereof) are referred to herein as the "COMPANY SEC
REPORTS." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports and (ii) did not at the time
they were filed (or if subsequently amended or superseded by a filing prior to
the date of this Agreement, then on the date of such subsequent filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Company's subsidiaries is required to file any forms,
reports or other documents with the SEC. Except as set forth in Part 3.5 of the
Company Disclosure Schedule or the Company SEC Reports, between the date of the
Company's last proxy statement filed with the SEC and the date hereof, no event
has occurred that would be required to be reported by the Company pursuant to
Item 404 of Regulation S-K promulgated by the SEC in its next proxy statement
that would otherwise be filed by the Company with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports (the
"COMPANY FINANCIALS"), including each Company SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q, 8-K or any successor
form under the Exchange Act) and (iii) fairly presented in all material respects
the consolidated financial position of the Company and its subsidiaries as at
the respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain all the footnotes required by GAAP
for audited statements, and were or are subject to normal and recurring year-end
adjustments that the Company does not expect to be material, individually or in
the aggregate. The balance sheet of the Company contained in the Company SEC
Reports as of
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September 30, 2005 is hereinafter referred to as the "COMPANY BALANCE SHEET."
Neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise) that are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Company and its subsidiaries taken as a whole, except for liabilities reflected
on the Company Balance Sheet or incurred since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practice or
incurred in connection with the transactions contemplated hereby.
(c) The Company has not been notified by its independent auditors or
by the staff of the SEC that such auditors or the staff of the SEC, as the case
may be, are of the view that any financial statement included in any
registration statement filed by the Company under the Securities Act or any
periodic or current report filed by the Company under the Exchange Act should be
restated, or that the Company should modify its accounting in future periods in
a manner that would be materially adverse to the Company. The Company has
heretofore furnished to Parent a complete and correct copy of any amendments or
modifications, which have not yet been filed with the SEC but which are required
to be filed, to Company SEC Reports.
(d) The Company is in compliance in all material respects with all
effective provisions of the Xxxxxxxx-Xxxxx Act of 2002 that are applicable to
the Company, and any related rules and regulations promulgated by the SEC.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Part 3.6
of the Company Disclosure Schedule, since the date of the Company Balance Sheet
there has not been: (i) any Company Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Company's or any
of its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by the Company of any of the Company's capital stock or any other
securities of the Company or its subsidiaries or any grant or issuance of any
options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements
or issuances of Company Options to employees in the ordinary course of business,
(iii) any split, combination or reclassification of any of the Company's or any
of its subsidiaries' capital stock, (iv) any granting by the Company or any of
its subsidiaries of any increase in compensation or fringe benefits, including
severance, termination or retention payments, to any of their officers or
employees outside the ordinary course of business consistent with past practice,
or any payment by the Company or any of its subsidiaries of any bonus to any of
their officers or employees outside the ordinary course of business consistent
with past practice, or any granting by the Company or any of its subsidiaries of
any bonus to any of their officers, employees or consultants outside the
ordinary course of business, consistent with past practice, or the entry by the
Company or any of its subsidiaries into, or material modification or amendment
of, any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are triggered
by, contingent or the terms of which are materially altered upon the occurrence
of a transaction involving the Company of the nature contemplated hereby or upon
the termination of employment or services with the Company, (v) any material
change or alteration in the policy of the Company relating to the granting of
stock options or other equity compensation to its employees and consultants,
(vi) entry by the Company or any of its subsidiaries into, or material
modification, amendment or cancellation of, any development services, licensing,
distribution, sales, sales services or other similar agreement with
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respect to any material Intellectual Property Rights (as defined in Section 3.9)
other than in the ordinary course of business consistent with past practice,
(vii) any acquisition, sale or transfer of any material asset by the Company or
any of its subsidiaries other than in the ordinary course of business, (viii)
any material change by the Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (ix) any
material revaluation by the Company of any of its assets, including writing off
notes or accounts receivable other than in the ordinary course of business.
3.7 TAXES.
(a) Except as set forth in Part 3.7(a) of the Company Disclosure
Schedule, the Company and each of its subsidiaries have timely filed all
material Tax Returns required to be filed by or on behalf of the Company and
each of its subsidiaries, such Tax Returns were true, correct and complete in
all material respects, and the Company and each of its subsidiaries have paid
all Taxes shown on such Tax Returns.
(b) The Company and each of its subsidiaries have withheld and paid
all material Taxes required to be withheld and paid in connection with any
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(c) Except as set forth in Part 3.7(c) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is currently the
beneficiary of any extension of time within which to file any Tax Return.
(d) Neither the Company nor any of its subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) Except as set forth in Part 3.7(e) of the Company Disclosure
Schedule, there are no liens for Taxes (other than Taxes not yet delinquent, or
Taxes being contested in good faith as set forth in Part 3.7(e) of the Company
Disclosure Schedule) upon any of the assets of the Company or any of its
subsidiaries.
(f) Except as set forth in Part 3.7(f) of the Company Disclosure
Schedule, neither the Company or any of its subsidiaries thereof has received
from any taxing authority any (i) written notice indicating an intent to open an
audit or other review or (ii) written notice or deficiency or proposed
adjustment for any amount of Tax proposed, asserted, or assessed by any taxing
authority against the Company or any of its subsidiaries.
(g) No tax audit or administrative or judicial Tax proceeding is
pending or presently in progress with respect to the Company or any of its
subsidiaries.
(h) The unpaid Taxes of the Company and its subsidiaries did not, as
of the date of the most recent Company Balance Sheet, exceed the reserve
established in accordance with GAAP for Tax liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of such Company Balance Sheet (rather than in
any notes thereto) and do not exceed that reserve as adjusted for the passage of
time
-22-
through the Closing Date in accordance with the past custom and practice of the
Company and its subsidiaries in filing their Tax Returns.
(i) Neither the Company nor any of its subsidiaries is a party to
any agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any (i) "excess parachute
payment" within the meaning of Code section 280G (or any corresponding provision
of state, local of foreign Tax law) or (ii) any amount that will not be fully
deductible as a result of Code section 162(m) or 404.
(j) Neither the Company nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(k) Neither the Company nor any of its subsidiaries (A) has been a
member of an Affiliated Group (as defined in this Section 3.7) filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Company) or (B) has any liability for the Taxes of any Person
(other than the Company or any of its subsidiaries) under Treasury Regulation
section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract or otherwise.
(l) Neither the Company nor any of its subsidiaries has distributed
stock of a corporation, or has had its stock distributed, in a transaction
purported or intended to be governed in whole or in part by section 355 or 361
of the Code.
For the purposes of this Agreement, "TAX" or "TAXES" means any federal,
state, local or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not and including any obligations to indemnify or
otherwise assume or succeed to the Tax liability of any other Person.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
For purposes of this Agreement, "AFFILIATED GROUP" means any affiliated
group within the meaning of Code section 1504(a) or any similar group defined
under a similar provision of state, local, or foreign law.
3.8 TITLE TO PROPERTIES.
(a) Neither the Company nor any of its subsidiaries owns any
interest in real property, other than the leaseholds described in Part 3.8 of
the Company Disclosure Schedule. Part 3.8 of the Company Disclosure Schedule
lists all real property leases to which the Company is a party and each
amendment thereto that is in effect as of the date of this Agreement. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which
-23-
with notice or lapse of time, or both, would constitute a default) that would
give rise to a claim against the Company in excess of $75,000.
(b) The Company has good, valid and marketable title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of its
material tangible properties and assets, real, personal and mixed, used or held
for use in its business, free and clear of any Encumbrances, except as reflected
in the Company Financials and except for liens for Taxes not yet due and payable
and such Encumbrances, if any, which are not material in character, amount or
extent. Each of the Company's subsidiaries has good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its tangible properties and assets, real, personal and mixed, used or held for
use in its business, free and clear of any Encumbrances, except as reflected in
the Company Financials and except for liens for Taxes not yet due and payable
and such Encumbrances, if any, which are not material in character, amount or
extent.
3.9 INTELLECTUAL PROPERTY. For purposes of this Agreement, the following
terms shall have the definitions set forth below:
"INTELLECTUAL PROPERTY RIGHTS" means all intellectual property
rights used by the Company and its subsidiaries in the conduct of their
business, including, without limitation: (i) all trademarks, service marks,
trade names, Internet domain names, trade dress, and the goodwill associated
therewith, and all registrations or applications for registration thereof
(collectively, the "COMPANY MARKS"); (ii) all patents, patent applications and
continuations (collectively, the "COMPANY PATENTS"); (iii) all copyrights,
database rights and moral rights in both published works and unpublished works,
including all such rights in software, user and training manuals, marketing and
promotional materials, internal reports, business plans and any other
expressions, mask works, firmware and videos, whether registered or
unregistered, and all registrations or applications for registration thereof
(collectively, the "COMPANY COPYRIGHTS"); and (iv) trade secret and confidential
information, including such rights in inventions (whether or not reduced to
practice), know how, customer lists, technical information, proprietary
information, technologies, processes and formulae, software, data, plans,
drawings and blue prints, whether tangible or intangible and whether stored,
compiled, or memorialized physically, electronically, photographically, or
otherwise (collectively, the "COMPANY SECRET INFORMATION"). For purposes of this
Section 3.9, "SOFTWARE" means any and all: (w) computer programs and
applications, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (x) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise, (y) descriptions, flow charts, library functions,
algorithms, architecture, structure, display screens and development tools, and
other information, work product or tools used to design, plan, organize or
develop any of the foregoing and (z) all documentation, including user manuals
and training materials, relating to any of the foregoing.
(a) Part 3.9 of the Company Disclosure Schedule sets forth a
complete and correct list of each of the following which is owned by the Company
or any of its subsidiaries: (i) each registered Company Xxxx, (ii) each material
unregistered Company Xxxx, (iii) each Company Patent and (iv) each registered
Company Copyright. Except as set forth in Part 3.9 of the Company Disclosure
Schedule, the Company or one of its subsidiaries: (i) owns all right, title and
interest in and to the Intellectual Property Rights, free and clear of all
Encumbrances (the "COMPANY OWNED INTELLECTUAL PROPERTY"), or (ii) is licensed to
use, or otherwise possesses legally valid and
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enforceable rights to use, the Intellectual Property Rights that it does not so
own (the "COMPANY LICENSED INTELLECTUAL PROPERTY"). The Company and its
Subsidiaries have made all necessary filings, recordations and payments to
protect and maintain their interests in the registered Company Marks, Company
Patents and registered Company Copyrights owned by the Company except where the
failure to make such filings, recordations or payments would not have a Company
Material Adverse Effect. No person has notified the Company or any subsidiary of
any claim that any of the products, services or technology used, sold, offered
for sale or licensed or proposed for use, sale, offer for sale or license by the
Company or any of its subsidiaries infringes any Intellectual Property Rights of
any person.
