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EXHIBIT 10.14
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PRINTCAFE, INC.
PRINTCAFE SYSTEMS, INC.
XXXXX SYSTEMS, INC.
AND
STOCKHOLDERS
OF XXXXX SYSTEMS, INC.
FEBRUARY 22, 2000
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TABLE OF CONTENTS
SECTION PAGE
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1. THE MERGER........................................................................................... 1
1.1 The Merger................................................................................. 1
1.2 Closing; Effective Time.................................................................... 2
1.3 Effect of the Merger....................................................................... 2
1.4 Certificate of Incorporation; Bylaws....................................................... 2
1.5 Directors and Officers..................................................................... 2
1.6 Effect on Capital Stock.................................................................... 2
1.7 Surrender of Certificates.................................................................. 4
1.8 No Further Ownership Rights in Target Capital Stock........................................ 5
1.9 Tax and Accounting Consequences............................................................ 5
1.10 Taking of Necessary Action; Further Action................................................. 6
1.11 Withholding................................................................................ 6
1.12 Lost, Stolen or Destroyed Certificates..................................................... 6
2. REPRESENTATIONS AND WARRANTIES OF TARGET AND TARGET STOCKHOLDERS..................................... 6
2.1 Organization; Subsidiaries................................................................. 7
2.2 Articles of Incorporation; Bylaws.......................................................... 7
2.3 Capital Structure.......................................................................... 7
2.4 Authority.................................................................................. 8
2.5 No Conflicts; Required Filings and Consents................................................ 8
2.6 Financial Statements....................................................................... 9
2.7 Absence of Undisclosed Liabilities......................................................... 9
2.8 Absence of Certain Changes................................................................. 9
2.9 Litigation................................................................................. 11
2.10 Restrictions on Business Activities........................................................ 11
2.11 Permits; Company Products; Regulation...................................................... 12
2.12 Title to Property.......................................................................... 13
2.13 Intellectual Property...................................................................... 13
2.14 Environmental Matters...................................................................... 15
2.15 Taxes...................................................................................... 16
2.16 Employee Benefit Plans..................................................................... 19
2.17 Certain Agreements Affected by the Merger.................................................. 21
2.18 Employee Matters........................................................................... 21
2.19 Material Contracts......................................................................... 22
2.20 Interested Party Transactions.............................................................. 23
2.21 Insurance.................................................................................. 23
2.22 Compliance With Laws....................................................................... 24
2.23 Minute Books............................................................................... 24
2.24 Brokers' and Finders' Fees................................................................. 24
2.25 Vote Required.............................................................................. 24
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TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
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2.26 Board Approval............................................................................. 24
2.27 Accounts Receivable........................................................................ 24
2.28 Customers and Suppliers.................................................................... 25
2.29 Third Party Consents....................................................................... 25
2.30 No Commitments Regarding Future Products................................................... 25
2.31 Representations Complete................................................................... 25
3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB............................................ 26
3.1 Organization, Standing and Power........................................................... 26
3.2 Capital Structure.......................................................................... 26
3.3 Authority.................................................................................. 27
3.4 No Conflict; Required Filings and Consents................................................. 28
3.5 Absence of Undisclosed Liabilities......................................................... 28
3.6 Absence of Certain Changes................................................................. 28
3.7 Litigation................................................................................. 28
3.8 Governmental Authorization................................................................. 29
3.9 Compliance With Laws....................................................................... 29
3.10 Broker's and Finders' Fees................................................................. 29
3.11 Accounting and Tax Matters................................................................. 29
3.12 Xxxx-Xxxxx-Xxxxxx Exemption................................................................ 29
3.13 Securities Laws............................................................................ 29
3.14 Representations Complete................................................................... 29
4. CONDUCT PRIOR TO THE EFFECTIVE TIME.................................................................. 30
4.1 Conduct of Business of Target and Acquiror................................................. 30
4.2 Conduct of Business of Target.............................................................. 31
4.3 No Solicitation............................................................................ 33
5. ADDITIONAL AGREEMENTS................................................................................ 33
5.1 Best Efforts and Further Assurances........................................................ 33
5.2 Consents; Cooperation...................................................................... 33
5.3 Access to Information...................................................................... 34
5.4 Confidentiality............................................................................ 35
5.5 Public Disclosure.......................................................................... 35
5.6 FIRPTA..................................................................................... 35
5.7 State Statutes............................................................................. 35
5.8 Blue Sky Laws.............................................................................. 35
5.9 Stockholder's Representation Agreements.................................................... 35
5.10 Maintenance of Target Indemnification Obligations.......................................... 36
5.11 Non-Competition Agreements................................................................. 36
5.12 Certain Tax Matters........................................................................ 36
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TABLE OF CONTENTS
(CONTINUED)
SECTION PAGE
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5.13 401(k) Plan................................................................................ 37
5.14 Waiver of Dissenter's Rights............................................................... 37
5.15 Stock Option Agreements.................................................................... 37
6. CONDITIONS TO THE MERGER............................................................................. 37
6.1 Conditions to Obligations of Each Party to Effect the Merger............................... 37
6.2 Additional Conditions to Obligations of Target............................................. 38
6.3 Additional Conditions to the Obligations of Acquiror and Merger Sub........................ 40
7. TERMINATION, AMENDMENT AND WAIVER.................................................................... 42
7.1 Termination................................................................................ 42
7.2 Effect of Termination...................................................................... 43
7.3 Expenses................................................................................... 43
7.4 Amendment.................................................................................. 43
7.5 Extension; Waiver.......................................................................... 43
8. ESCROW AND INDEMNIFICATION........................................................................... 43
8.1 Survival of Representations and Warranties................................................. 43
8.2 Escrow Fund................................................................................ 44
8.3 Indemnification by Target and Target Shareholders.......................................... 44
8.4 Damages Threshold.......................................................................... 45
8.5 Escrow Period.............................................................................. 45
8.6 Method of Asserting Claims................................................................. 45
8.7 Representative of the Stockholders; Power of Attorney...................................... 45
8.8 Indemnification by Acquiror................................................................ 46
8.9 Damages Threshold.......................................................................... 46
9. GENERAL PROVISIONS................................................................................... 46
9.1 Notices.................................................................................... 46
9.2 Interpretation............................................................................. 47
9.3 Counterparts............................................................................... 48
9.4 Entire Agreement; Nonassignability; Parties in Interest.................................... 48
9.5 Severability............................................................................... 48
9.6 Remedies Cumulative........................................................................ 48
9.7 Governing Law.............................................................................. 48
9.8 Rules of Construction...................................................................... 48
9.9 Amendments and Waivers..................................................................... 48
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EXHIBITS
Exhibit A - Delaware Certificate of Merger
Exhibit B - Minnesota Certificate of Merger
Exhibit C - Exchange Ratio
Exhibit D - FIRPTA Certificate
Exhibit E - Stockholder's Representation Agreement
Exhibit F - Non-Competition Agreement
Exhibit G - Employment Agreements
Exhibit H - Legal Opinion from Acquiror's Counsel
Exhibit I - Legal Opinion from Target's Counsel
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of February 22, 2000 by and among printCafe, Inc., a Delaware
corporation ("Acquiror"), printCafe Systems, Inc., a Delaware corporation and
wholly a owned subsidiary of Acquiror ("Merger Sub"), Xxxxx Systems, Inc., a
Minnesota corporation ("Target"), and Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxxxxx and
Xxxxxxxx X. Xxxxxxxx (each a "Target Stockholder" and, collectively, the "Target
Stockholders").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub and the
Target Stockholders believe it is in the best interests of their respective
companies and the stockholders of their respective companies that Target and
Merger Sub combine into a single company through the merger of Merger Sub and
Target (the "Merger") and, in furtherance thereof, have approved the Merger.
Pursuant to the Merger, among other things, the outstanding shares of capital
stock of Target (the "Target Capital Stock") shall be converted into shares of
the Class A Common Stock, par value $0.0001 per share, of Acquiror (the
"Acquiror Common Stock"), at the rates set forth herein and the right to receive
cash and subordinated promissory notes at the rates set forth herein.
B. Target, Acquiror and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
AGREEMENT
In consideration of the premises and the mutual representations,
warranties and covenants set forth below, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION ONE
1. THE MERGER.
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, the
certificate of merger to be filed with the Secretary of State of the State of
Delaware attached hereto as Exhibit A (the "Delaware Certificate of Merger") the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
the certificate of merger to be filed with the Secretary of State of the State
of Minnesota attached hereto at Exhibit B (the "Minnesota Certificate of
Merger"), the applicable provisions of the Minnesota Business Corporation Act
("Minnesota Law"), Target shall be merged with and into Merger Sub, the separate
corporate existence of
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Target shall cease and Merger Sub shall continue as the surviving corporation of
the Merger. Merger Sub as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place as soon as
practicable, (and in no event later than 5 business days after the satisfaction
or waiver of each of the conditions set forth in Section 4 below) or at such
other time as the parties agree (the "Closing Date"). In connection with the
Closing, the parties shall cause the Merger to be consummated by filing the
Certificate of Merger, with the Secretary of State of the State of Delaware, in
accordance with the relevant provisions of Delaware Law (the time of such filing
being the "Effective Time") and shall file the Minnesota Certificate of Merger
with the Secretary of State of the State of Minnesota, in accordance with the
relevant provisions of Minnesota Law. The Closing shall take place at the
offices of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, or at such other location as the parties agree.
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Delaware Certificate of
Merger, the applicable provisions of Delaware Law, the Minnesota Certificate of
Merger and the applicable provisions of Minnesota Law. At the Effective Time,
all the property, rights, privileges, powers and franchises of Target and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Target and Merger Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation.
(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 as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, and the officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any
action on the part of Merger Sub, Target or any of their respective
stockholders, the following shall occur at the Effective Time:
(a) CONVERSION OF TARGET CAPITAL STOCK. All of the issued and
outstanding shares of Common Stock, par value $0.01 per share, of Target (the
"Target Common
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Stock") issued and outstanding immediately prior to the Effective Time (other
than shares to be cancelled pursuant to Section 1.6(b) and shares, if any, held
by persons who have not voted such shares for approval of the Merger and with
respect to which such persons shall become entitled to exercise dissenters'
rights in accordance with Section 302A.471 of Minnesota Law ("Dissenting
Shares")) shall be converted and exchanged for (i) that number of shares of
Acquiror Common Stock as shall be determined in accordance with the calculation
set forth with respect to the Target Common Stock set forth on Exhibit C
attached hereto (the "Exchange Ratio"), (ii) $34.60582 per share in cash, plus
an amount per share in cash equal to interest thereon at the rate of 8.75% per
annum from February 9, 2000 to the Closing Date (the "Cash Consideration") and
(iii) $51.90872 per share in Subordinated Promissory Notes of Acquiror (the
"Notes Consideration" and, together with the shares to be received under clause
(i) and the Cash Consideration to be received under clause (ii), the "Merger
Consideration"). All shares of Target Common Stock, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Target Common Stock shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration therefor upon the surrender of
such certificate in accordance with Section 1.7, without interest.