(b) Except as set forth in Part 3.9 of the Company Disclosure
Schedule: (i) to the Company's Knowledge, all the Company Patents owned by the
Company are valid and subsisting; (ii) to the Company's Knowledge, none of the
Company Patents is being infringed; and (iii) to the Company's Knowledge,
neither the validity nor the enforceability of any of the Company Patents owned
by the Company has been challenged by any person.
(c) Except as set forth in Part 3.9 of the Company Disclosure
Schedule: (i) to the Company's Knowledge, all the registered Company Marks owned
by the Company are valid and subsisting; (ii) to the Company's Knowledge, none
of the Company Marks owned by the Company is being infringed or diluted; and
(iii) to the Company's Knowledge, none of the Company Marks owned by the Company
has been opposed or challenged and no proceeding has been commenced or
threatened that would seek to prevent the use by the Company or any of its
subsidiaries of any Company Xxxx.
(d) Except as set forth in Part 3.9 of the Company Disclosure
Schedule: (i) to the Company's Knowledge, all the registered Company Copyrights
owned by the Company are valid and enforceable; (ii) to the Company's Knowledge,
none of the Company Copyrights owned by the Company is being infringed, or its
validity challenged or threatened in any way; and (iii) to the Company's
Knowledge, no proceeding has been commenced or threatened that would seek to
prevent the use by the Company or any of its subsidiaries of the Company
Copyrights owned by the Company.
(e) The Company and its subsidiaries have taken commercially
reasonable measures to protect the secrecy, confidentiality and value of the
Company Secret Information. To the Company's Knowledge, no Company Secret
Information owned by the Company has been used, divulged or appropriated for the
benefit of any person (other than the Company or any of its subsidiaries) or
otherwise misappropriated in a manner which would result in a Company Material
Adverse Effect.
(f) To the Company's Knowledge, no Company Owned Intellectual
Property is subject to any outstanding order, proceeding (other than pending
proceedings pertaining to applications for patent or trademark or copyright
registration) or stipulation that restricts in any manner the licensing thereof
by the Company or any of its subsidiaries.
(g) To the Company's Knowledge, none of its employees engaged in the
development of software or in performing sales and marketing functions on behalf
of the Company is obligated under any contract with any third party which would
materially conflict with such
-25-
employee's rights to develop software or engage in such sales and marketing
functions on behalf of the Company or following the Merger, the Surviving
Corporation.
(h) All employees, contractors, agents and consultants of the
Company or any of its subsidiaries who are or were involved in the creation of
Company Owned Intellectual Property have executed an assignment of inventions
agreement to vest in the Company or its subsidiary, as appropriate, exclusive
ownership of such Company Owned Intellectual Property, except where the failure
to have executed such an agreement would not result in a Company Material
Adverse Effect. All employees, contractors, agents and consultants of the
Company or any of its subsidiaries who have or have had access to Company Secret
Information owned by the Company have executed nondisclosure agreements to
protect the confidentiality of such Company Secret Information, except where the
failure to have executed such an agreement would not result in a Company
Material Adverse Effect.
(i) Without limiting the generality of the foregoing, except as set
forth in Part 3.9 of the Company Disclosure Schedule, (i) all the software that
the Company or any of its subsidiaries licenses or otherwise makes available to
customers, and all Intellectual Property Rights therein, were: (A) developed by
employees of the Company or of a subsidiary of the Company within the scope of
their employment and subject to their obligation to assign inventions and
patents therein; or (B) developed by independent contractors or consultants who
assigned all of their right, title and interest in and to that software to the
Company; or (ii) such software was otherwise acquired or licensed by the Company
from a third party by an agreement or contract that is disclosed in Part 3.9 of
the Company Disclosure Schedule.
(j) All material contracts, licenses and agreements relating to the
Intellectual Property Rights are in full force and effect. The consummation of
the transactions contemplated by this Agreement will neither violate nor result
in the breach, modification, cancellation, termination, or suspension of such
contracts, licenses and agreements, except to the extent that such breach,
modification, cancellation, termination, or suspension would not result in a
Company Material Adverse Effect. The Company and each of its subsidiaries are in
material compliance with, and have not materially breached any term of any of
such contracts, licenses and agreements and, to the Knowledge of the Company and
its subsidiaries, all other parties to such contracts, licenses and agreements
are in compliance in all material respects with, and have not materially
breached any term of, such contracts, licenses and agreements. Except as set
forth in Part 3.9 of the Company Disclosure Schedule, following the Closing
Date, the Surviving Corporation will be permitted to exercise all of the
Company's rights under such contracts, licenses and agreements to the same
extent the Company would have been able to had the transactions contemplated by
this Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
would otherwise be required to pay.
(k) Part 3.9 of the Company Disclosure Schedule lists all Open
Source Materials (as defined in this Section 3.9(k)) used by the Company in any
way, and describes the manner in which such Open Source Materials have been or
are currently used. Such description includes, without limitation, whether (and,
if so, how) the Open Source Materials were embedded, linked (including dynamic
linking), modified and/or distributed by the Company and whether and the extent
to which each of the Open Source Materials was used to develop, distribute or
design Company products to link with (including dynamic linking at runtime) or
access in any way
-26-
(whether by calls, execution branching, interprocess control or other technique
of any kind whatsoever) any Open Source Materials. Except as set forth in Part
3.9 of the Company Disclosure Schedule, the Company has not (i) incorporated
Open Source Materials into, or combined Open Source Materials with, any
Intellectual Property Rights or any Company products, (ii) distributed Open
Source Materials in conjunction with any Intellectual Property Rights or Company
products or (iii) used Open Source Materials that create, or purport to create,
obligations for the Company with respect to Intellectual Property Rights or
Company products or grant, or purport to grant, to any third party, any rights
or immunities under Intellectual Property Rights (including, but not limited to,
using any Open Source Materials that require, as a condition of use,
modification and/or distribution of such Open Source Materials that other
software incorporated into, derived from or distributed with such Open Source
Materials be (A) made available or distributed in source code form; (B) licensed
for the purpose of making derivative works; (C) licensed under terms that allow
reverse engineering, reverse assembly or disassembly of any kind; or (D)
redistributable at no charge). Except as set forth in Part 3.9 of the Company
Disclosure Schedule, no Intellectual Property Right or Company product is
subject to the terms of license of any such Open Source Materials. The Company
has not used Program Code (as defined in this Section 3.9(k)) that includes the
Linux kernel version 2.4 or any later version. "OPEN SOURCE MATERIALS" means any
software, library, utility, tool or other computer or program code
(collectively, "PROGRAM CODE") that is licensed or distributed as "free
software", "freeware", "open source software" or under any terms or conditions
that impose any requirement that any software using, linked with, incorporating,
distributed with, based on, derived from or accessing Program Code: (i) be made
available or distributed in source code form; (ii) be licensed for the purpose
of making derivative works; (iii) be licensed under terms that allow reverse
engineering, reverse assembly or disassembly of any kind; or (iv) be
redistributable at no charge. Open Source Materials include without limitation
any Program Code licensed or distributed under any of the following licenses or
distribution models or similar licenses or distribution models: the GNU General
Public License (GPL), GNU Lesser General Public License or GNU Library General
Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic
License, the Netscape Public License, the Sun Community Source License, (SCSL),
the Sun Industry Standards License (SISL) and the Apache License.
3.10 COMPLIANCE WITH LAWS.
(a) Neither the Company nor any of its subsidiaries is in conflict
with, or in default or violation of (i) any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which the Company or any of its subsidiaries or any of their respective
properties is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties is bound or affected, except for conflicts, violations and defaults
that, individually or in the aggregate, would not result in a Company Material
Adverse Effect. To the Company's Knowledge, no investigation or review by any
Governmental Entity is pending or has been threatened in a writing delivered to
the Company against the Company or any of its subsidiaries, nor, to the
Company's Knowledge, has any Governmental Entity indicated an intention to
conduct an investigation of the Company or any of its subsidiaries. There is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or could reasonably be expected to have the effect
of prohibiting in any material respect or materially impairing any business
practice of the Company or any of its subsidiaries, any acquisition
-27-
of material property by the Company or any of its subsidiaries or the conduct of
business by the Company and its subsidiaries as currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities that are
material to or necessary for the operation of the business of the Company and of
its subsidiaries as currently conducted (collectively, the "COMPANY PERMITS").
The Company and its subsidiaries are in compliance with the terms of the Company
Permits, which Company Permits are listed in Part 3.10 of the Company Disclosure
Schedule, except for such failure to comply which would not result in a Company
Material Adverse Effect.
3.11 LITIGATION. Except as set forth in Part 3.11 of the Company
Disclosure Schedule, there are no claims, suits, actions or proceedings pending
or, to the Company's Knowledge, threatened against, relating to or affecting the
Company or any of its subsidiaries, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which would, either singularly or in the
aggregate with all such claims, actions or proceedings, result in a Company
Material Adverse Effect. No Governmental Entity has at any time challenged or
questioned in a writing delivered to the Company the legal right of the Company
or any of its subsidiaries to design, offer or sell any of its products or
services in the present manner or style thereof or otherwise to conduct its
business as currently conducted. There are no claims, suits, actions or
proceedings pending, or to the Company's Knowledge, threatened against, relating
to or affecting the Company or any of its subsidiaries in connection with which
a director or officer of the Company or of any of its subsidiaries is seeking or
requesting indemnification from the Company or any of its subsidiaries.
3.12 EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of "Affiliate"
set forth in this Section 3.12(a) (which definition shall apply only to this
Section 3.12), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with the Company within the meaning of sections 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan" within the meaning of
Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate, or with respect
to which the Company had any liability, for the benefit of any Employee during
the calendar years 2001 through 2005;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
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(v) "EMPLOYEE" shall mean any current, former or retired
employee, officer or director of the Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each
Company Employee Plan that has been adopted or maintained by the Company,
whether informally or formally, for the benefit of Employees outside the United
States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan"
(as defined in this Section 3.12(a)) which is a "multiemployer plan," as defined
in Section 3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "PENSION PLAN" shall mean each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(xiv) "WARN ACT" shall mean the Worker Adjustment and
Retraining Notification Act and any similar state or local law of any
jurisdiction in the United States of America.
(b) DISCLOSURE OF PLANS. Part 3.12(b) of the Company Disclosure
Schedule contains an accurate and complete list of each Company Employee Plan
and each Employee Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement.
(c) DOCUMENTS. The Company has provided or made available to Parent:
(i) accurate and complete copies of all documents embodying each Company
Employee Plan and each Employee Agreement including all amendments thereto; (ii)
the most recent annual actuarial valuations, if any, prepared for each Company
Employee Plan; (iii) the three most recent annual reports (Form Series 5500 and
all schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Company Employee Plan or related
trust; (iv) if the Company Employee Plan is funded, the most recent annual and
periodic accounting
-29-
of Company Employee Plan assets; (v) the most recent summary plan description
together with the summary of material modifications thereto, if any, required
under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the DOL with respect to any Company Employee Plan delivered
or received during the previous three (3) calendar years; (vii) all material
written agreements and contracts relating to each Company Employee Plan,
including, but not limited to, administrative service agreements, group annuity
contracts and group insurance contracts; (viii) all communications material to
any Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company; (ix) all COBRA forms and related notices; (x) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan; and (xi) a list of all employees, officers and consultants of the Company
reflecting each such person's current title and/or job description and
compensation.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth in Part 3.12(d) of
the Company Disclosure Schedule, (i) the Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no Knowledge of any default or violation by any other
party to, each Company Employee Plan and/or Employee Agreement, and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code;
(ii) each Company Employee Plan intended to qualify under section 401(a) of the
Code and each trust intended to qualify under section 501(a) of the Code has
either received a favorable determination letter from the IRS with respect to
each such Plan as to its qualified status under the Code or has remaining a
period of time under applicable Treasury regulations or IRS pronouncements in
which to apply for such a determination letter and make any amendments necessary
to obtain a favorable determination and since the issuance of any determination
letter, to the Company's Knowledge, no event has occurred which would adversely
affect the status of such determination letter or the qualified status of such
Plan; (iii) no "prohibited transaction," within the meaning of section 4975 of
the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any Company Employee Plan;
(iv) there are no actions, suits or claims pending, or, to the Company's
Knowledge, threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any Company
Employee Plan; (v) each Company Employee Plan can be amended, terminated or
otherwise discontinued either before or after the Effective Time in accordance
with its terms, without liability to Parent, the Company or any of its
Affiliates (other than ordinary administration expenses typically incurred in a
termination event); (vi) there are no audits, inquiries or proceedings pending
or, to the Company's Knowledge, threatened by the IRS or DOL with respect to any
Company Employee Plan; (vii) neither the Company nor any Affiliate is subject to
any penalty or tax with respect to any Company Employee Plan under Section
402(i) of ERISA or sections 4975 through 4980 of the Code; (viii) all
contributions due from the Company or any Affiliate with respect to any of the
Company Employee Plans have been made as required under ERISA or have been
accrued on the Company Balance Sheet and no further contributions will be due or
will have accrued thereunder as of the Closing Date; and (ix) since 2004, there
has been no amendment to, written interpretation or authorized announcement
(whether or not written) by the Company relating to, or change in
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employee participation or coverage under, any Company Employee Plan or Employee
Agreement that would increase materially the expense of maintaining such Company
Employee Plan or Employee Agreement above the level of the expense incurred in
respect thereof during the calendar year 2005.
(e) PENSION PLANS. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has the Company contributed to
or been obligated to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. No Company Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) COBRA; FMLA. Neither the Company nor any Affiliate has, prior to
the Effective Time, and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees. The group health plans (as
defined in section 4980B(g) of the Code) that benefit employees of the Company
are in compliance, in all material respects, with the continuation coverage
requirements of section 4980B of the Code and Sections 601 through 608 of ERISA,
the Americans with Disabilities Act of 1990, as amended and the FMLA, and the
regulations thereunder, as such requirements affect the Company and its
employees. As of the Closing Date, there will be no material outstanding,
uncorrected violations under COBRA, with respect to any of the Company Employee
Plans or Employee Agreements, covered employees or qualified beneficiaries.
(i) EFFECT OF TRANSACTION. Except as set forth in Part 3.12(i) of
the Company Disclosure Schedule, the execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee. No payment or benefit
which will or may be made by the Company or its Affiliates with respect to any
Employee as a result of the transactions contemplated by this Agreement will be
characterized as an "excess parachute payment," within the meaning of section
280G(b)(1) of the Code or will be treated as a nondeductible expense within the
meaning of section 162(m) of the Code.
(j) EMPLOYMENT MATTERS. The Company and each of its subsidiaries:
(i) is in compliance in all material respects with all applicable foreign,
federal, state and local laws, rules and regulations respecting employment,
employment practices, immigration, terms and conditions of
-31-
employment, wages and hours, and the WARN Act and any similar state or local
"mass layoff" or "plant closing" laws, rules and regulations, in each case, with
respect to Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) has properly classified independent contractors for purposes of
federal and applicable state tax laws, laws applicable to employee benefits and
other applicable laws, except where the failure to properly classify such
independent contractors would not result in a material liability to the Company;
(iv) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (v) is not liable for any
material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending, or, to the Company's Knowledge, threatened
or reasonably anticipated claims or actions against the Company under any
workers compensation policy or long-term disability policy. To the Company's
Knowledge, no Employee of the Company has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such Employee is
bound due to such Employee being employed by the Company and disclosing to the
Company or using trade secrets or proprietary information of any other person or
entity. All employees of the Company are legally permitted to be employed by the
Company in the United States of America in their current jobs. There are no
controversies pending or, to the Company's Knowledge threatened, between the
Company or any subsidiary of the Company, on the one hand, and any of their
respective employees, on the other hand, that would be reasonably likely to
result in the Company's incurring material liability. Except as set forth in
Part 3.12(j) of the Company Disclosure Schedule, the Company does not have any
employment contracts, Employee Agreements, or consulting agreements currently in
effect that are not terminable at will (other than agreements for the sole
purpose of providing for the confidentiality of proprietary information or
assignment of invention). The Company will have no liability to any employee or
to any organization or any other entity as a result of the termination of any
employee leasing arrangement.
(k) LABOR. No work stoppage or labor strike against the Company is
pending, threatened or reasonably anticipated. The Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
Company's Knowledge, threatened or reasonably anticipated relating to any labor,
safety or discrimination matters involving any Employee, including charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
liability to the Company. Neither the Company nor any of its subsidiaries has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. The Company is not presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.
(l) INTERNATIONAL EMPLOYEE PLANS. Each International Employee Plan
has been established, maintained and administered in material compliance with
its terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International Employee
Plan. Furthermore, no International Employee Plan has unfunded liabilities that
are not fully accrued on the Company Balance Sheet. Except as required by law,
no condition exists that would prevent the Company or Parent from terminating or
amending any
-32-
International Employee Plan at any time for any reason (other than ordinary
administration expenses or routine claims for benefits).
(m) CODE SECTION 409A. Each Plan required to be listed in Part
3.12(b) of the Company Disclosure Schedule that is a "nonqualified deferred
compensation plan" (as defined in section 409A(d)(1) of the Code) and was in
existence prior to October 3, 2004, has not been "materially modified" (within
the meaning of Section 885(d)(2)(B) of the American Jobs Creation Act of 2004
and any applicable guidance issued thereunder) since October 3, 2004, in a
manner which would cause amounts deferred in taxable years beginning before
January 1, 2005, under such plan to be subject to section 409A of the Code. Each
Plan required to be listed in Part 3.12(b) of the Company Disclosure Schedule
that is a "nonqualified deferred compensation plan" (as defined in section
409A(d)(1) of the Code) and which has not been terminated has been operated
since January 1, 2005 in good faith compliance with the provisions of section
409A of the Code, Notice 2005-1 and the proposed regulations issued under
section 409A of the Code.
3.13 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not result in a Company
Material Adverse Effect, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "HAZARDOUS MATERIAL") are present, as a result of the
actions of the Company or any of its subsidiaries or any affiliate of the
Company, or, to the Company's Knowledge, as a result of any actions of any third
party or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof that the Company or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not result in a
Company Material Adverse Effect (in any individual case or in the aggregate) (i)
neither the Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither the Company nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) PERMITS. The Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents
("ENVIRONMENTAL PERMITS") material to and necessary for the conduct of the
Company's and its subsidiaries' Hazardous Material Activities and other
businesses of the Company and its subsidiaries as such activities and businesses
are currently being conducted, except as such failure to hold such Environmental
Permits would result in a Company Material Adverse Effect.
-33-
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to the
Company's Knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against the Company or any of its subsidiaries in a writing delivered to the
Company concerning any Environmental Permit of the Company, Hazardous Material
or any Hazardous Materials Activity of the Company or any of its subsidiaries,
other than such actions, proceedings, revocation proceedings, amendment
procedures, writs or injunctions that would not have, singularly or in the
aggregate, a Company Material Adverse Effect. To the Company's Knowledge, there
is no fact or circumstance which could involve the Company or any of its
subsidiaries in any environmental litigation or impose upon the Company any
material environmental liability which would result in a Company Material
Adverse Effect.
3.14 CERTAIN AGREEMENTS. Except as otherwise set forth in the applicable
lettered subsection of Part 3.14 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement or commitment with any
employee or member of the Company's Board of Directors, providing any term of
employment or compensation guarantee or any consulting agreement or any
employment agreement that provides severance benefits or other benefits after
the termination of employment of such employee regardless of the reason for such
termination of employment, except as required by applicable law;
(b) any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(c) any agreement of indemnification, other than licenses entered
into in the ordinary course of business;
(d) any agreement of any guaranty or any instrument evidencing
indebtedness for borrowed money by way of credit facility, direct loan, sale of
debt securities, purchase money obligation, conditional sale, or otherwise (any
disclosure of which in Part 3.14(d) of the Company Disclosure Schedule shall set
forth the corresponding amount of such indebtedness for borrowed money
outstanding thereunder);
(e) any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit the Company's or any of its
subsidiaries' freedom to compete in any line of business or in any geographic
area or which would so limit Parent, the Company or the Surviving Corporation or
any of its subsidiaries after the Effective Time or granting any exclusive
distribution or other exclusive rights;
(f) any agreement or commitment currently in force relating to the
disposition or acquisition by the Company or any of its subsidiaries after the
date of this Agreement of material assets not in the ordinary course of
business, or pursuant to which the Company has any material
-34-
ownership or participation interest in any corporation, partnership, joint
venture, strategic alliance or other business enterprise other than the
Company's subsidiaries;
(g) any licensing, distribution, resale or other agreement, contract
or commitment with regard to the acquisition, distribution, resale or licensing
of any Intellectual Property Rights other than licenses, distribution, resale
agreements, advertising agreements, or other similar agreement entered into in
the ordinary course of business consistent with past practice;
(h) agreement to forgive any indebtedness in excess of $20,000 of
any person to the Company or any subsidiary;
(i) agreement regarding the lease of real property involving rental
obligations in excess of $75,000 per annum, or agreement regarding the purchase
of real property;
(j) loan agreement, promissory note or other evidence of
indebtedness for borrowed money;
(k) agreement pursuant to which the Company or any subsidiary (A)
uses any intellectual property of any third party that is material to the
operation of its business (other than off-the-shelf commercial software programs
with respect to which no future license or royalty payment will become due), (B)
incorporates any third party intellectual property in any of its products; or
(C) has granted to any third party an exclusive license of any Intellectual
Property Rights owned by the Company or any license of its source code
(including customary source code escrow arrangements entered into in the
ordinary course of business);
(l) agreement obligating the Company or any subsidiary to make
aggregate payments in excess of $150,000 to any third party during the two-year
period ending September 30, 2007;
(m) agreement pursuant to which the Company or any subsidiary (A)
reasonably expects to receive aggregate payments in excess of $200,000 during
the two year period ending September 30, 2007 or (B) reasonably expects to
recognize revenue in such aggregate amount during such two year period;
(n) agreement or commitment with any affiliate of the Company;
(o) any agreement or commitment currently in force providing for
capital expenditures by the Company or its subsidiaries in excess of $112,500;
or
(p) any other agreement or commitment currently in effect that is
material to the Company's or its subsidiaries' business as presently conducted.