(b) CANCELLATION OF TARGET CAPITAL STOCK OWNED BY ACQUIROR OR
TARGET. At the Effective Time, all shares of Target Capital Stock that are owned
by Target as treasury stock, each share of Target Capital Stock owned by
Acquiror or any direct or indirect wholly owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
(c) CAPITAL STOCK OF MERGER SUB. At the Effective Time, each
stock certificate of Merger Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(d) ADJUSTMENTS; MAXIMUM CONSIDERATION. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Acquiror Common Stock or Target Capital Stock), reorganization,
recapitalization or other like change with respect to Acquiror Common Stock or
Target Capital Stock occurring after the date of this Agreement and prior to the
Effective Time. The Cash Consideration and Note Consideration shall also be
adjusted to reflect the effect of any of the events described in the immediately
preceding sentence with respect to Target occurring after the date of this
Agreement and prior to the Effective Time. In exchange for the acquisition by
Merger Sub of all outstanding Target Capital Stock, the maximum number of shares
of Acquiror Common Stock to be issued shall be 2,305,084.7 shares, adjusted in
accordance with the preceding sentence and Exhibit C attached hereto and reduced
as a result of any Dissenting Shares, the maximum aggregate Cash Consideration
shall be $8,000,000 and the maximum aggregate amount of the Notes Consideration
shall be $12,000,000. No adjustment shall be made in the Merger Consideration as
a result of any increase or decrease in the market price of Acquiror Common
Stock prior to the Effective Time.
(e) DISSENTERS' RIGHTS. Any Dissenting Shares shall not be converted
into the right to receive the Merger Consideration but shall instead be
converted into the right to
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receive such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to applicable law. Target agrees that, except with
the prior written consent of Acquiror, or as required under applicable law, it
will not voluntarily make any payment with respect to, or settle or offer to
settle, any such purchase demand. Each holder of Dissenting Shares who, pursuant
to the provisions of applicable law, becomes entitled to payment of the fair
value for shares of Target Capital Stock shall receive payment therefor (but
only after such value shall have been agreed upon or finally determined pursuant
to such provisions). If, after the Effective Time, any Dissenting Shares shall
lose their status as Dissenting Shares, Acquiror shall issue and deliver, upon
surrender by such holder of certificate or certificates representing shares of
Target Capital Stock and the Merger Consideration to which such holder would
otherwise be entitled under this Section 1.6.
(f) FRACTIONAL SHARES. No fraction of a share of Acquiror
Common Stock will be issued, but in lieu thereof each holder of shares of Target
Capital Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the fair market value of a share of Acquiror
Common Stock immediately prior to the Effective Time, as determined in good
faith by Acquiror's Board of Directors.
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP shall
act as exchange agent (the "Exchange Agent") in the Merger.
(b) ACQUIROR TO PROVIDE COMMON STOCK, CASH AND NOTES. Promptly
after the Effective Time, Acquiror shall make available to the Exchange Agent
for exchange in accordance with this Section 1, through such reasonable
procedures as Acquiror may adopt, (i) the shares of Acquiror Common Stock
issuable pursuant to Section 1.6(a), (ii) cash in an amount sufficient to permit
payment of the Cash Consideration, together with cash in lieu of fractional
shares pursuant to Section 1.6(g) and (iii) Subordinated Promissory Notes
issuable pursuant to Section 1.6(a) less the notes to be deposited into the
Escrow Fund pursuant to the requirements of Section 8.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time,
the Exchange Agent shall, subject to the satisfaction of the conditions set
forth in Section 6.3(m), deliver or cause to be delivered to each Target
Stockholder (i) a certificate representing the number of whole shares of
Acquiror Common Stock to which such holder is entitled as calculated in
accordance with the Exchange Ratio (ii) cash in the amount of the Cash
Consideration to which such holder is entitled as provided in Section 1.6(a)
plus payment in lieu of fractional shares which such holder has the right to
receive pursuant to Section 1.6 and (iii) a Subordinated Promissory Note in the
amount of the Notes Consideration to which such holder is entitled as provided
in Section 1.6(a), less the notes to be deposited in the Escrow Fund on such
holder's behalf pursuant to Section 8 below, and the Certificate so surrendered
shall forthwith be cancelled. Until so surrendered, each Certificate will be
deemed from and after the Effective Time, for all corporate purposes, to
evidence the right to receive the Merger Consideration.
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(d) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(e) DISSENTING SHARES. The provisions of this Section 1.7
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Acquiror under this Section 1.7 shall commence on the
date of loss of such status and the holder of such shares shall be entitled to
receive in exchange for such shares the Merger Consideration to which such
holder is entitled pursuant to Section 1.6 hereof.
(f) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of any such dividends or other distributions with a record date after the
Effective Time payable (but for the provisions of this Section 1.7(f)) with
respect to such shares of Acquiror Common Stock.
(g) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Acquiror Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of such issuance that the Certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of Acquiror or any agent designated by it that such tax has been
paid or is not payable.
1.8 NO FURTHER OWNERSHIP RIGHTS IN TARGET CAPITAL STOCK. All shares
of Acquiror Common Stock and all Subordinated Promissory Notes of the Acquiror
issued upon the surrender for exchange of shares of Target Capital Stock in
accordance with the terms hereof (including any cash paid in lieu of fractional
shares) shall be deemed to have been issued, and all cash in the amount of the
Cash Consideration shall be deemed to have been paid, in full satisfaction of
all rights pertaining to such shares of Target Capital Stock, and there shall be
no further registration of transfers on the records of the Surviving Corporation
of shares of Target Capital Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be cancelled and exchanged
as provided in this Section 1.
1.9 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code.
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1.10 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 Target and Merger Sub, the officers and directors of
Target and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
1.11 WITHHOLDING. Each of the Exchange Agent, Acquiror, and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Target Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or any provision of state,
local or foreign tax law or under any other applicable legal requirement. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the person to whom
such amounts would otherwise have been paid.
1.12 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such Merger Consideration as may
be required pursuant to Section 1.6; provided, however, that Acquiror may, in
its discretion and as a condition precedent to such exchange, require the owner
of such lost, stolen or destroyed Certificates to deliver a bond in such sum as
Acquiror may reasonably direct as indemnity against any claim that may be made
against Acquiror, the Surviving Corporation or the Exchange Agent with respect
to the Certificates alleged to have been lost, stolen or destroyed.
SECTION TWO
2. REPRESENTATIONS AND WARRANTIES OF TARGET AND TARGET STOCKHOLDERS.
In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results of operations or prospects of such entity and its subsidiaries, taken as
a whole, or to prevent or materially delay consummation of the Merger or
otherwise to prevent such entity and its subsidiaries from performing their
obligations under this Agreement.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after due and diligent inquiry of officers, directors
and other employees of such party reasonably believed to have knowledge of the
matter in questions.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Target to Acquiror prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Target Disclosure
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Schedule"), Target and Target Stockholders represent and warrant to Acquiror and
Merger Sub as follows:
2.1 ORGANIZATION; SUBSIDIARIES. Each of Target and each subsidiary
of Target (each a "Subsidiary") is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of Target and each Subsidiary has the requisite corporate
power and authority and all necessary government approvals to own, lease and
operate its properties and to carry on its business as now being conducted and
as proposed to be conducted, except where the failure to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on Target. Each of Target and each
Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect on Target. Section 2.1 of Target
Disclosure Schedule sets forth each jurisdiction where Target and each
Subsidiary is qualified to do business. A true and complete list of all the
Subsidiaries, together with the jurisdiction of incorporation of each
Subsidiary, is set forth in Section 2.1 of the Target Disclosure Schedule.
Target is the owner of all outstanding shares of capital stock of each
Subsidiary and all such shares are duly authorized, validly issued, fully paid
and nonassessable. All of the outstanding shares of capital stock of each
Subsidiary are owned by Target free and clear of all liens, charges, claims,
encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any Subsidiary, or otherwise
obligating Target or any Subsidiary to issue, transfer, sell, purchase, redeem
or otherwise acquire any such securities. Except as set forth in Section 2.1 of
the Target Disclosure Schedule, Target does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity
2.2 ARTICLES OF INCORPORATION; BYLAWS. Target has delivered a true
and correct copy of the Articles of Incorporation and Bylaws or other charter
documents, as applicable, of Target and each Subsidiary, each as amended to
date, to Acquiror. Neither Target nor any Subsidiary is in violation of any of
the provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents.
2.3 CAPITAL STRUCTURE. The authorized capital stock of Target
consists of 1,250,000 shares of voting Common Stock, par value $0.01 per share
and 1,250,000 shares of non-voting Common Stock, par value $0.01 per share, and
no shares of Preferred Stock, of which there were issued and outstanding as of
the date hereof 111,175 shares of voting Common Stock and 120,000 shares of
non-voting Common Stock. There are no other outstanding shares of capital stock
or voting securities and no outstanding commitments to issue any shares of
capital stock or voting securities after the date hereof or any other rights or
securities granted or issued to any person to cause Target to issue, sell,
redeem or repurchase any shares of capital stock of Target. There does not exist
nor is there outstanding any right, option, warrant, convertible obligation or
other security or agreement entered into or granted by any Target
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Stockholder with respect to any shares of Target Common Stock. All outstanding
shares of Target Capital Stock are duly authorized, validly issued, fully paid
and non-assessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Articles of Incorporation or Bylaws of Target or any agreement to which
Target or any Target Stockholder is a party or by which it is bound. Each Target
Stockholder is the lawful record and beneficial owner of that number of shares
of Target Common Stock set forth next to each Target Stockholder's name on
Section 2.3 of the Target Disclosure Schedule, free and clear of all liens,
encumbrances or claims of any kind. There does not exist nor is there
outstanding any right, option, warrant, convertible obligation or other security
or agreement entered into or granted by any Target Stockholder with respect to
any shares of Target Common Stock. Except (i) for the rights created pursuant to
this Agreement and (ii) as set forth in this Section 2.3, there are no options,
warrants, calls, rights, commitments, agreements or arrangements of any
character to which Target or any Subsidiary is a party or by which Target or any
Subsidiary is bound relating to the issued or unissued capital stock of Target
or any Subsidiary or obligating Target or any Subsidiary to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of capital stock of Target or any Subsidiary or
obligating Target or any Subsidiary to grant, extend, accelerate the vesting of,
change the price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of Target's capital stock (i)
between or among Target and any of the Target Stockholders or (ii) entered into
by or on behalf of any of the Target Stockholders.