Each agreement that is required to be disclosed in the Company Disclosure
Schedule pursuant to clauses (a) through (o) above or pursuant to Section 3.9
and each agreement that is required to be filed with any Company SEC Report as a
"material contract" (as defined by 601 of Regulation S-K) shall be referred to
herein as a "COMPANY CONTRACT." Each Company Contract is valid and in full force
and effect. Neither the Company nor any of its subsidiaries, nor to the
Company's Knowledge, any other party thereto, is in breach, violation or default
under, and neither
-35-
the Company nor any of its subsidiaries has received written notice alleging
that it has breached, violated or defaulted under, any of the terms or
conditions of any Company Contract in such a manner as would permit any other
party thereto to cancel or terminate any such Company Contract, or would permit
any other party to seek material damages or other remedies for any or all such
alleged breaches, violations, or defaults.
3.15 BROKERS' AND FINDERS' FEES . Except for fees payable to Jefferies
Broadview pursuant to an engagement letter dated September 13, 2005, the Company
has not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.16 INSURANCE. The Company and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting business or owing assets similar to those of the Company and its
subsidiaries. Except as set forth in Part 3.16 of the Company Disclosure
Schedule, there is no material claim pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
have been paid, and the Company and its subsidiaries are otherwise in compliance
in all material respects with the terms of such policies and bonds. Except as
set forth in Part 3.16 of the Company Disclosure Schedule, to the Company's
Knowledge, there has been no threatened termination of, or material premium
increase with respect to, any of such policies.
3.17 DISCLOSURE DOCUMENTS.
(a) Each document required to be filed by the Company with the SEC
or required to be distributed or otherwise disseminated by the Company to its
stockholders in connection with the transactions contemplated by this Agreement
(the "COMPANY DISCLOSURE DOCUMENTS"), including, without limitation, the
Schedule 14D-9 and the information statement to be filed by the Company with the
SEC in connection with the Offer pursuant to Rule 14f-1 promulgated under the
Exchange Act (as amended or supplemented from time to time, the "INFORMATION
STATEMENT"), will, when filed, distributed or disseminated, comply as to form in
all material respects with the applicable requirements of the Exchange Act. The
representations and warranties contained in this Section 3.17(a) will not apply
to statements or omissions included in the Company Disclosure Documents based
upon information furnished to the Company in writing by Parent or Merger Sub or
any of their representatives specifically for use therein.
(b) At the time of the filing of any Company Disclosure Document,
the Schedule 14D-9 and the Information Statement with the SEC, and at the
respective times such documents and any amendments or supplements thereto are
distributed or disseminated to stockholders of the Company, such documents will
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 3.17(b) will not apply to statements or
omissions included in the Company Disclosure Documents based upon information
furnished to the Company in writing by Parent or Merger Sub or any of their
representatives specifically for use therein.
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(c) The information with respect to the Company or any of its
subsidiaries that the Company furnishes to Parent in writing specifically for
use in the Offer Documents, at the time of the filing thereof with the SEC and
at the time of any distribution or dissemination thereof to stockholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
3.18 CUSTOMERS. No customer which individually accounted for more than
five percent of the Company's gross revenues during the year ended March 31,
2005 or the six months ended September 30, 2005 has indicated in writing to the
Company since the date of the most recent written purchase agreement between the
Company and such customer that it will stop buying, discontinue maintenance
services, or materially decrease the rate of buying services or products of the
Company, or has at any time since April 1, 2004 decreased materially its
acquisition of services or products of the Company.
3.19 BOARD APPROVAL. The Board of Directors of the Company, at a meeting
duly called and held, has unanimously (i) determined that this Agreement and the
transactions contemplated hereby, including, without limitation, the Offer, the
purchase of the shares of Company Common Stock contemplated by the Offer, and
the Merger (collectively, the "TRANSACTIONS") are fair to and in the best
interests of the Company and its stockholders and declared the advisability
thereof, (ii) approved and adopted this Agreement and approved the Transactions
in accordance with the requirements of Delaware Law, (iii) subject to Section
6.1(c), resolved to recommend that the stockholders of the Company accept the
Offer and approve and adopt this Agreement and approve the Merger and (iv)
resolved to appoint Parent's designees to the Board of Directors of the Company
effective at the Appointment Time, consistent with Section 1.4. The Board of
Directors of the Company has taken all actions so that the restrictions
contained in Section 203 of Delaware Law applicable to a "business combination"
(as defined therein) will not apply to the execution, delivery or performance of
this Agreement or the consummation of the Transactions.
3.20 FAIRNESS OPINION. The Company's Board of Directors has received from
Jefferies Broadview, financial advisor to the Company, its opinion that, as of
the date hereof, the Offer Price is fair, from a financial point of view, to the
holders of Company Common Stock, such opinion to be delivered to the Company in
writing promptly following the date hereof.
3.21 ACCOUNTING SYSTEM. The Company and its subsidiaries maintain a
system of internal controls over financial reporting reasonably sufficient in
all material respects to provide reasonable assurance (a) that transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP; (b) that receipts and expenditures are executed in
accordance with the authorization of management and (c) regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the Company
assets that could have a material effect on the financial statements. The
Company has not been notified by its independent auditor that there is any
significant deficiency or material weakness in the Company's internal control
over financial reporting. Complete and accurate copies of any management letter
or similar correspondence from any independent auditor of the Company or any of
its subsidiaries have been made available to Parent.
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3.22 INFORMATION TO BE SUPPLIED. None of the information with respect to
the Company contained in this Agreement, the Company Disclosure Schedule, or in
any certificate to be executed or delivered pursuant hereto by the Company at or
prior to the Appointment Time, contains any untrue statement of a material fact,
or omits to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading.
3.23 TRANSACTION EXPENSES . Part 3.23 of the Company Disclosure Schedule
sets forth a detailed list of the Company's Transaction Expenses (or a
reasonable estimate thereof to the extent the final amount of certain individual
Transaction Expenses will not be known until after the date of this Agreement).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date of this Agreement and as of the Closing Date, Parent and
Merger Sub represent and warrant to the Company, subject to any exception
expressly stated in the disclosure schedule, delivered by Parent to the Company
dated as of the date hereof and certified by a duly authorized officer of Parent
(the "PARENT DISCLOSURE SCHEDULE"), which exception shall specifically identify
the representation to which it relates, as follows:
4.1 ORGANIZATION OF PARENT AND MERGER SUB.
(a) Each of Parent and Merger Sub (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized; (ii) has the corporate or other power and
authority to own, lease and operate its assets and property and to carry on its
business as now being conducted; and (iii) except as would not be material to
Parent, is duly qualified or licensed to do business in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary.
(b) Parent has delivered or made available to the Company true,
correct and complete copies of the Certificate of Incorporation and Bylaws of
Parent and Merger Sub, each as amended to date (collectively, the "PARENT
CHARTER DOCUMENTS"), and each such instrument is in full force and effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of the
Parent Charter Documents. Parent has delivered or made available to the Company
all proposed or considered amendments to the Parent Charter Documents.
4.2 AUTHORITY; NON-CONTRAVENTION.
(a) Parent and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub, subject
only to (i) the filing of the Offer Documents pursuant to applicable federal
securities laws and (ii) the filing of the Certificate of Merger pursuant to
Delaware Law. No other approval of any holder of any securities of Parent is
required in connection with the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery by the Company,
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constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally and general principles of equity.
(b) The execution and delivery of this Agreement by Parent and
Merger Sub does not, and the performance of this Agreement by Parent and Merger
Sub will not, (i) conflict with or violate the Parent Charter Documents, (ii)
subject to compliance with the requirements set forth in Section 4.2(c),
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or Merger Sub or by which any of their respective material
properties is bound or affected, or (iii) result in any material breach of or
constitute a material default (or an event that with notice or lapse of time or
both would become a material default) under, or impair Parent's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of Parent or
Merger Sub pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, concession or other instrument or
obligation to which Parent or Merger Sub is a party or by which Parent or Merger
Sub or any of their respective material properties are bound or affected.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other person
is required to be obtained or made by Parent or Merger Sub in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for (i) the filing of the
Offer Documents with the SEC, and compliance with applicable federal securities
laws in connection therewith, (ii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (iii) the filing of a
Notification and Report Form under the HSR Act, and the termination or
expiration of the waiting period under the HSR Act and any other antitrust or
competition laws, rules or regulations the parties reasonably agree are
applicable, (iv) the filing of a Schedule 13D with regard to the Voting
Agreements in accordance with the Securities Act and the Exchange Act, (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable Legal Requirements and any antitrust
or competition laws, rules or regulations the parties reasonably agree are
applicable, and (vi) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to Parent or
the Surviving Corporation or have a material adverse effect on the ability of
the parties hereto to consummate the Offer and the Merger.
4.3 LITIGATION. There are no claims, suits, actions or proceedings
pending or, to the knowledge of Parent, threatened against, relating to or
affecting Parent or any of its subsidiaries, before any Governmental Entity or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to have a material adverse effect on the ability of the parties
hereto to consummate the Offer and the Merger.
4.4 DISCLOSURE DOCUMENTS.
(a) Parent and Merger Sub will deliver to the Company all
information reasonably requested by the Company for inclusion in the Company
Disclosure Documents. None of the information to be supplied by Parent or Merger
Sub to the Company for inclusion in any such
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Company Disclosure Document will, at the time it is filed with the SEC or
distributed or disseminated to the stockholders of the Company or at the time of
the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(b) The Offer Documents, when filed, distributed or disseminated, as
the case may be, will comply as to form in all material respects with the
applicable requirements of the Exchange Act and, at the time of the filing
thereof, at the time of any distribution or dissemination thereof and at the
time of consummation of the Offer, will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
will not apply to statements or omissions included in the Offer Documents based
upon information furnished to Parent or Merger Sub by the Company in writing
specifically for use therein.
4.5 AVAILABILITY OF FUNDS. Parent has as of the date of this Agreement,
and will have upon the expiration date of the Offer (as the same may be extended
from time to time pursuant to this Agreement) and at the Effective Time, and
will make available to Merger Sub at the expiration date of the Offer and at the
Effective Time, the funds necessary to consummate the Offer and the Merger.
4.6 NO COMPANY SHARES. As of the date hereof, neither Parent nor Merger
Sub beneficially owns any shares of Company Common Stock.
4.7 MERGER SUB. Since its inception, Merger Sub has not had any
operations and has not conducted any business. All of the outstanding capital
stock of Merger Sub is owned beneficially and of record by Parent.
4.8 BROKERS' AND FINDERS' FEES. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
ARTICLE 5
CONDUCT PRIOR TO THE APPOINTMENT TIME
5.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Appointment Time, the Company and each of
its subsidiaries shall, except to the extent that Parent shall otherwise consent
in writing, carry on its business in the usual, regular and ordinary course,
consistent with past practice and in compliance in all material respects with
all applicable laws and regulations, pay its debts and Taxes when due subject to
good faith disputes over such debts or Taxes, pay or perform other material
obligations when due, and use commercially reasonable efforts consistent with
past practice and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees, (iii) collect its accounts receivable and any other amounts payable
to it when due and otherwise enforce any obligations owed to it by others
substantially in accordance with their terms, and (iv) preserve its
relationships with customers, suppliers, licensors, licensees, and others with
which it has business
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dealings. In addition, the Company will promptly notify Parent in writing of any
material event involving its business or operations.
In addition, except as permitted by the terms of this Agreement, without
the prior written consent of Parent, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Appointment Time, the Company shall not do any of
the following and shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of repurchase of restricted stock, or reprice options granted to any
employee, consultant, director or other person or authorize cash payments in
exchange for any options or take any such action with regard to any warrant or
other right to acquire the Company's capital stock;
(b) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements in effect, or policies existing,
on the date hereof and as previously made available, in the case of written
agreements or written policies, or disclosed in writing, in the case of existing
policies, to Parent, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to Intellectual Property
Rights, other than non-exclusive licenses in the ordinary course of business and
consistent with past practice;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of the Company or its subsidiaries, except
repurchases of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to option agreements or
purchase agreements in effect on the date hereof;
(f) Enter into any agreement, obligation or commitment containing
covenants purporting to limit or which effectively limit the Company's or any of
its subsidiaries' freedom to compete in any line of business and/or in any
geographic area or which would so limit Parent, the Company or the Surviving
Corporation or any of its subsidiaries after the Effective Time or granting any
exclusive distribution or other exclusive rights;
(g) Issue, deliver, sell, authorize, pledge or otherwise encumber
any shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) shares of Company Common Stock pursuant to the
exercise of Company Options and Company Warrants and (ii) options granted to
newly hired employees consistent in amounts with the Company's prior practices
and having an exercise price at least equal to the fair market value of Company
Common Stock on the date any such option is granted;
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(h) Cause, permit or propose any amendments to the Company Charter
Documents or to the charter documents of any subsidiary;
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof; or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of the Company or enter into any material joint ventures, strategic
relationships, alliances, marketing or co-sale agreements or make any material
loan or advance to, or investment in, any person, except for loans or capital
contributions to a subsidiary or advances of routine business or travel expenses
to employees, officers or directors in the ordinary course of business,
consistent with past practice;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company, other than in the ordinary course of business,
consistent with past practice;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of the Company or
any of its subsidiaries, enter into any "keep well" or other agreement to
maintain any financial statement condition or enter into any arrangement having
the economic effect of any of the foregoing, other than in the ordinary course
of business consistent with past practice;
(l) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice
with employees who are terminable "at will"), pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors, officers, employees or consultants, other than in the ordinary course
of business, consistent with past practice, or change in any material respect
any management policies or procedures;
(m) Make any capital expenditures outside of the ordinary course of
business in excess of $112,500 in the aggregate;
(n) Modify, amend or terminate any Company Contract or other
material contract or agreement to which the Company or any subsidiary thereof is
a party or waive, release or assign any material rights or claims thereunder;
(o) Enter into, modify, amend or cancel any development services,
licensing, distribution, sales, sales representation or other similar agreement
or obligation with respect to any Intellectual Property Rights other than such
agreements entered into in the ordinary course of business consistent with past
practice or enter into any contract of a character required to be disclosed by
Section 3.14;
(p) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
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(q) Discharge, settle or satisfy any disputed claim, litigation,
arbitration, disputed liability or other controversy (absolute, accrued,
asserted or unasserted, contingent or otherwise), including any liability for
Taxes, other than the discharge or satisfaction in the ordinary course of
business consistent with past practice or incurred in connection with the
transactions contemplated hereby, or in accordance with their terms, of
liabilities reflected or reserved against in the Company Balance Sheet or
incurred since September 30, 2005 in the ordinary course of business consistent
with past practice, or waive any material benefits of, or agree to modify in any
material respect, any confidentiality, standstill or similar agreements to which
the Company or any of its subsidiaries is a party; provided, however, that the
discharge or settlement of any disputed claim, liability or other controversy in
the amount of less than $162,500 shall not be deemed to be prohibited by the
foregoing; or
(r) Agree in writing or otherwise to take any of the actions
described in Sections 5.1(a) through 5.1(q) above.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 STOCKHOLDERS MEETING.
(a) Upon consummation of the Offer, the Company, acting through its
Board of Directors, shall, in accordance with applicable law and its certificate
of incorporation and bylaws, duly call, give notice of, convene and hold a
special meeting of its stockholders (the "STOCKHOLDERS MEETING") as soon as
practicable on a date determined in accordance with the mutual agreement of
Parent and the Company for the purpose of considering and voting upon the
approval and adoption of this Agreement and the approval of the Merger, unless
Delaware Law does not require a vote of the stockholders of the Company for
consummation of the Merger. The Company's Board of Directors shall (i) recommend
to the stockholders of the Company the approval and adoption of this Agreement
and the approval of the Merger, (ii) include in the proxy or information
statement of the Company containing information required by Regulation 14A under
the Exchange Act (together with all amendments and supplements thereto, the
"PROXY STATEMENT"), to be filed with the SEC in connection with the Merger if
required under Delaware Law, its recommendation that the stockholders of the
Company vote in favor of the approval and adoption of this Agreement and the
approval of the Merger, (iii) take all lawful action to solicit such approval
from the stockholders of the Company to the extent such approval of the Merger
is required under Delaware Law, (iv) not withdraw, modify or qualify (or propose
to withdraw, modify or qualify) such favorable recommendation and (v) not take
any action or make any statement in connection with Stockholders Meeting
inconsistent with such recommendation, except as permitted in Section 6.1(c)
below.
(b) In connection with the Stockholders Meeting, the Company shall
(i) as promptly as practicable after the Appointment Time prepare and file with
the SEC, use commercially reasonable efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable the Proxy
Statement and all other proxy materials required in connection with such
meeting, (ii) notify Parent of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information and shall promptly provide
to Parent copies of all correspondence between the Company or any representative
of the Company and the SEC and (iii) shall cooperate with Parent
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and its counsel and give Parent and its counsel the reasonable opportunity to
review and comment on the Proxy Statement prior to its being filed with the SEC
and shall give Parent and its counsel the opportunity to review and comment on
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their being
filed with, or sent to, the SEC.
(c) Nothing in this Agreement shall prevent the Board of Directors
of the Company from, prior to the Appointment Time, withholding, withdrawing,
amending, modifying or qualifying its recommendation in favor of the Offer or
the Merger (and recommending that its stockholders accept a Superior Offer (as
defined in this Section 6.1(c))) or entering into a definitive agreement
relating to a Superior Offer (a "CHANGE OF RECOMMENDATION") if (i) a Superior
Offer is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "NOTICE OF SUPERIOR OFFER") advising Parent
that the Company has received a Superior Offer, specifying all of the material
terms and conditions of such Superior Offer and identifying the person or entity
making such Superior Offer, (iii) Parent shall not, within three (3) Business
Days of Parent's receipt of the Notice of Superior Offer, have made an offer
that the Company's Board of Directors determines in its reasonable judgment,
after consultation with a financial advisor of national standing, to be at least
as favorable to the Company's stockholders as such Superior Offer (it being
agreed that the Board of Directors of the Company shall promptly following the
receipt of any such offer convene a meeting at which it will consider such offer
in good faith), (iv) the Board of Directors of the Company reasonably concludes,
after consultation with its outside counsel, that, in light of such Superior
Offer, the failure to withhold, withdraw, amend or modify such recommendation
would be inconsistent with the fiduciary obligations of the Board of Directors
of the Company to the Company's stockholders under applicable law, and (v) the
Company shall not have violated any of the restrictions set forth in this
Section 6.1 or Section 6.4. The Company shall provide Parent with at least two
(2) Business Days prior notice (or such lesser prior notice as is provided to
the members of the Company's Board of Directors but in no event less than
twenty-four hours) of any meeting of the Company's Board of Directors at which
the Company's Board of Directors is reasonably expected to consider any
Acquisition Proposal (as defined in Section 6.4(a)) to determine whether such
Acquisition Proposal is a Superior Offer. Nothing contained in this Section 6.1
shall limit the Company's obligation to hold and convene the Stockholders
Meeting (regardless of whether the recommendation of the Board of Directors of
the Company shall have been withdrawn, amended or modified prior to the
Appointment Time).