2.4 AUTHORITY. (a) Target 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 Target. Target's Board of
Directors has unanimously approved the Merger and this Agreement. This Agreement
has been duly executed and delivered by Target and assuming due authorization,
execution and delivery by Acquiror and Merger Sub, constitutes the valid and
binding obligation of Target and each Target Stockholder enforceable against
Target and each Target Stockholder in accordance with its terms.
(a) Each Target Stockholder has the requisite capacity to
enter into this Agreement and to consummate the transaction contemplated hereby.
This Agreement has been duly executed and delivered by each Target Stockholder
and constitutes a valid and binding obligation enforceable against him or her in
accordance with its terms.
2.5 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Target and
each Target Stockholder does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (i) any provision of the Articles of Incorporation or
Bylaws of Target or any of its Subsidiaries, or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment,
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order, decree, statute, law, ordinance, rule or regulation applicable to Target,
any Target Stockholder, or any Subsidiary or any of his, hers or its properties
or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Target, any Target Stockholder or any
Subsidiary 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, together with the required officers'
certificates, as provided in Section 1.2, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), applicable state
securities laws and the securities laws of any foreign country; and (iii) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not have a Material Adverse Effect on Target and
would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
2.6 FINANCIAL STATEMENTS. Section 2.6 of the Target Disclosure
Schedule includes a true, correct and complete copy of Target's audited balance
sheet, income statement and statement of cash flows for each of the fiscal years
ended December 31,1998 and December 31, 1999, respectively (collectively, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each. The Financial Statements
accurately set out and describe the financial condition and operating results of
Target and its consolidated Subsidiaries as of the dates, and for the periods,
indicated therein. Target maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Target nor any
Subsidiary has material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (i) those set forth or adequately
provided for in the Balance Sheet for the period ended December 31, 1999 (the
"Target Balance Sheet"), (ii) those incurred in the ordinary course of business
and not required to be set forth in the Target Balance Sheet under generally
accepted accounting principles, (iii) those incurred in the ordinary course of
business since the date of the Target Balance Sheet and consistent with past
practice, and (iv) those incurred in connection with the execution of this
Agreement.
2.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 2.8
of the Target Disclosure Schedule, since date of the Target Balance Sheet (the
"Target Balance Sheet Date") there has not been, occurred or arisen any:
(a) transaction by Target or any Subsidiary except in the
ordinary course of business as conducted on that date and consistent with past
practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of Target;
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(c) capital expenditure or commitment by Target or any
Subsidiary, in any individual amount exceeding $5,000, or in the aggregate,
exceeding $20,000;
(d) destruction of, damage to, or loss of any assets
(including, without limitation, intangible assets), business or customer of
Target or any Subsidiary (whether or not covered by insurance) which would
constitute a Material Adverse Effect;
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates, any change in policies
in making or reversing accruals, or any change in capitalization of software
development costs) by Target or any revaluation by Target of any of its or any
of its Subsidiaries' assets;
(g) revaluation by the Company or any Subsidiary of any of
their respective assets;
(h) declaration, setting aside, or payment of a dividend or
other distribution in respect to the capital stock of Target, or any direct or
indirect redemption, purchase or other acquisition by Target of any of its
capital stock, except repurchases of Target Common Stock from terminated Target
employees at the original per share purchase price of such shares;
(i) increase in the salary or other compensation payable or to
become payable by Target to any officers, directors, employees or advisors of
Target or any Subsidiary, except in the ordinary course of business consistent
with past practice, or the declaration, payment, or commitment or obligation of
any kind for the payment by Target of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement, or other than as set forth in Section 2.16 below, the establishment
of any bonus, insurance, deferred compensation, pension, retirement, profit
sharing, stock option (including without limitation, the granting of stock
options, stock appreciation rights, performance awards), stock purchase or other
employee benefit plan;
(j) sale, lease, license of other disposition of any of the
assets or properties of Target or any Subsidiary, except in the ordinary course
of business and not in excess of $20,000 in the aggregate;
(k) termination or material amendment of any material
contract, agreement or license (including any distribution agreement) to which
Target or any Subsidiary is a party or by which it is bound;
(l) loan by Target or any Subsidiary to any person or entity,
or guaranty by Target or any Subsidiary of any loan, except for (x) travel or
similar advances made to employees in connection with their employment duties in
the ordinary course of business, consistent with past practices and (y) trade
payables not in excess of $200,000 in the aggregate and in the ordinary course
of business, consistent with past practices;
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(m) waiver or release of any right or claim of Target or any
Subsidiary, including any write-off or other compromise of any account
receivable of Target or any Subsidiary, in excess of $20,000 in the aggregate;
(n) the commencement or notice or threat of commencement of
any lawsuit or proceeding against or, to the Target's or and it Subsidiaries
knowledge, investigation of Target or any Subsidiary or their respective
affairs;
(o) notice of any claim of ownership by a third party of
Target's or any Subsidiary's Intellectual Property (as defined in Section 2.13
below) or of infringement by Target or any Subsidiary of any third party's
Intellectual Property rights;
(p) issuance or sale by Target or any Subsidiary of any of its
shares of capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by Target or
any Subsidiary to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property to Target or any
Subsidiary;
(r) event or condition of any character that has or could
reasonably be expected to have a Material Adverse Effect on the Company; or
(s) agreement by Target, any Subsidiary or any officer or
employee of either on behalf of such entity to do any of the things described in
the preceding clauses (a) through (r) (other than negotiations with Acquiror and
its representatives regarding the transactions contemplated by this Agreement).
2.9 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target or any
Subsidiary, threatened against Target or any Subsidiary or any of their
respective properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Target or any Subsidiary. There is
no judgment, decree or order against Target or any Subsidiary or, to the best
knowledge of Target and its Subsidiaries, any of their respective directors or
officers (in their capacities as such), that could prevent, enjoin, or
materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Target. All litigation to which Target or any Subsidiary is a party
(or, to the knowledge of Target, threatened to become a party) is disclosed in
the Target Disclosure Schedule.
2.10 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon Target or any Subsidiary
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current or future business practice of Target or any
Subsidiary, any acquisition of property by Target or any Subsidiary or the
overall conduct of business by Target or any Subsidiary as currently conducted
or as proposed to be conducted by Target or by any Subsidiary. Neither Target
nor any Subsidiary has entered into any agreement under which Target or any
Subsidiary is restricted
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from selling, licensing or otherwise distributing any of its products to any
class of customers, in any geographic area, during any period of time or in any
segment of the market.
2.11 PERMITS; COMPANY PRODUCTS; REGULATION.
(a) Each of Target and each Subsidiary is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders necessary for Target or
that Subsidiary, to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Target Authorizations") and no
suspension or cancellation of any Target Authorization is pending or, to the
best of Target's knowledge, threatened, except where the failure to have, or the
suspension or cancellation of, any Target Authorization would not have a
Material Adverse Effect on Target. Neither Target nor any Subsidiary is in
conflict with, or in default or violation of, (i) any laws applicable to Target
or any Subsidiary or by which any property or asset of Target or any Subsidiary
is bound or affected, (ii) any Target Authorization, or (iii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Target or any Subsidiary is a party or
by which Target or any Subsidiary or any property or asset of Target or any
Subsidiary is bound or affected, except for any such conflict, default or
violation that would not, individually or in the aggregate, have a Material
Adverse Effect on Target or any Subsidiary.
(b) Except as would not have a Material Adverse Effect on
Target, there have been no written notices, citations or decisions by any
governmental or regulatory body that any product produced, manufactured,
marketed or distributed at any time by Target or any Subsidiary (the "Products")
is defective or fails to meet any applicable standards promulgated by any such
governmental or regulatory body. To the best knowledge of Target, Target and
each Subsidiary has complied in all material respects with the laws,
regulations, policies, procedures and specifications with respect to the design,
manufacture, labeling, testing and inspection of the Products. Except as
disclosed in Section 2.11(b) of the Target Disclosure Schedule, there have been
no recalls, field notifications or seizures ordered or, to Target's knowledge,
threatened by any such governmental or regulatory body with respect to any of
the Products.
(c) Target has obtained, in all countries where either Target
or a Subsidiary is marketing or has marketed its Products, all applicable
licenses, registrations, approvals, clearances and authorizations required by
local, state or federal agencies in such countries regulating the safety,
effectiveness and market clearance of the Products currently or previously
marketed by Target or any Subsidiary in such countries, except for any such
failures as would not, individually or in the aggregate, have a Material Adverse
Effect on Target. Target has identified and made available for examination by
Acquiror all information relating to regulation of its Products, including
licenses, registrations, approvals and permits. Target has identified in writing
to Acquiror all international locations where regulatory information and
documents are kept.
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2.12 TITLE TO PROPERTY.
(a) Target and each Subsidiary has good and marketable title
to all of its respective properties, interests in properties and assets, real
and personal, reflected in the Target Balance Sheet or acquired after the Target
Balance Sheet Date (except properties, interests in properties and assets sold
or otherwise disposed of since the Target Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges, charges
or encumbrances of any kind or character, except (i) the lien of current taxes
not yet due and payable, (ii) such imperfections of title, liens and easements
as do not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties, and (iii) liens securing debt
which is reflected on the Target Balance Sheet. The plants, property and
equipment of Target and Subsidiaries that are used in the operations of their
businesses are in good operating condition and repair. All properties used in
the operations of Target and its Subsidiaries are reflected in the Target
Balance Sheet to the extent United States generally accepted accounting
principles require the same to be reflected. Section 2.12(a) of the Target
Disclosure Schedule sets forth a true, correct and complete list of all real
property owned or leased by Target and by each Subsidiary, the name of the
lessor, the date of the lease and each amendment thereto and the aggregate
annual rental and other fees payable under such lease. Such leases are in good
standing, are valid and effective in accordance with their respective terms, and
there is not under any such leases any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a default).
(b) Section 2.12(b) of the Target Disclosure Schedule also
sets forth a true, correct and complete list of all equipment (the "Equipment")
owned or leased by Target and its Subsidiaries, and such Equipment is, taken as
a whole, (i) adequate for the conduct of Target's business, consistent with its
past practice, and (ii) in good operating condition (except for ordinary wear
and tear).