For purposes of this Agreement, "SUPERIOR OFFER" shall mean an
unsolicited, bona fide written offer made by a third party to consummate any of
the following transactions: (i) a merger, consolidation or other business
combination involving the Company or (ii) the acquisition by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) (including by way of a tender offer or an exchange offer
or a two step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger involving the Company), directly or indirectly,
of ownership of 100% of the then outstanding shares of capital stock, in each
case, pursuant to which the stockholders of the Company (other than Parent or
Merger Sub) immediately preceding such transaction hold less than 50% of the
equity interest in the surviving or resulting entity of such transaction, or
substantially all of the assets of the Company, in each case, on terms that the
Board of Directors of the Company determines, in its reasonable judgment (after
consultation with a financial advisor of national standing) to be more favorable
to the Company's stockholders than the terms of the Offer and the Merger;
provided, however, that any
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such offer shall not be deemed to be a "Superior Offer" unless: (A) any
financing that is required to consummate the transaction contemplated by such
offer is committed; (B) either, (x) the aggregate cash consideration payable to
the Company's stockholders in respect of the transaction contemplated by such
offer (or payable to the Company in the case that the transaction contemplated
by such offer is a sale of the Company's assets) is at least $67,721,888, or (y)
the value of the total aggregate consideration (cash and securities) payable to
the Company's stockholders in respect of the transaction contemplated by such
offer (or payable to the Company in the case that the transaction contemplated
by such offer is a sale of the Company's assets) could not reasonably be
expected to be less than $67,721,888, after taking into account, fluctuations in
historical prices, risks associated with future prices and liquidity of the
securities that would be issued in connection with such offer; and (C) the Board
of Directors of the Company has determined, in its reasonable judgment and after
consultation with its outside counsel, that (i) the conditions to closing the
transaction contemplated by such offer are no more difficult to satisfy in the
aggregate than the conditions set forth in Annex A hereto and (ii) the
transaction contemplated by such offer is reasonably capable of being
consummated timely on the terms proposed, taking into account all financial,
regulatory, legal and other aspects of such offer.
(d) Nothing contained in this Agreement shall prohibit the Company
or its Board of Directors from disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, if,
in the good faith judgment of the Company's Board of Directors, after
consultation with and advice from its outside counsel, such a disclosure is
required under applicable law or the failure to do so would be inconsistent with
the fiduciary obligations of the Board of Directors.
6.2 ANTITRUST AND OTHER FILINGS.
(a) As promptly as practicable after the execution of this
Agreement, each of the Company and Parent will prepare and file (i) any
pre-merger notification forms and other documentation required by the merger
notification or control laws and regulations of any applicable jurisdiction, as
agreed to by the parties (the "ANTITRUST FILINGS") and (ii) any other filings
required to be filed by it under the Exchange Act, the Securities Act or any
other federal, state or foreign laws relating to the Transactions (the "OTHER
FILINGS"). In furtherance and not in limitation of the foregoing, each of the
Company and Parent agrees to make, as promptly as practicable, an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect to
the Transactions and all other necessary filings with other Governmental
Entities relating to the transactions contemplated hereby. The Company and
Parent each shall promptly supply the other with any information or
documentation which may be required in order to effectuate any filings pursuant
to this Section 6.2.
(b) Each of the Company and Parent will notify the other promptly
upon the receipt of any comments from any government officials in connection
with any filing made pursuant hereto and of any request for amendments or
supplements to any Antitrust Filings or Other Filings or for additional
information and will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and any government
officials, on the other hand, with respect to the Offer and the Merger or any
Antitrust Filing or Other Filing. Each of the Company and Parent will cause all
documents that it is responsible for filing with any regulatory authorities to
comply in all material respects with all applicable requirements of law and the
rules
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and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to any Antitrust Filing
or Other Filing, the Company or Parent, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the appropriate
government officials such amendment or supplement.
6.3 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) The parties acknowledge that the Company and Parent have
previously executed that certain Confidentiality Agreement dated as of May 4,
2005 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
(b) The Company will afford Parent and its accountants, counsel and
other representatives reasonable access to its properties, books, records,
personnel and customers during the period commencing on the date of this
Agreement and ending at the Appointment Time to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel, as Parent may reasonably
request. No information or knowledge obtained by a party in any investigation
pursuant to this Section 6.3(b) will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Transactions.
6.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the Appointment
Time or termination of this Agreement pursuant to its terms, the Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, (i) solicit, initiate, knowingly encourage or induce the making,
submission or announcement of any Acquisition Proposal, (ii) participate in any
discussions or negotiations with a third party regarding, or furnish to any
person any nonpublic information with respect to, or knowingly take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
(iii) engage in discussions with any person with respect to any Acquisition
Proposal, except to refer them to the provisions of this Section 6.4(a), (iv)
approve, endorse or recommend any Acquisition Proposal, subject to Section
6.1(c) and 6.1(d) or (v) enter into any letter of intent or similar document or
any contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Proposal, subject to Section 6.1(c) and 6.1(d); provided, however,
that prior to the Appointment Time, if required under Delaware Law, this Section
6.4(a) shall not prohibit the Company from furnishing nonpublic information
regarding the Company and its subsidiaries to, or entering into discussions
with, any person or group who has submitted (and not withdrawn) to the Company
an unsolicited, written, bona fide Acquisition Proposal that the Board of
Directors of the Company reasonably concludes (after consultation with a
financial advisor of national standing) constitutes, or is reasonably likely to
lead to, a Superior Offer; provided further that (1) neither the Company nor any
representative of the Company and its subsidiaries shall have violated any of
the restrictions set forth in this Section 6.4, (2) the Board of Directors of
the Company concludes in good faith, after consultation with its outside legal
counsel, that such action is required in order for the Board of Directors of the
Company to comply with its fiduciary obligations to the Company's stockholders
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under applicable law, (3) prior to furnishing any such nonpublic information to,
or entering into any such discussions with, such person or group, the Company
gives Parent written notice of the identity of such person or group and all of
the material terms and conditions of such Acquisition Proposal, including
providing to Parent a written copy of such Acquisition Proposal, and of the
Company's intention to furnish nonpublic information to, or enter into
discussions with, such person or group, and the Company receives from such
person or group an executed confidentiality agreement containing terms at least
as restrictive with regard to the Company's confidential information as the
Confidentiality Agreement, and (4) contemporaneously with furnishing any such
nonpublic information to such person or group, the Company furnishes such
nonpublic information to Parent (to the extent such nonpublic information has
not been previously furnished by the Company to Parent). The Company and its
subsidiaries will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any
offer or proposal (other than an offer or proposal by Parent or Merger Sub)
relating to, or involving: (A) any acquisition or purchase by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 15% beneficial ownership interest in the
total outstanding voting securities of the Company or any of its subsidiaries;
(B) any tender offer or exchange offer that if consummated would result in any
person or "group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) beneficially owning 15% or more of the total
outstanding voting securities of the Company or any of its subsidiaries; (C) any
merger, consolidation, business combination or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 85% of the equity interests in the surviving or
resulting entity of such transaction; (D) any sale, lease, exchange, transfer,
license (other than in the ordinary course of business), acquisition, or
disposition of 15% or more of the assets of the Company; or (E) any liquidation
or dissolution of the Company.
(b) In addition to the obligations of the Company set forth in
Section 6.4(a), the Company as promptly as practicable, and in any event within
twenty four (24) hours of its receipt, shall advise Parent orally and in writing
of an Acquisition Proposal or any request for nonpublic information or other
inquiry which the Company reasonably believes could lead to an Acquisition
Proposal, the material terms and conditions of such Acquisition Proposal,
request or inquiry, and the identity of the person or group making any such
Acquisition Proposal, request or inquiry, and shall provide to Parent a written
copy of any such Acquisition Proposal if in writing. The Company will keep
Parent informed as promptly as practicable in all material respects of the
status and details (including material amendments or proposed amendments and
providing to Parent written copies thereof if in writing) of any such
Acquisition Proposal, request or inquiry.
6.5 PUBLIC DISCLOSURE. Prior to the Appointment Time, Parent and the
Company will consult with each other, and agree, before issuing any press
release or otherwise making any public statement with respect to the Offer, the
Merger or this Agreement and will not issue any such press release or make any
such public statement without the written consent of the other, except as may be
required by law or any listing agreement with a national securities exchange or
market.
6.6 REASONABLE EFFORTS; NOTIFICATION.
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(a) Subject to Section 6.1(c) and 6.1(d), and upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Offer, the
Merger and the other transactions contemplated hereby, including using
commercially reasonable efforts to accomplish the following: (i) causing the
conditions precedent set forth in Article 7 and the conditions to the Offer set
forth in Annex A to be satisfied, (ii) obtaining all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and making of all necessary registrations, declarations
and filings (including registrations, declarations and filings with Governmental
Entities) and taking commercially reasonable steps that may be necessary to
avoid any suit, claim, action, investigation or proceeding by any Governmental
Entity, (iii) obtaining all necessary consents, approvals or waivers from third
parties, (iv) defending any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) executing and delivering any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. Notwithstanding anything
in this Agreement to the contrary, neither Parent nor any of its affiliates
shall be under any obligation to make proposals, execute or carry out agreements
or submit to orders providing for the sale or other disposition or holding
separate (through the establishment of a trust or otherwise) of any assets or
categories of assets of Parent or any of its affiliates or the Company or any of
its subsidiaries or the holding separate of the shares of Company Common Stock
(or shares of stock of the Surviving Corporation) or imposing or seeking to
impose any limitation on the ability of Parent or any of its subsidiaries or
affiliates to conduct their business or own such assets or to acquire, hold or
exercise full rights of ownership of the shares of Company Common Stock (or
shares of stock of the Surviving Corporation).
(b) Each of the Company and Parent will give prompt notice to the
other of (i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the Offer or the
Merger, (ii) any notice or other communication from any Governmental Entity in
connection with the Offer or the Merger or (iii) any litigation relating to,
involving or otherwise affecting the Company, Parent or their respective
subsidiaries, in each case, that relates to the consummation of the Offer or the
Merger. The Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate,
or any failure of the Company to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement; provided however, that no such notification shall affect
the representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. Parent shall
give prompt notice to the Company of any representation or warranty made by it
or Merger Sub contained in this Agreement becoming untrue or inaccurate, or any
failure of Parent or Merger Sub to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
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(c) Parent agrees to vote or cause to be voted all shares of Company
Common Stock Beneficially Owned by Parent, Merger Sub or their affiliates in
favor of the approval and adoption of this Agreement and the approval of the
Merger at the Stockholders Meeting.
6.7 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Parent and the Company will use commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
6.8 INDEMNIFICATION.
(a) From and after the Appointment Time, Parent will, and will cause
the Company or the Surviving Corporation, as applicable, to fulfill and honor in
all respects the obligations of the Company pursuant to any indemnification
agreements between the Company and its directors and officers as of the
Effective Time (the "INDEMNIFIED PARTIES") and any indemnification provisions
under the Company's Certificate of Incorporation or Bylaws as in effect on the
date hereof. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Certificate of Incorporation and Bylaws of the Company as
in effect on the date hereof, which provisions will not be amended, repealed or
otherwise modified for a period of six (6) years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers, employees or
agents of the Company, unless such modification is required by law.