2.13 INTELLECTUAL PROPERTY.
(a) Target and each of its Subsidiaries own, or are licensed
or otherwise possess legally enforceable rights to use all patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, copyrights, and any applications for any of the foregoing, maskworks, net
lists, schematics, industrial models, inventions, technology, know-how, trade
secrets, inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are used or proposed to be used in the business of Target or any Subsidiary as
currently conducted or as proposed to be conducted by Target or any Subsidiary,
except to the extent that the failure to have such rights have not had and could
not reasonably be expected to have a Material Adverse Effect on Target or any
Subsidiary.
(b) Section 2.13 of the Target Disclosure Schedule lists (i)
all patents and patent applications and all registered and unregistered
trademarks, trade names and service marks, registered and unregistered
copyrights, and maskworks, included in the Intellectual
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Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all licenses, sublicenses and
other agreements as to which Target or any Subsidiary is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii) all
licenses, sublicenses and other agreements as to which Target or any Subsidiary
is a party and pursuant to which Target or any Subsidiary is authorized to use
any third party patents, trademarks or copyrights, including software ("Third
Party Intellectual Property Rights") which are incorporated in, are, or form a
part of any Target product that is material to its business. Neither Target nor
any Subsidiary is in violation of any license, sublicense or agreement described
in Section 2.13 of the Target Disclosure Schedule. The execution and delivery of
this Agreement by Target and the consummation of the transactions contemplated
hereby, will neither cause Target or any Subsidiary to be in violation or
default under any such license, sublicense or agreement, nor entitle any other
party to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement. Except as set forth in Section 2.13 of the
Target Disclosure Schedule, Target is the sole and exclusive owner or licensee
of, with all right, title and interest in and to (free and clear of any liens),
the Intellectual Property, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which Intellectual Property is being
used.
(c) There is no material unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Target
or any Subsidiary, any trade secret material to Target or any Subsidiary or any
Intellectual Property right of any third party to the extent licensed by or
through Target or any Subsidiary, by any third party, including any employee or
former employee of Target or any Subsidiary. Neither Target nor any Subsidiary
has entered into any agreement to indemnify any other person against any charge
of infringement of any Intellectual Property, other than indemnification
provisions contained in purchase orders arising in the ordinary course of
business.
(d) Neither Target nor any Subsidiary is or will be as a
result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights, the breach of which would have a Material Adverse Effect on
Target.
(e) All patents, registered trademarks, service marks and
copyrights held by Target or any Subsidiary are valid and existing and there is
no assertion or claim (or basis therefor) challenging the validity of any
Intellectual Property of Target or any Subsidiary. Target has not been sued in
any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party. Neither the conduct of the
business of Target and each Subsidiary as currently conducted or contemplated
nor the manufacture, sale, licensing or use of any of the products of Target or
any Subsidiary as now manufactured, sold or licensed or used, nor the use in any
way of the Intellectual Property in the manufacture, use, sale or licensing by
Target or any Subsidiary of any products currently proposed, infringes on or
will infringe or conflict with, in any way, any license, trademark, trademark
right, trade name, trade name right, patent, patent right, industrial model,
invention, service xxxx or copyright of any
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third party that, individually or in the aggregate, is reasonably likely to have
a Material Adverse Effect on Target. All registered trademarks, service marks
and copyrights held by Target are valid and existing. To Target's knowledge, no
third party is challenging the ownership by Target or any Subsidiary, or the
validity or effectiveness of, any of the Intellectual Property. Neither Target
nor any Subsidiary has brought any action, suit or proceeding for infringement
of Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. There are no pending, or to the
best of Target's knowledge, threatened interference, re-examinations,
oppositions or nullities involving any patents, patent rights or applications
therefor of Target or any Subsidiary, except such as may have been commenced by
Target or any Subsidiary. There is no breach or violation of or threatened or
actual loss of rights under any license agreement to which Target is a party.
(f) Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does not
already own by operation of law.
(g) Target has taken all necessary and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("Confidential
Information"). Each of Target and its respective Subsidiaries has a policy
requiring each employee, consultant and independent contractor to execute
proprietary information and confidentiality agreements substantially in Target's
standard forms and all current and former employees, consultant and independent
contractors of Target and each Subsidiary have executed such an agreement. All
use, disclosure or appropriation of Confidential Information owned by Target or
a Subsidiary by or to a third party has been pursuant to the terms of a written
agreement between Target or the applicable Subsidiary and such third party. All
use, disclosure or appropriation of Confidential Information not owned by Target
or a Subsidiary has been pursuant to the terms of a written agreement between
Target or a Subsidiary and the owner of such Confidential Information, or is
otherwise lawful.
2.14 ENVIRONMENTAL MATTERS.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders, as each may be amended from time to time, that are intended to
assure the protection of the environment, or that classify, regulate, call for
the remediation of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants; which regulate the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Materials or
materials containing Hazardous Materials; or which are intended to assure the
protection, safety and good health of employees, workers or other persons,
including the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
those substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws; petroleum and petroleum
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products including crude oil and any fractions thereof; natural gas, synthetic
gas, and any mixtures thereof; radon; asbestos; and any other pollutant or
contaminant.
(iii) "Property" shall mean all real property leased
or owned by Target or its Subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Target or its Subsidiaries.
(b) Target represents and warrants as follows: (i) no
methylene chloride or asbestos is contained in or has been used at or released
from the Facilities; (ii) all Hazardous Materials and wastes have been disposed
of in accordance with all Environmental and Safety Laws; (iii) Target and its
Subsidiaries have received no notice (verbal or written) of any noncompliance of
the Facilities or of its past or present operations with Environmental and
Safety Laws; (iv) no notices, administrative actions or suits are pending or
threatened relating to Hazardous Materials or a violation of any Environmental
and Safety Laws; (v) neither Target nor its Subsidiaries are a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), or any state analog statute, arising
out of events occurring prior to the Closing Date; (vi) there has not been in
the past, and are not now, any contamination, disposal, spilling, dumping,
incineration, discharge, storage, treatment or handling of Hazardous Materials
on, under or migrating to or from the Facilities or Property (including without
limitation, soils and surface and ground waters); (vii) there have not been in
the past, and are not now, any underground tanks or underground improvements at,
on or under the Property including without limitation, treatment or storage
tanks, sumps, or water, gas or oil xxxxx; (viii) there are no polychlorinated
biphenyls ("PCBs") deposited, stored, disposed of or located on the Property or
Facilities or any equipment on the Property containing PCBs at levels in excess
of 50 parts per million; (ix) there is no formaldehyde on the Property or in the
Facilities, nor any insulating material containing urea formaldehyde in the
Facilities; (x) the Facilities and Target's and its Subsidiaries uses and
activities therein have at all times complied with all Environmental and Safety
Laws; (xi) Target and its Subsidiaries have all the permits and licenses
required to be issued and are in full compliance with the terms and conditions
of those permits; and (xii) neither Target nor any of its Subsidiaries is liable
for any off-site contamination nor under any Environmental and Safety Laws.
2.15 TAXES.
(a) For purposes of this Section 2.15 and other provisions of
this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal, state and foreign income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes,
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franchise taxes, gross receipts taxes, withholding taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (B) any liability for the
payment of amounts referred to in (A) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (C) any liability for
amounts referred to in (A) or (B) as a result of any obligations to indemnify
another person.
(ii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
required to be filed in connection with any Taxes, including information returns
with respect to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of Target
or any Subsidiary have been duly filed on a timely basis, except where the
failure to timely file such Return will not have a Material Adverse Effect on
Target, and each such Return is true, complete and correct in all material
respects. All Taxes shown to be payable on such Returns or on subsequent
assessments with respect thereto, and all payments of estimated Taxes required
to be made by or on behalf of Target or any Subsidiary under Section 6655 of the
Code or comparable provisions of state, local or foreign law, have been paid in
full on a timely basis, and no other material Taxes are payable by Target or any
Subsidiary with respect to items or periods covered by such Returns (whether or
not shown on or reportable on such Returns). Target and each Subsidiary have
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding in connection
with amounts paid or owing to any employee, creditor, independent contractor, or
other third party. There are no liens on any of the assets of Target or any
Subsidiary with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that Target or that Subsidiary is contesting in good faith
through appropriate proceedings. Neither Target nor any Subsidiary has been at
any time a member of an affiliated group of corporations filing consolidated,
combined or unitary income or franchise tax returns for a period for which the
statute of limitations for any Tax potentially applicable as a result of such
membership has not expired.
(c) The amount of Target's and any Subsidiary's liabilities
for unpaid Taxes for all periods through the date of the Financial Statements do
not, in the aggregate, materially exceed the amount of the current liability
accruals for Taxes reflected on the Financial Statements, and the Financial
Statements properly accrue in accordance with generally accepted accounting
principles ("GAAP") all liabilities for Taxes of Target and its Subsidiaries
payable after the date of the Financial Statements attributable to transactions
and events occurring prior to such date. No liability for Taxes of Target or any
Subsidiary has been incurred (or prior to Closing will be incurred) since such
date other than in the ordinary course of business.
(d) Acquiror has been furnished by Target true and complete copies
of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of Target or
any Subsidiary relating to Taxes, and (ii) all federal, state and foreign income
or franchise tax Returns for or including Target and its
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Subsidiaries for all periods since the later of Target's and such Subsidiaries'
inception, or 3 full years preceding the date of this Agreement.
(e) No audit of the Returns of or including Target and its
Subsidiaries by a government or taxing authority is in process, threatened or,
to Target's knowledge, pending (either in writing or orally, formally or
informally). No deficiencies exist or have been asserted (either in writing or
orally, formally or informally and not resolved) or are expected to be asserted
with respect to Taxes of Target or any of its Subsidiaries, and Target has not
received notice (either in writing or orally, formally or informally) nor does
it expect to receive notice that it or any Subsidiary has not filed a Return or
paid Taxes required to be filed or paid. Neither Target nor any Subsidiary is a
party to any action or proceeding for assessment or collection of Taxes, nor has
such event been asserted or threatened (either in writing or orally, formally or
informally) against Target, any Subsidiary or any of their respective assets. No
waiver or extension of any statute of limitations is in effect with respect to
Taxes or Returns of Target or any Subsidiary. Target and each Subsidiary have
disclosed on their federal and state income and franchise tax returns all
positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662 or comparable provisions of
applicable state tax laws.
(f) Target and its Subsidiaries are not (nor have they ever
been) parties to any tax sharing agreement. Since April 16, 1997, neither Target
nor any of its Subsidiaries has been a distributing corporation or a controlled
corporation in a transaction described in Section 355(a) of the Code.
(g) Target is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Target is not a "consenting corporation" under Section 341(f) of the Code.
Neither Target nor any Subsidiary has entered into any compensatory agreements
with respect to the performance of services which payment thereunder would
result in a nondeductible expense to Target or to such Subsidiary pursuant to
Section 280G of the Code or an excise tax to the recipient of such payment
pursuant to Section 4999 of the Code. Neither Target nor any Subsidiary has
agreed to, nor is it required to make, other than by reason of the Merger, any
adjustment under Code Section 481(a) by reason of, a change in accounting
method, and Target and each Subsidiary will not otherwise have any income
reportable for a period ending after the Closing Date attributable to a
transaction or other event (e.g., an installment sale) occurring prior to the
Closing Date with respect to which Target or such Subsidiary received the
economic benefit prior to the Closing Date. Neither Target nor any Subsidiary
is, nor has it been, a "reporting corporation" subject to the information
reporting and record maintenance requirements of Section 6038A and the
regulations thereunder.
(h) The Target Disclosure Schedule contains accurate and
complete information regarding Target's and its Subsidiaries' net operating
losses for federal and each state tax purposes. Target and its Subsidiaries have
no net operating losses and credit carryovers or other tax attributes currently
subject to limitation under Sections 382, 383, or 384 of the Code, not taking
into account any such limitation resulting from the Merger.
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(i) Target has made a valid election under the Code to be
treated as an S corporation effective for all taxable years of Target since its
taxable year that began on January 1, 1997, and Target's status as an S
corporation for federal income tax purposes has not been terminated for any
reason and has remained valid during the period since such date to and including
the Closing Date.
2.16 EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.16 lists, with respect to Target, each
Subsidiary of Target and any trade or business (whether or not incorporated)
which is treated as a single employer with Target (an "ERISA Affiliate") within
the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (ii) each loan to a non-officer
employee, loans to officers and directors and any stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
contracts and agreements relating to employment and all severance agreements,
with any of the directors, officers or employees of Target or its Subsidiaries
(other than, in each case, any such contract or agreement that is terminable by
the Company or its Subsidiary at will or without penalty or other adverse
consequence), (iv) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (v) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of Target or any Subsidiary and that do not generally apply to all employees,
and (vi) any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Target
or any Subsidiary remain for the benefit of, or relating to, any present or
former employee, consultant or director of Target or any Subsidiary (together,
the "Target Employee Plans").
(b) Target has furnished to Acquiror a copy of each of the Target
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each Target
Employee Plan which is subject to ERISA reporting requirements, provided copies
of the Form 5500 reports filed for the last three plan years. Any Target
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination with the exception of any amendments required by such
subsequent legislation for which the period during which a determination letter
may be requested from the Internal Revenue Service has not yet expired under
such applicable Treasury regulation or Internal Revenue Service pronouncements.
Target has also furnished Acquiror with the most recent Internal Revenue Service
determination letter issued with respect to each such Target Employee Plan, and
nothing
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has occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Target Employee
Plan subject to Code Section 401(a) except as has been disclosed to Acquiror or
its counsel.
(c) Except as set forth in Section 2.16(c) of the Target
Disclosure Schedule, (i) none of the Target Employee Plans promises or provides
retiree medical or other retiree welfare or life insurance benefits to any
person; (ii) there has been no "prohibited transaction," as such term is defined
in Section 406 of ERISA and Section 4975 of the Code, with respect to any Target
Employee Plan, which could reasonably be expected to have, in the aggregate, a
Material Adverse Effect; (iii) each Target Employee Plan has been administered
in accordance with its terms and in compliance with the requirements prescribed
by any and all statutes, rules and regulations (including ERISA and the Code),
except as would not have, in the aggregate, a Material Adverse Effect, and
Target and each Subsidiary or ERISA Affiliate have performed all obligations
required to be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any material default or
violation by any other party to, any of the Target Employee Plans; (iv) neither
Target nor any Subsidiary or ERISA Affiliate is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Target Employee Plans; (v) all material contributions
required to be made by Target or any Subsidiary or ERISA Affiliate to any Target
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Target Employee Plan for the
current plan years; (vi) with respect to each Target Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Target Employee Plan
is covered by, and neither Target nor any Subsidiary or ERISA Affiliate has
incurred or expects to incur any direct or indirect liability under, arising out
of or by operation of Title IV of ERISA in connection with the termination of,
or an employee's withdrawal from, any Target Employee Plan or other retirement
plan or arrangement, and no fact or event exists that could give rise to any
such liability, or under Section 412 of the Code; (viii) Target and the
Subsidiaries have not incurred any liability under, and have complied in all
respects with, the Worker Adjustment Retraining Notification Act, (the "WARN
Act")and no fact or event exists that could give rise to liability under such
act; and (ix) no compensation paid or payable to any employee of Target or any
Subsidiary has been, or will be, non-deductible by reason of application of
Section 162(m) of the Code. With respect to each Target Employee Plan subject to
ERISA as either an employee pension plan within the meaning of Section 3(2) of
ERISA or an employee welfare benefit plan within the meaning of Section 3(1) of
ERISA, Target has prepared in good faith and timely filed all requisite
governmental reports (which were true and correct as of the date filed to the
best of Targets' knowledge) and has properly and timely filed and distributed or
posted all notices and reports to employees required to be filed, distributed or
posted with respect to each such Target Employee Plan. No suit, administrative
proceeding, action or other litigation has been brought, or to the best
knowledge of Target is threatened, against or with respect to any such Target
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither Target nor any Subsidiary or other ERISA Affiliate
is a party to, or has made any contribution to or otherwise incurred any
obligation under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
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(d) With respect to each Target Employee Plan, Target and each
of its United States Subsidiaries have complied with (i) the applicable health
care continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations thereunder and
(ii) the applicable requirements of the Family Leave Act of 1993 and the
regulations thereunder, except to the extent that such failure to comply would
not, in the aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Target, any Subsidiary or any other ERISA Affiliate to severance
benefits or any other payment (including, without limitation, unemployment
compensation, golden parachute or bonus), except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting of any such
benefits (except to the extent of any vesting required as a result of the
termination of the plan described in Section 5.13), or increase the amount of
compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target, any Subsidiary or other ERISA
Affiliate relating to, or change in participation or coverage under, any Target
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal year included in Target's financial statements.
2.17 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of Target or any of
its Subsidiaries, (ii) materially increase any benefits otherwise payable by
Target, or (iii) result in the acceleration of the time of payment or vesting of
any such benefits.
2.18 EMPLOYEE MATTERS. Target and each of its Subsidiaries are in
compliance in all material respects with all currently applicable federal,
state, local and foreign laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice. There are no pending claims against Target or any
of its Subsidiaries under any workers compensation plan or policy or for long
term disability. Neither Target nor any of its Subsidiaries has any material
obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder. There are no controversies pending or, to the
knowledge of Target or any of its Subsidiaries, threatened, between Target or
any of its Subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect on Target. Neither Target nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor unions contract nor does Target
or any of its Subsidiaries know of any activities or proceedings of any labor
union or other group to organize any such employees.
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2.19 MATERIAL CONTRACTS.
(a) Subsections (i) through (ix) of Section 2.19(a) of the
Target Disclosure Schedule contain a list of all contracts and agreements to
which Target or any Subsidiary is a party and that are material to the business,
results of operations, or condition (financial or otherwise), of Target and the
Subsidiaries taken as a whole (such contracts, agreements and arrangements as
are required to be set forth in Section 2.19(a) of the Target Disclosure
Schedule being referred to herein collectively as the "Material Contracts").
Material Contracts shall include, without limitation, the following and shall be
categorized in the Target Disclosure Schedule as follows:
(i) each contract and agreement (other than routine
purchase orders and pricing quotes in the ordinary course of business covering a
period of less than 1 year) for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to Target or any Subsidiary under the terms of which Target or any
Subsidiary: (A) paid or otherwise gave consideration of more than $5,000 in the
aggregate during the calendar year ended December 31, 1999 , (B) is likely to
pay or otherwise give consideration of more than $5,000 in the aggregate during
the calendar year ended December 31, 2000, (C) is likely to pay or otherwise
give consideration of more than $5,000 in the aggregate over the remaining term
of such contract, or (D) cannot be cancelled by Target or such Subsidiary
without penalty or further payment of less than $5,000;
(ii) each customer contract and agreement (other than
routine purchase orders, pricing quotes with open acceptance and other tender
bids, in each case, entered into in the ordinary course of business and covering
a period of less than one year) to which Target or any Subsidiary is a party
which (A) involved consideration of more than $5,000 in the aggregate during the
calendar year ended December 31, 1999, (B) is likely to involve consideration of
more than $5,000 in the aggregate during the calendar year ended December 31,
2000, (C) is likely to involve consideration of more than $5,000 in the
aggregate over the remaining term of the contract, or (D) cannot be cancelled by
Target or such Subsidiary without penalty or further payment of less than
$5,000;
(iii) (A) all distributor, manufacturer's
representative, broker, franchise, agency and dealer contracts and agreements to
which Target or any Subsidiary is a party (specifying on a matrix, in the case
of distributor agreements, the name of the distributor, product, territory,
termination date and exclusivity provisions) and (B) all sales promotion, market
research, marketing and advertising contracts and agreements to which Target or
any Subsidiary is a party which: (1) involved consideration of more than $5,000
in the aggregate during the calendar year ended December 31, 1999, (2) are
likely to involve consideration of more than $5,000 in the aggregate during the
calendar year ended December 31, 2000, or (3) are likely to involve
consideration of more than $5,000 in the aggregate over the remaining term of
the contract;
(iv) all management contracts with independent
contractors or consultants (or similar arrangements) to which Target or any
Subsidiary is a party and which (A) involved consideration or more than $5,000
in the aggregate during the calendar year ended December 31, 1999, (B) are
likely to involve consideration of more than $5,000 in the aggregate
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during the calendar year ended December 31, 2000, or (C) are likely to involve
consideration of more than $5,000 in the aggregate over the remaining term of
the contract;
(v) all contracts and agreements (excluding routine
checking account overdraft agreements involving xxxxx cash amounts) under which
Target or any Subsidiary has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness or under which Target or any
Subsidiary has imposed (or may impose) a security interest or lien on any of
their respective assets, whether tangible or intangible, to secure indebtedness;
(vi) all contracts and agreements that limit the ability
of Target or any Subsidiary or, after the Effective Time, Acquiror or any of its
affiliates, to compete in any line of business or with any person or in any
geographic area or during any period of time, or to solicit any customer or
client;
(vii) all contracts and agreements between or among
Target or any Subsidiary, on the one hand, and any affiliate of Target (other
than a wholly owned subsidiary), on the other hand:
(viii) all contracts and agreements to which Target or
any Subsidiary is a party under which it has agreed to supply products to a
customer at specified prices, whether directly or through a specific
distributor, manufacturer's representative or dealer; and
(ix) all other contracts or agreements (A) which are
material to Target and its Subsidiaries or the conduct of their respective
businesses, (B) the absence of which would have a Material Adverse Effect on
Target, or (C) which are believed by Target to be of unique value even though
not material to the business of Target.