(b) For a period of six (6) years after the Effective Time, Parent
will cause the Surviving Corporation to maintain directors' and officers'
liability insurance covering those persons who are covered by the Company's
directors' and officers' liability insurance policy as of the date hereof in an
amount and on terms no less favorable than those applicable to the current
directors and officers of the Company so covered; provided, however, in no event
shall Parent be required to pay more than $275,000 for such coverage, and in the
event that the premium for such coverage exceeds $275,000, then Parent shall
obtain the maximum coverage at a premium of $275,000. The Company may, with the
prior written consent of Parent, purchase an insurance policy providing such
coverage.
(c) If Parent, the Surviving Corporation or any of their successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially of all of its properties and
assets to any Person, then, in each such case, proper provisions shall be made
so that the successors and assigns or Parent or the Surviving Corporation, as
the case may be, shall assume the obligations set forth in this Section 6.8.
(d) This Section 6.8 shall survive the consummation of the Merger,
is intended to benefit the Surviving Corporation and each Indemnified Party,
shall be binding on all successors and assigns of the Surviving Corporation and
Parent, and shall be enforceable by the Indemnified Parties, their heirs and
personal representatives.
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6.9 TAKEOVER STATUTES . If any "poison pill" or similar plan, agreement
or arrangement, or any anti-takeover, control share acquisition, fair price,
moratorium or other similar statute is or may become applicable to this
Agreement, the Offer, the Merger, the Voting Agreements, the Top-Up Option or
the other transactions contemplated by this Agreement, each of Parent and the
Company and their respective Boards of Directors shall grant such approvals and
take such lawful actions as are necessary to ensure that such transactions may
be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects of such plan,
agreement, arrangement or statute and any regulations promulgated thereunder on
such transactions.
6.10 PRIOR SERVICE CREDIT. Parent shall, to the extent permitted by any
employee benefit plan or program sponsored or maintained by Parent or any
affiliate thereof (including the Surviving Corporation after the Effective
Time), give former employees of the Company that are retained as employees of
the Surviving Corporation ("CONTINUING EMPLOYEES") credit for their service with
the Company both prior to and after the Effective Time for purposes of
determining eligibility to participate in and vesting or accrual in such plan or
program. Subject to the terms of any applicable employee benefit plan or program
of any third party insurer and to the extent consistent with applicable law,
Parent shall cause any and all pre-existing condition limitations, eligibility
waiting periods and evidence of insurability requirements under any Parent group
health plans to be waived with respect to such Continuing Employees and their
eligible dependents and shall provide them with credit for any co-payments and
deductibles prior to the Effective Time for purposes of satisfying any
applicable deductible, out-of-pocket, or similar requirements under any Parent
plans for the plan year in which the Effective Time occurs. Notwithstanding
anything to the contrary contained herein, Parent shall have sole discretion
with respect to the determination as to whether and when to terminate, merge or
continue any employee benefit plans and programs of the Company in accordance
with their terms.
6.11 401(k) PLAN. The Company shall take all action necessary in advance
of the Effective Time to terminate its and its subsidiaries 401(k) plans, if
any, effective immediately prior to the Effective Time (all such plans referred
to herein collectively as the "COMPANY'S 401(k) PLAN"). Parent hereby agrees
that, with the approval of the plan administrator of Parent's tax qualified
401(k) plan ("PARENT'S 401(k) PLAN"), which approval will not be unreasonably
withheld, Parent will cause Parent's 401(k) Plan to accept rollovers or direct
rollovers of "eligible rollover distributions" within the meaning of section
402(c) of the Code from or relating to the Company's 401(k) Plan by employees of
the Company who become employees of the Surviving Corporation by reason of the
transactions contemplated by this Agreement. Rollover amounts contributed to
Parent's 401(k) Plan in accordance with this Section 6.11 shall be held in each
such employee's account, which shall at all times be 100% vested and which shall
be invested in accordance with the provisions of Parent's 401(k) Plan.
6.12 TREASURY STOCK. The Company shall take all action necessary to cause
the Treasury Stock and any other shares of Company Common Stock held by the
Company or any of its subsidiaries to be canceled and extinguished immediately
prior to the Effective Time.
6.13 MERGER WITHOUT STOCKHOLDERS MEETING. If Parent, Merger Sub or any
other subsidiary of Parent shall acquire at least ninety percent (90%) of the
outstanding shares of Company Common Stock pursuant to the Offer or otherwise,
Parent and Merger Sub agree to take
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all necessary and appropriate action to cause the Merger to be effective as soon
as practicable after the acceptance for payment and purchase of Company Common
Stock pursuant to the Offer without the Stockholders Meeting in accordance with
Delaware Law.
6.14 PROHIBITION ON ACQUIRING SHARES. At all times during the period
commencing with the execution and delivery of this Agreement and continuing
until the earlier to occur of the termination of this Agreement pursuant to
Article 8 hereof and the Appointment Time, except as contemplated by this
Agreement, Parent and Merger Sub shall not acquire, and shall use commercially
reasonable efforts to ensure that none of its affiliates and associates (as such
terms are defined in Section 203 of the Delaware Law) acquire, (i) beneficial
ownership of, (ii) the right to acquire pursuant to any agreement, arrangement
or understanding, or upon the exercise of conversion rights, exchange rights,
warrants or options or otherwise, or (iii) the right to vote pursuant to any
agreement, arrangement or understanding, any shares of Company Common Stock.
6.15 SECTION 16 MATTERS. Prior to the Effective Time, Parent and the
Company shall take all such steps as may be required (to the extent permitted
under applicable law) to cause any disposition of Company Common Stock
(including derivative securities with respect to Company Common Stock) resulting
from the transactions contemplated by Article I and Article II of this Agreement
by each individual who is subject to the reporting requirements of Section 16(a)
of the Exchange Act with respect to the company to be exempt under Rule 16b-3
promulgated under the Exchange Act.
6.16 MERGER SUB COMPLIANCE. Parent shall cause Merger Sub to comply with
all of Merger Sub's obligations under or relating to this Agreement. Merger Sub
shall not engage in any business which is not in connection with the Offer or
the Merger.
ARTICLE 7
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) PURCHASE OF SHARES. Merger Sub shall have purchased shares of
Company Common Stock pursuant to the Offer.
(b) STOCKHOLDER APPROVAL. If required under Delaware Law, the
Company Stockholder Approval shall have been obtained.
(c) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
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ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Appointment Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by Parent if, subject to Section 1.2(c), the Offer shall have
expired without any shares of Company Common Stock being purchased therein;
provided that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to Parent if its breach of this Agreement has been the
cause of, or resulted in, the failure of Parent or Merger Sub to purchase the
shares of Company Common Stock pursuant to the Offer;
(c) by either the Company or Parent, if the Offer shall have not
been consummated by April 19, 2006 (the "TERMINATION DATE"); provided, that the
right to terminate this Agreement pursuant to this Section 8.1(c) shall not be
available to any party hereto whose action or failure to fulfill any obligation
under this Agreement has been a principal cause of or resulted in the failure of
the Offer to have been consummated before such date, and such action or failure
to act constitutes a breach of this Agreement;
(d) by either the Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(e) by Parent (at any time prior to the Appointment Time) if a
Triggering Event (as defined in this Section 8.1) shall have occurred;
(f) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub shall
have become untrue, in either case in any material respect, so as to prevent or
otherwise materially adversely effect or delay the ability of Parent or Merger
Sub from consummating the Offer in accordance with the terms hereof, provided
that if such inaccuracy in Parent's or Merger Sub's representations and
warranties or breach by Parent or Merger Sub is curable by Parent or Merger Sub,
as applicable, then the Company may not terminate this Agreement under this
Section 8.1(f) for 30 days after delivery of written notice from the Company to
Parent of such breach and intent to terminate, provided Parent continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that the Company may not terminate this Agreement pursuant to this
Section 8.1(f) if such breach by Parent or Merger Sub is cured during such
30-day period, or if the Company shall have materially breached this Agreement);
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in clause (c) or (d) of Annex A
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in the
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Company's representations and warranties or breach by the Company is curable by
the Company, then Parent may not terminate this Agreement under this Section
8.1(g) for 30 days after delivery of written notice from Parent to the Company
of such breach and intent to terminate, provided the Company continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that Parent may not terminate this Agreement pursuant to this Section
8.1(g) if such breach by the Company is cured during such 30-day period, or if
Parent shall have materially breached this Agreement); or
(h) By the Company, if the Board of Directors of the Company shall
have effected a Change of Recommendation pursuant to and in compliance with
Section 6.1(c).
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be deemed
to have occurred if, whether or not permitted to do so: (i) the Board of
Directors of the Company or any committee thereof shall for any reason have
withdrawn or shall have amended or modified in a manner adverse to Parent or
Merger Sub its approval or recommendation in favor of the Offer, the adoption
and approval of the Agreement or the approval of the Merger; (ii) the Company
shall have failed to include in the Schedule 14d-9 the recommendation of the
Board of Directors of the Company in favor of the acceptance of the Offer; (iii)
the Board of Directors of the Company fails publicly to reaffirm its approval or
recommendation in favor of the Offer within ten (10) Business Days after Parent
requests in writing that such recommendation be reaffirmed at any time following
the public announcement of an Acquisition Proposal; (iv) the Board of Directors
of the Company or any committee thereof shall have approved or publicly
recommended any Acquisition Proposal; (v) the Company shall have entered into
any letter of intent or similar document or any agreement, contract or
commitment accepting any Acquisition Proposal; or (vi) a tender or exchange
offer relating to securities of the Company shall have been commenced by a
person unaffiliated with Parent, and the Company shall not have sent to its
stockholders pursuant to Rule 14e-2 promulgated under the Exchange Act, within
ten (10) Business Days after such tender or exchange offer is first published
sent or given, a statement disclosing that the Company recommends rejection of
such tender or exchange offer.
8.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any proper termination
of this Agreement under Section 8.1 will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in Section 6.3(a), this Section 8.2, Section 8.3 and Article 9, each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
8.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated and the filing fee in connection with the Notification and
Report Form under the HSR Act shall be borne by Parent.
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(b) In the event that this Agreement is terminated by Parent or the
Company, as applicable, pursuant to Section 8.1(c), 8.1(e) or 8.1(h), the
Company shall promptly, but in no event later than two (2) days after the date
of such termination, pay Parent a fee in the amount of $2,040,000 in immediately
available funds (the "TERMINATION FEE"); provided, that in the case of a
termination under Section 8.1(c) prior to which no Triggering Event has
occurred, (i) such payment shall be made only if (A) following the date of this
Agreement and prior to the termination of this Agreement, a person has publicly
announced an Acquisition Proposal and (B) within twelve (12) months following
the termination of this Agreement a Company Acquisition (as defined in this
Section 8.3) is consummated or the Company enters into a binding agreement
providing for a Company Acquisition and (ii) such payment shall be made
promptly, but in no event later than two (2) Business Days after the
consummation of such Company Acquisition or the entry by the Company into such
agreement.