(b) Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Target, each Target license, each Material
Contract and each other material contract or agreement of Target or any
Subsidiary which would not have been required to be disclosed in Section 2.19(a)
of the Target Disclosure Schedule had such contract or agreement been entered
into prior to the date of this Agreement, is a legal, valid and binding
agreement, and none of the Target licenses or Material Contracts is in default
by its terms or has been cancelled by the other party; Target and the
Subsidiaries are not in receipt of any claim of default under any such
agreement; and none of Target or any of the Subsidiaries anticipates any
termination or change to, or receipt of a proposal with respect to, any such
agreement as a result of the Merger or otherwise. Target has furnished Acquiror
with true and complete copies of all such agreements together with all
amendments, waivers or other changes thereto.
2.20 INTERESTED PARTY TRANSACTIONS. Neither Target nor any
Subsidiary is indebted to any director, officer, employee or agent of Target or
any Subsidiary (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such person is indebted to Target or
any Subsidiary.
2.21 INSURANCE. Target and each of its Subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or
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owning assets similar to those of Target and its Subsidiaries. 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 and bonds have been
paid and Target and its Subsidiaries are otherwise in compliance with the terms
of such policies and bonds. Target has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
2.22 COMPLIANCE WITH LAWS. Each of Target and its Subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not reasonably be expected to have a Material Adverse Effect on Target.
2.23 MINUTE BOOKS. The minute books of Target and its Subsidiaries
made available to Acquiror contain a complete summary of all meetings of
directors and stockholders or actions by written consent since the time of
incorporation of Target and the respective Subsidiaries through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
2.24 BROKERS' AND FINDERS' FEES. Target has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.25 VOTE REQUIRED. Except for shareholder approval which has been
duly obtained, the signature by the Target Stockholders on this Agreement is the
only action of the holders of any of Target's capital stock necessary to approve
this Agreement and the transactions contemplated hereby.
2.26 BOARD APPROVAL. The Board of Directors of Target has
unanimously (i) approved this Agreement and the Merger, (ii) determined that the
Merger is in the best interests of the stockholders of Target and is on terms
that are fair to such stockholders and (iii) recommended that the stockholders
of Target approve this Agreement and the Merger.
2.27 ACCOUNTS RECEIVABLE.
(a) Target has made available to Acquiror a list of all
accounts receivable of Target and each Subsidiary reflected on the Financial
Statements ("Accounts Receivable") along with a range of days elapsed since
invoice.
(b) All Accounts Receivable of Target and its Subsidiaries
arose in the ordinary course of business and are carried at values determined in
accordance with GAAP consistently applied. No person has any lien on any of such
Accounts Receivable and no request or agreement for deduction or discount has
been made with respect to any of such Accounts Receivable.
(c) All of the inventories of Target and each Subsidiary
reflected in the Financial Statements and Target's books and records on the date
hereof were purchased,
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acquired or produced in the ordinary and regular course of business and in a
manner consistent with Target's regular inventory practices and are set forth on
Target's books and records in accordance with the practices and principles of
Target consistent with the method of treating said items in prior periods. None
of the inventory of Target or any Subsidiary reflected on the Financial
Statements or on Target's books and records as of the date hereof (in either
case net of the reserve therefor) is obsolete, defective or in excess of the
needs of the business of Target reasonably anticipated for the normal operation
of the business consistent with past practices and outstanding customer
contracts. The presentation of inventory on the Financial Statements conforms to
GAAP and such inventory is stated at the lower of cost or net realizable value.
2.28 CUSTOMERS AND SUPPLIERS. As of the date hereof, no customer
which individually accounted for more than 5% of Target's gross revenues during
the 12-month period preceding the date hereof, and no supplier of Target, has
cancelled or otherwise terminated, or made any written threat to Target to
cancel or otherwise terminate its relationship with Target, or has at any time
on or after the Target Balance Sheet Date decreased materially its services or
supplies to Target in the case of any such supplier, or its usage of the
services or products of Target in the case of such customer, and to Target's
knowledge, no such supplier or customer intends to cancel or otherwise terminate
its relationship with Target or to decrease materially its services or supplies
to Target or its usage of the services or products of Target, as the case may
be. From and after the date hereof, no customer which individually accounted for
more than 5% of Target's gross revenues during the 12 month period preceding the
Closing Date, has cancelled or otherwise terminated, or made any written threat
to Target to cancel or otherwise terminate, for any reason, including without
limitation the consummation of the transactions contemplated hereby, its
relationship with Target, and to Target's knowledge, no such customer intends to
cancel or otherwise terminate its relationship with Target or to decrease
materially its usage of the services or products of Target. Target has not
knowingly breached, so as to provide a benefit to Target that was not intended
by the parties, any agreement with, or engaged in any fraudulent conduct with
respect to, any customer or supplier of Target.
2.29 THIRD PARTY CONSENTS. Except as set forth in Section 2.29 of
the Target Disclosure Schedule, no consent or approval is needed from any third
party in order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
2.30 NO COMMITMENTS REGARDING FUTURE PRODUCTS. Target has made no
sales to customers that are contingent upon providing future enhancements of
existing products, to add features not presently available on existing products
or to otherwise enhance the performance of its existing products (other than
beta or similar arrangements pursuant to which Target's customers from time to
time test or evaluate products). The products Target has delivered to customers
substantially comply with published specifications for such products and Target
has not received material complaints from customers about its products that
remain unresolved. Section 2.30 of the Target Disclosure Schedule accurately
sets forth a complete list of products in development (exclusive of mere
enhancements to and additional features for existing products).
2.31 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement, when all such documents are read
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together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
SECTION THREE
3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Acquiror to Target prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Acquiror Disclosure Schedule"), Acquiror and Merger Sub
hereby jointly and severally represent and warrant to Target as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of Acquiror and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. Each of Acquiror and Merger Sub
has the corporate power to own its properties and to carry on its business as
now being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on
Acquiror. Acquiror has delivered a true and correct copy of the Certificate of
Incorporation and Bylaws or other charter documents, as applicable, of Acquiror
and Merger Sub, each as amended to date, to Target. Neither Acquiror nor any of
its subsidiaries is in violation of any material provisions of its Certificate
of Incorporation or Bylaws or equivalent organizational documents.
3.2 CAPITAL STRUCTURE.
(a) Except as disclosed in Section 3.2 of the Acquiror
Disclosure Schedule, the authorized capital stock of Acquiror consists of (i)
150,000,000 shares of Common Stock, $0.0001 par value, of which (A) 118,750,000
have been designated Class A Common Stock, 5,886,656 shares of which were issued
and outstanding as of the close of business on the day immediately preceding the
Closing Date (the "Capitalization Date"), and (B) 31,250,000 have been
designated Class B Common Stock, none of which were issued and outstanding as of
the close of business on the Capitalization Date and (ii) 46,165,082 shares of
Preferred Stock, $0.0001 par value, of which (A) 2,500,000 shares have been
designated Series A Preferred Stock, 2,455,798 of which were issued and
outstanding as of the closing of business on the Capitalization Date, (B)
10,250,000 shares have been designated Series A-1 Preferred Stock, 9,725,096 of
which were issued and outstanding as of the closing of business on the
Capitalization Date, (C) 31,250,000 have been designated Series B Preferred
Stock, 31,186,312 of which were issued and outstanding as of the closing of
business on the Capitalization Date, (D) 2,015,082 have been designated Series C
Preferred Stock, 1,765,082 which were issued and outstanding as of the closing
of business on the Capitalization Date, and (E) 150,000 have been designated
Series C-1 Preferred Stock, all of which were issued and outstanding as of the
closing of business on the Capitalization Date. As of the close of business on
the Capitalization Date, the Acquiror has reserved 382,215 shares of Class A
Common Stock and 516,976 shares of
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Series A-1 Preferred Stock (collectively, "Option Stock") for issuance to
officers, directors, employees and consultants of the Acquiror pursuant to its
1999 Revised Stock Plan duly adopted by the Board of Directors and approved by
the Acquiror's stockholders (the "1999 Revised Stock Plan"), and the Acquiror
has reserved 2,500,000 shares of Common Stock for issuance to officers,
directors, employees and consultants of the Acquiror pursuant to its 2000
Incentive Stock Plan duly adopted by the Board of Directors and approved by the
Acquiror's stockholders (the "2000 Incentive Stock Plan" and, together with the
1999 Revised Stock Plan, the "Stock Plans"). Of such reserved shares of Option
Stock under the 1999 Revised Stock Plan, no shares have been issued pursuant to
restricted stock purchase agreements, options to purchase 382,215 shares of
Class A Common Stock and 516,976 shares of Series A-1 Preferred Stock have been
granted and are currently outstanding, and no shares of Class A Common Stock
remain available for issuance to officers, directors, employees and consultants
pursuant to the 1999 Revised Stock Plan. Of such reserved shares of Class A
Common Stock under the 2000 Incentive Stock Plan, no shares have been issued
pursuant to restricted stock purchase agreements, options to purchase 175,000
shares of Class A Common Stock have been granted and are currently outstanding,
and 2,325,000 shares of Class A Common Stock remain available for issuance to
officers, directors, employees and consultants pursuant to the 2000 Incentive
Stock Plan. Other than as contemplated under this Agreement or as set forth in
the Acquiror Disclosure Schedule, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which Acquiror or Merger
Sub is a party or by which either of them is bound obligating Acquiror or Merger
Sub to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
Acquiror or obligating Acquiror or Merger Sub to grant, extend or enter into any
such option, warrant, call, right, commitment or agreement. The shares of
Acquiror Common Stock to be issued pursuant to the Merger will be duly
authorized, validly issued, fully paid, and non-assessable.
(b) The authorized capital stock of Merger Sub consists of
1,000,000 shares of Common Stock, par value $0.0001 of which 100 are issued and
outstanding and are held by Acquiror. All outstanding shares of Acquiror and
Merger Sub have been duly authorized, validly issued, fully paid and are
nonassessable and free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. There are no
options, warrants, calls, rights, commitments or agreements of any character to
which Acquiror or Merger Sub is a party or by which either of them is bound
obligating Acquiror or Merger Sub to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of Merger Sub or obligating Acquiror or Merger Sub to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement.
3.3 AUTHORITY. Acquiror 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, including but not
limited to the issuance of the Notes Consideration, have been duly authorized by
all necessary corporate action on the part of Acquiror and Merger Sub (other
than, with respect to the Merger, the filing and recordation of appropriate
merger documents as required by Delaware Law). This Agreement has been duly
executed and delivered by Acquiror and Merger Sub and constitutes the valid and
binding obligations of Acquiror and Merger Sub.
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3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Acquiror or Merger Sub, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or Merger Sub or their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or Merger Sub in connection with the execution
and delivery of this Agreement by Acquiror and Merger Sub or the consummation by
Acquiror and Merger Sub of the transactions contemplated hereby, except for (i)
the filing of appropriate merger documents as required by Delaware Law and
Minnesota Law, (ii) any filings as may be required under applicable state
securities laws and the securities laws of any foreign country and (iii) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not have a Material Adverse Effect on Acquiror and
would not prevent, materially alter or delay any the transactions contemplated
by this Agreement.
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet heretofore provided to Target for the period ended December 31,
1999 (the "Acquiror Balance Sheet"), (ii) those incurred in the ordinary course
of business and not required to be set forth in the Acquiror Balance Sheet under
United States generally accepted accounting principles, and (iii) those incurred
in the ordinary course of business since the Acquiror Balance Sheet Date and
consistent with past practice.
3.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 3.6
of the Acquiror Disclosure Schedule, since the date of the Acquiror Balance
Sheet (the "Acquiror Balance Sheet Date"), Acquiror has conducted its business
in the ordinary course in a manner consistent with past practice and there has
not occurred: (i) any change, event or condition (whether or not covered by
insurance) that has resulted in, or might reasonably be expected to result in, a
Material Adverse Effect to Acquiror; (ii) any declaration, setting aside, or
payment of a dividend or other distribution with respect to the shares of
Acquiror, or any direct or indirect redemption, purchase or other acquisition by
Acquiror of any of its shares of capital stock; (iii) any material amendment or
change to Acquiror's Certificate of Incorporation or Bylaws; or (iv) any
negotiation or agreement by Acquiror to do any of the things described in the
preceding clauses (i) through (iii) (other than negotiations with Target and its
representatives regarding the transactions contemplated by this Agreement).
3.7 LITIGATION. Except as set forth in Section 3.7 of the Acquiror
Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Acquiror or any of its
subsidiaries, threatened against Acquiror or any of its
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subsidiaries or any of their respective properties or any of their respective
officers or directors (in their capacities as such) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Acquiror. There is no judgment, decree or order against Acquiror or any of its
subsidiaries or, to the knowledge of Acquiror or any of its subsidiaries, any of
their respective directors or officers (in their capacities as such) that could
prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Acquiror.
3.8 GOVERNMENTAL AUTHORIZATION. Except as set forth in Section 3.8
of the Acquiror Disclosure Schedule, each of Acquiror and its subsidiaries has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity that is
required for the operation of Acquiror's or any of its subsidiaries' business
("Acquiror Authorizations"), and all of such Acquiror Authorizations are in full
force and effect, except where the failure to obtain or have any of such
Acquiror Authorizations could not reasonably be expected to have a Material
Adverse Effect on Acquiror.
3.9 COMPLIANCE WITH LAWS. Each of Acquiror and its subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not reasonably be expected to have a Material Adverse Effect on Acquiror.
3.10 BROKER'S AND FINDERS' FEES. Acquiror has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.11 ACCOUNTING AND TAX MATTERS. Neither Acquiror nor any of its
subsidiaries nor, to the knowledge of Acquiror, any of their respective
affiliates or agents is aware of any agreement, plan or other circumstance that
would prevent the Merger from constituting a transaction under Section 368(a) of
the Code.
3.12 XXXX-XXXXX-XXXXXX EXEMPTION. Neither the Acquiror not any
person that is an "ultimate parent entity" of Acquiror (as defined in the
regulations promulgated by the Federal trade Commission under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act")) has annual net sales or total assets (each as determined pursuant to the
regulations promulgated by the Federal Trade Commission under the HSR Act) of
$100,000,000 or more.
3.13 SECURITIES LAWS. All outstanding shares of capital stock of
Acquiror were issued, and the shares of Acquiror Common Stock to be issued
pursuant to the Merger will be issued, in compliance with all applicable federal
and state securities laws.
3.14 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Acquiror and Merger Sub herein or in any Schedule hereto, or
certificate furnished by Acquiror or Merger Sub pursuant to this Agreement, when
all such documents are read together in their entirety, contains or will contain
at the Effective Time any untrue statement of a material
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fact, or omits or will omit at the Effective Time to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
SECTION FOUR
4. CONDUCT PRIOR TO THE EFFECTIVE TIME.
4.1 CONDUCT OF BUSINESS OF TARGET AND ACQUIROR. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of Target and Acquiror
agrees (except to the extent expressly contemplated by this Agreement or as
consented to in writing by the other), to carry on its and its subsidiaries'
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay and to cause its subsidiaries to pay
debts and Taxes when due subject in the case of Taxes of Target or any of its
Subsidiaries, to Acquiror's consent to the filing of material Tax Returns if
applicable, to pay or perform other obligations when due, and to use all
reasonable efforts consistent with past practice and policies to preserve intact
its and its subsidiaries' present business organization, keep available the
services of its and its subsidiaries' present officers and key employees and
preserve its and its subsidiaries' relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it
or its subsidiaries, to the end that its and its subsidiaries' goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Each of Target and
Acquiror agrees to promptly notify the other of any event or occurrence not in
the ordinary course of its or its subsidiaries' business, and of any event which
could have a Material Adverse Effect. Without limiting the foregoing, except as
expressly contemplated by this Agreement, Target shall not do, cause or permit
any of the following, or allow, cause or permit any of its Subsidiaries to do,
cause or permit any of the following, without the prior written consent of
Acquiror:
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its Subsidiaries;
(c) STOCK OPTION PLANS, ETC. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under its
stock plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans; or
(d) OTHER. Take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (c) above, or any action
which would make any of
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its representations or warranties contained in this Agreement untrue or
incorrect or prevent it from performing or cause it not to perform its covenants
hereunder.
4.2 CONDUCT OF BUSINESS OF TARGET. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated by this
Agreement, Target shall not do, cause or permit any of the following, or allow,
cause or permit any of its Subsidiaries to do, cause or permit any of the
following, without the prior written consent of Acquiror:
(a) MATERIAL CONTRACTS. Enter into any Material Contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Material Contracts, other than in the ordinary course of business
consistent with past practice;
(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement; provided, however, that Target
may, in the ordinary course of business consistent with past practice, grant
options for the purchase of Target Common Stock under the Target Stock Option
Plan;
(c) INTELLECTUAL PROPERTY. Transfer to any person or entity
any rights to its Intellectual Property;
(d) EXCLUSIVE RIGHTS. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(e) DISPOSITIONS. Sell, lease, license or otherwise dispose of
or encumber any of its properties or assets which are material, individually or
in the aggregate, to its and its Subsidiaries' business, taken as a whole,
except in the ordinary course of business consistent with past practice;
(f) INDEBTEDNESS. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(g) LEASES. Enter into operating lease;
(h) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an
amount in excess of $5,000 in any one case or $20,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the Target Financial Statements;
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(i) CAPITAL EXPENDITURES. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(j) INSURANCE. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(k) TERMINATION OR WAIVER. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(l) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt or
amend any employee benefit or stock purchase or option plan, or hire any new
director level or officer level employee (except that it may hire a replacement
for any current director level or officer level employee if it first provides
Acquiror advance notice regarding such hiring decision), pay any special bonus
or special remuneration to any employee or director, or increase the salaries or
wage rates of its employees;
(m) SEVERANCE ARRANGEMENT. Grant any severance or termination
pay (i) to any director or officer or (ii) to any other employee except payments
made pursuant to standard written agreements outstanding on the date of this
Agreement;
(n) LAWSUITS. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with Acquiror
prior to the filing of such a suit, or (iii) for a breach of this Agreement;
(o) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, 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 its and its Subsidiaries' business, taken as a whole;
(p) TAXES. Other than in the ordinary course of business, make
or change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any extension or waiver
of the limitation period applicable to any claim or assessment in respect of
Taxes;
(q) NOTICES. Target shall give all notices and other
information required to be given to the employees of Target, any collective
bargaining unit representing any group of employees of Target, and any
applicable government authority under the National Labor Relations Act, the
Internal Revenue Code, COBRA, and other applicable law in connection with the
transactions provided for in this Agreement;
(r) REVALUATION. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
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(s) OTHER. Take or agree in writing or otherwise to take, any
of the actions described in Sections 4.2(a) through (r) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
4.3 NO SOLICITATION. Target and its Subsidiaries and the officers,
directors, employees or other agents of Target and its Subsidiaries and the
Target Stockholders will not, directly or indirectly, (i) take any action to
solicit, initiate, encourage or approve any Takeover Proposal (as defined below)
or (ii) engage in negotiations with, or disclose any nonpublic information
relating to Target or any of it Subsidiaries to, or afford access to the
properties, books or records of Target or any of its Subsidiaries to, any person
that has advised Target that it may be considering making, or that has made, a
Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" means any
offer or proposal for, or any indication of interest in, a merger or other
business combination involving Target or any of its Subsidiaries or the
acquisition of any significant equity interest in, or a significant portion of
the assets of, Target or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
SECTION FIVE
5. ADDITIONAL AGREEMENTS.
5.1 BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
5.2 CONSENTS; COOPERATION.
(a) Each of Acquiror and Target shall use its reasonable best
efforts to promptly (i) obtain from any Governmental Entity any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Acquiror or Target or any of their subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder and (ii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under the Securities Act and
the Exchange Act and any other applicable federal, state or foreign securities
laws.
(b) From the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, each party shall promptly
notify the other party in writing of any pending or, to the knowledge of such
party, threatened action, proceeding or investigation by any Governmental Entity
or any other person (i) challenging or seeking material damages in connection
with this Agreement or the transactions contemplated hereunder or (ii) seeking
to restrain or prohibit the consummation of the Merger or the transactions
contemplated
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hereunder or otherwise limit the right of Acquiror or its subsidiaries to own or
operate all or any portion of the businesses or assets of Target or its
subsidiaries.
(c) Each of Acquiror and Target shall give or cause to be
given any required notices to third parties, and use its reasonable best efforts
to obtain all consents, waivers and approvals from third parties (i) necessary,
proper or advisable to consummate the transactions contemplated hereunder, (ii)
disclosed or required to be disclosed in the Target Disclosure Schedule or the
Acquiror Disclosure Schedule, or (iii) required to prevent a Material Adverse
Effect on Target or Acquiror from occurring prior or after the Effective Time.