(c) In the event that this Agreement is terminated by Parent
pursuant to Section 8.1(g) due to a material breach by the Company of any of the
provisions of Section 6.1(c) or 6.4 as a result of actions of any of the
Company's directors or executive officers, then the Company shall promptly, but
in no event later than two (2) days after demand by Parent therefor together
with a statement from Parent setting forth the amount thereof, pay Parent its
out-of-pocket fees and expenses (including fees of attorneys, accountants,
financial printers, the Agent, and the dealer-manager and information agent for
the Offer) incurred in connection with this Agreement and the transactions
contemplated hereby, up to an aggregate amount of such fees and expenses not to
exceed $500,000.
(d) Each of Parent and the Company acknowledges that the agreements
contained in this Section 8.3 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, neither
Parent nor the Company would enter into this Agreement. Accordingly, if the
Company fails to pay in a timely manner amounts due pursuant to Section 8.3(b)
or 8.3(c), and, in order to obtain such payment, Parent makes a claim for such
amounts that results in a judgment against the Company for the amounts described
in Section 8.3(b) or 8.3(c), as the case may be, the Company shall pay to Parent
its reasonable costs and expenses (including reasonable attorneys' fees and
expenses as provided in Section 9.7(b)) in connection with such suit, together
with interest on the amounts described in Section 8.3(b) or 8.3(c) (at the prime
rate of Bank of America, N.A. in effect on the date such payment was required to
be made) from such date until the payment of such amount (together with such
accrued interest). Payment of the fees described in Section 8.3(b) or 8.3(c)
shall not be in lieu of damages incurred in the event of breach of this
Agreement.
For the purposes of this Agreement, "COMPANY ACQUISITION" shall mean any
of the following transactions (other than the transactions contemplated by this
Agreement); (i) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company pursuant
to which the stockholders of the Company (other than with Parent or any
controlled affiliate thereof) immediately preceding such transaction hold less
than 50% of the aggregate equity interests in the surviving or resulting entity
of such transaction, (ii) a sale or other disposition by the Company of assets
representing 50% or more of the aggregate fair market value of the Company's
business immediately prior to such sale, or (iii) the acquisition by any person
or group (other than by Parent or any controlled affiliate thereof) (including
by way of a tender offer or an exchange offer or issuance by the Company),
directly or indirectly, of beneficial ownership or a
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right to acquire beneficial ownership of shares representing 50% or more of the
voting power of the then outstanding shares of capital stock of the Company.
8.4 AMENDMENT. Subject to applicable law and the terms and provisions of
this Agreement (including Section 1.4(d)), this Agreement may be amended by the
parties hereto at any time by execution of an instrument in writing signed on
behalf of each of Parent and the Company.
8.5 EXTENSION; WAIVER. Subject to the terms and provisions of this
Agreement (including Section 1.4(d)), at any time prior to the Effective Time
any party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE 9
GENERAL PROVISIONS
9.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Appointment Time, and only the covenants that by their
express terms survive the Appointment Time shall survive the Appointment Time.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Progress Software Corporation
00 Xxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Chief Executive Officer
with copies to:
Progress Software Corporation
00 Xxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Senior Vice President and
General Counsel
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and
Xxxxx Xxxx LLP
Seaport World Trade Center West
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq. and
Xxxxxxx X. Xxxx, Esq.
(b) if to the Company, to:
NEON Systems, Inc.
00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx, Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
0000 Xxxxxxx xx Xxxxx Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
9.3 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The headings contained in this Agreement are only for reference purposes and
shall not affect in any way the meaning or interpretation of this Agreement.
When reference is made herein to "the business of" an entity, such reference
shall be deemed to include the business of all direct and indirect subsidiaries
of such entity. Reference to the subsidiaries of an entity shall be deemed to
include all direct and indirect subsidiaries of such entity. Reference to an
agreement herein is to such agreement as amended in accordance with its terms up
to the date hereof. Reference to a statute herein is to such statute, as
amended.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement, its
Exhibits and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Company
Disclosure Schedule and the Parent Disclosure Schedule (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
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supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 6.8.
9.6 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to negotiate in good
faith to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
9.7 OTHER REMEDIES; SPECIFIC PERFORMANCE; FEES.
(a) Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
(b) If any action, suit or other proceeding (whether at law, in
equity or otherwise) is instituted concerning or arising out of this Agreement
or any transaction contemplated hereunder, the prevailing party shall recover,
in addition to any other remedy granted to such party therein, all such party's
costs and attorneys fees incurred in connection with the prosecution or defense
of such action, suit or other proceeding.
9.8 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law thereof. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of the United
States of America located in Boston, Massachusetts for any actions, suits or
proceedings arising out of or relating to this Agreement (and the parties agree
not to commence any action, suit or proceeding relating thereto except in such
courts), and further agree that service of any process, summons, notice or
document by U.S. certified mail shall be effective service of process for any
action, suit or proceeding brought against the parties in any such court. The
parties hereby irrevocably and unconditionally waive any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement, in the
courts of the United States of America located in Boston, Massachusetts, and
hereby further irrevocably and unconditionally waive and agree not to
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plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Any purported assignment in
violation of this Section 9.10 shall be void.
9.11 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
*****
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be executed by their duly authorized respective officers as of the
date first written above.
PROGRESS SOFTWARE CORPORATION
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
NOBLE ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
NEON SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Agreement and Plan of Merger (the "AGREEMENT") of
which this Annex A is a part. Notwithstanding any other provision of the Offer,
Merger Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated
under the Exchange Act (relating to the obligation of Merger Sub to pay for or
return tendered shares of Company Common Stock promptly after termination or
withdrawal of the Offer), pay for any tendered shares of Company Common Stock
and (subject to any such rules or regulations) may delay the acceptance for
payment of or the payment for any tendered shares of Company Common Stock if (i)
there are not validly tendered (and not properly withdrawn) prior to the
expiration date for the Offer (as extended in accordance with Section 1.2(c) of
the Agreement) (the "DETERMINATION TIME") that number of shares of Company
Common Stock which, when added to any such shares of Company Common Stock owned
by Parent or any of its affiliates, will at least satisfy the Minimum Condition,
(ii) by the Determination Time the waiting period (or any extension thereof)
applicable to the Offer or the Merger under the HSR Act or any other antitrust
or competition laws, rules or regulations the parties reasonably agree are
applicable shall not have been terminated or shall not have expired, (iii) prior
to the Determination Time the Agreement shall have been terminated in accordance
with its terms or (iv) at the Determination Time any of the following events
shall have occurred and be continuing:
(a) there shall be instituted or pending any action or proceeding by any
Governmental Entity (i) seeking to restrain, prohibit or otherwise materially
interfere with the ownership or operation by Parent or any of its subsidiaries
of all or any portion of the business of the Company or any of its subsidiaries
or of Parent or any of its subsidiaries or to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any portion of the business
or assets of the Company or any of its subsidiaries or of Parent or any of its
subsidiaries, (ii) seeking to impose material limitations on the ability of
Parent or any of its subsidiaries effectively to exercise full rights of
ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation) including the right to vote any such shares on any
matters properly presented to shareholders or (iii) seeking to require
divestiture by Parent or any of its subsidiaries of any such shares; or
(b) there has been any Legal Requirement, injunction, order (whether
temporary, preliminary or permanent) or decree enacted, entered, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger by any
Governmental Entity which (i) results in any of the consequences referred to in
clauses (i) or (ii) of paragraph (a) above or (ii) is in effect and which has
the effect of making the Offer or the Merger illegal or otherwise prohibiting
consummation of the Offer or the Merger; or
(c) any representation or warranty of the Company contained in this
Agreement (i) shall not have been true and correct as of the date of this
Agreement or (ii) shall not be true and correct as of the Determination Time
with the same force and effect as if made as of the Determination Time
and, in each case, (A) the failure of such representation or warranty to be true
and correct, in each case, or in the aggregate, constitutes or would constitute
a Company Material Adverse Effect as of the Determination Time; provided,
however, such Company Material Adverse Effect qualification shall be
inapplicable with respect to the representations and warranties contained in
Sections 3.2(a) or (b), 3.3, 3.4(a) and 3.19 of the Agreement (which
representations shall be true and correct at the applicable times in all
material respects), and (B) for those representations and warranties which
address matters only as of a particular date, which representations shall have
been true and correct (subject to the qualifications set forth in the preceding
clause (A) as of such particular date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, any update of
or modification to the Company Disclosure Schedule made or purported to have
been made after the execution of this Agreement shall be disregarded). At the
Determination Time, Parent shall have received a certificate with respect to the
truth and correctness of each representation and warranty of the Company,
consistent with the foregoing and signed on behalf of the Company by the Chief
Executive Officer or Chief Financial Officer of the Company; or
(d) the Company shall have failed to perform or comply in any material
respect with any of its obligations, covenants or agreements contained in the
Agreement required to be performed or complied with at or prior to the
Determination Time, including all obligations, covenants, and agreements set
forth in Section 5.1 of the Agreement regarding conduct of business by the
Company, and Parent shall have received a certificate to the effect that the
Company has so performed or complied in all material respects with all such
obligations, covenants and agreements, signed on behalf of the Company by the
Chief Executive Officer or Chief Financial Officer of the Company; or
(e) any Company Material Adverse Effect.
The foregoing conditions (x) are for the sole benefit of Parent and Merger Sub
and (y) may be asserted by Parent and Merger Sub, and, except for the (1)
Minimum Condition or (2) expiration or termination or any applicable waiting
period under the HSR Act or foreign laws, and otherwise subject to the terms of
the Agreement, may be waived by Parent and Merger Sub, in whole or in part, at
any time and from time to time, in the sole discretion of Parent and Merger Sub.
The failure of Parent or Merger Sub at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, and each right shall be
deemed a continuing right which may be asserted at any time and from time to
time. Should the Offer be terminated in accordance with the terms and provisions
of this Agreement, all tendered shares of Company Common Stock not theretofore
accepted for payment pursuant thereto shall forthwith be returned to the
tendering stockholders.
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LIST OF EXHIBITS
Exhibit A Form of Voting and Tender Agreement
Exhibit B Written Acknowledgement for Company Options
Exhibit C Written Acknowledgement for Company Warrants