In the event that Acquiror or Target shall fail to obtain any third party
consent, waiver or approval described in this Section 5.2(c), it shall use its
reasonable best efforts, and shall take any such actions reasonably requested by
the other party, to minimize any adverse effect upon Acquiror and Target, their
respective subsidiaries and their respective businesses resulting (or which
could reasonably be expected to result after the Effective Time) from the
failure to obtain such consent, waiver or approval.
(d) Each of Acquiror and Target will, and will cause their
respective subsidiaries to, take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on them with respect
to the consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto necessary in
connection with any such requirements imposed upon such other party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.3 ACCESS TO INFORMATION.
(a) Target shall afford Acquiror and its accountants, counsel
and other representatives reasonable access during normal business hours during
the period prior to the Effective Time to (i) all of Target's and its
Subsidiaries' properties, books, contracts, commitments and records, and (ii)
all other information concerning the business, properties and personnel of
Target and its Subsidiaries as Acquiror may reasonably request. Target agrees to
provide to Acquiror and its accountants, counsel and other representatives
copies of internal financial statements promptly upon request. Acquiror shall
afford Target and its accountants, counsel and other representatives reasonable
access during normal business hours during the period prior to the Effective
Time to (i) all of Acquiror's and its subsidiaries' properties, books,
contracts, commitments and records, and (ii) all other information concerning
the business, properties and personnel of Acquiror and its subsidiaries as
Target may reasonably request. Acquiror agrees to provide to Target and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Acquiror and Target shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
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(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 CONFIDENTIALITY. Any information concerning any party hereto
disclosed to any other party hereto or any party's affiliates or representatives
in connection with this Agreement or the transactions contemplated hereby, which
has not been publicly disclosed, shall be kept strictly confidential by such
party, its affiliates and/or representatives. Each party hereto shall keep, and
shall cause its affiliates and/or representatives to keep, such confidential
information in strict confidence.
5.5 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement,
Acquiror and Target shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law.
5.6 FIRPTA. Each Target Stockholder shall, prior to the Closing
Date, provide Acquiror with a properly executed certificate with respect to the
Foreign Investment and Real Property Tax Act of 1980 ("FIRPTA") in the form
attached hereto as Exhibit D ("FIRPTA Certificate").
5.7 STATE STATUTES. If any state takeover law shall become
applicable to the transactions contemplated by this Agreement, Acquiror and its
Board of Directors or Target and its Board of Directors, as the case may be,
shall use their reasonable best efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effects of such state takeover law on
the transactions contemplated by this Agreement.
5.8 BLUE SKY LAWS. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger. Target shall use its best efforts to assist Acquiror as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Acquiror Common Stock in
connection with the Merger.
5.9 STOCKHOLDER'S REPRESENTATION AGREEMENTS. The Target Stockholders
will each execute and deliver to Acquiror a Stockholder's Representation
Agreement substantially in the form attached hereto as Exhibit E (the
"Stockholder's Representation Agreement") which imposes certain restrictions
regarding the resale of Acquiror Common Stock received in the Merger.
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5.10 MAINTENANCE OF TARGET INDEMNIFICATION OBLIGATIONS.
(a) Subject to and following the Effective Time, the Surviving
Corporation shall, and Acquiror shall cause the Surviving Corporation to,
indemnify and hold harmless the Indemnified Target Parties (as defined below) to
the extent provided in the Bylaws or Articles of Incorporation of Target, in
each case as in effect as of the date of this Agreement. The Surviving
Corporation shall, and Acquiror shall cause the Surviving Corporation to, keep
in effect such provisions, which shall not be amended except as required by
applicable law or to make changes permitted by applicable law that would enlarge
the rights to indemnification available to the Indemnified Target Parties and
changes to provide for exculpation of director and officer liability to the
fullest extent permitted by applicable law. For purposes of this Section 5.10,
"Indemnified Target Parties" shall mean the individuals who were officers,
directors, employees and agents of Target on or prior to the Effective Time.
(b) Subject to and following the Effective Time, Acquiror and
the Surviving Corporation shall be jointly and severally obligated to pay the
reasonable expenses, including reasonable attorney's fees, that may be incurred
by any Indemnified Target Party in enforcing the rights provided in this Section
5.10 and shall make any advances of such expenses to the Indemnified Target
Party that would be available under the Bylaws or Articles of Incorporation of
Target (in each case as in effect as of the date of this Agreement) with regard
to the advancement of indemnifiable expenses, subject to the undertaking of such
party to repay such advances in the event that it is ultimately determined that
such party is not entitled to indemnification.
(c) The provisions of this Section 5.10 shall be in addition
to any other rights available to the Indemnified Target Parties, shall survive
the Effective Time of the Merger, and are expressly intended for the benefit of
the Indemnified Target Parties.
5.11 NON-COMPETITION AGREEMENTS. Prior to the Closing, the Target
Stockholders will each execute and deliver to Acquiror Non-Competition
Agreements substantially in the form of Exhibit F attached hereto (the
"Non-Competition Agreements").
5.12 CERTAIN TAX MATTERS.
(a) Merger Sub shall cause to be prepared by Target's current
auditors and file or cause to be prepared and filed all income and franchise Tax
Returns for the Target and its Subsidiaries for all periods ending on or prior
to the Closing Date that are filed after the Closing Date in a manner consistent
with the prior Tax Returns of Target and it Subsidiaries; provided, however,
that Merger Sub shall not be required to take any position that it reasonably
believes could subject it to penalty. Merger Sub shall permit Target
Stockholders to review and comment upon each Tax Return prior to filing and
shall make such revisions to such Tax Returns as are reasonably requested by a
majority of the Target Stockholders. All parties hereto agree to cooperate with
each other and with each other's agents, including accounting firms and legal
counsel, in connection with the preparation and filing of Tax Returns pursuant
to this Section 5.12(a).
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(b) Neither Acquiror nor Merger Sub shall file any amended
returns for Target for tax period ending on or prior to the Closing Date without
the consent of a majority in interest of the Target Stockholders.
(c) Neither Acquiror nor Merger Sub shall take any action,
either before or after the Merger, that would cause the Merger to fail to
constitute a "reorganization" within the meaning of Section 368(a) of the Code.
5.13 401(k) PLAN. Prior to the Closing, Target shall terminate the
Xxxxx Systems, Inc. 401(k) Plan. For purposes of the 401(k) plan sponsored by
Acquiror and/or its affiliates, (a) service with Target credited under the Xxxxx
Systems, Inc. 401(k) Plan as of the Closing shall be credited under the 401(k)
plan sponsored by Acquiror and/or its affiliates and (b) individuals who are
Target employees immediately prior to the Closing shall be considered to be
members of a class eligible for the 401(k) plan sponsored by Acquiror and/or its
affiliates.
5.14 WAIVER OF DISSENTER'S RIGHTS. Each Target Stockholder
acknowledges that such Target Stockholder has received from Target an adequate
disclosure and notice as required under Minnesota Law that such Target
Stockholder is entitled under the provisions of Section 302A.471 of the
Minnesota Law to dissent from the Merger and receive the fair market value of
his or her shares of Target Common Stock in accordance with the terms,
conditions and procedures set forth in Section 302A.471 of the Minnesota Law.
Each Target Stockholder hereby irrevocably and unconditionally waives any and
all rights which such Target Stockholder has or may have to dissent from the
Merger under or by reason of Section 302A.471 of the Minnesota Law and agrees
with the Acquiror, Merger Sub, Target and each other Target Stockholder that the
fair market value of each share of Target Common Stock for purposes of such
Section 302A.471 is not greater than the per share Merger Consideration and
agrees that he or she shall not exercise or attempt to exercise any rights of
dissent with respect to the Merger provided for in such Section 302A.471.
5.15 STOCK OPTION AGREEMENTS. Promptly after the Closing Date,
Acquiror shall enter into stock option agreements with those new employees of
Merger Sub listed on the Employees Stock Options List (dated 2-17-2000) provided
by Target on February 16, 2000, granting to each such employee options to
acquire the number of shares of Acquiror's Common Stock listed opposite such
employee's name at a purchase price equal to the share price used to calculate
the Exchange Ratio at Closing, such option to be subject to Acquiror's normal
terms and conditions, including vesting restrictions.
SECTION SIX
6. CONDITIONS TO THE MERGER.
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction on or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
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(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(b) GOVERNMENTAL APPROVAL. Acquiror, Target and Merger Sub and
their respective subsidiaries shall have timely obtained from each Governmental
Entity all approvals, waivers and consents, if any, necessary for consummation
of or in connection with the Merger and the several transactions contemplated
hereby, including, without limitation, such approvals, waivers and consents as
may be required under the Securities Act and under any state securities laws.
(c) TAX OPINION. Acquiror and Target shall have received
written opinions of Acquiror's legal counsel and Target's legal counsel,
respectively, dated on or about the Closing Date, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code, and such opinions shall not have been withdrawn. In rendering such
opinions, counsel shall be entitled to rely upon, among other things, reasonable
assumptions as well as representations of Acquiror, Merger Sub and Target and
Target Stockholders.
(d) Merger Sub shall have entered into employee agreements
with Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxxxx, substantially in the form of
Exhibit G hereto, and shall have entered into an employment agreement with
Xxxxxx Xxxxxxxxx upon mutually agreeable terms.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The obligations
of Target to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Target:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS (i) Each of the
representations and warranties of Acquiror and Merger Sub in this Agreement that
is expressly qualified by a reference to materiality shall be true in all
respects as so qualified, and each of the representations and warranties of
Acquiror and Merger Sub in this Agreement that is not so qualified shall be true
and correct in all material respects, on and as of the Effective Time as though
such representation or warranty had been made on and as of such time (except
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), and (ii)
Acquiror and Merger Sub shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Effective Time.
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(b) Certificates of Acquiror.
(i) COMPLIANCE CERTIFICATE OF ACQUIROR. Target shall
have been provided with a certificate executed on behalf of Acquiror by its
President or its Chief Financial Officer to the effect that, as of the Effective
Time, each of the conditions set forth in Sections 6.1(a) has been satisfied
with respect to Acquiror.
(ii) CERTIFICATE OF SECRETARY OF ACQUIROR. Target shall
have been provided with a certificate executed by the Secretary or Assistant
Secretary of Acquiror certifying:
(A) Resolutions duly adopted by the Board of
Directors and the stockholders of Acquiror authorizing the execution of this
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby; and
(B) the incumbency of the officers of
Acquiror executing this Agreement and all agreements and documents contemplated
hereby.
(c) Certificates of Merger Sub.
(i) COMPLIANCE CERTIFICATE OF MERGER SUB. Target shall
have been provided with a certificate executed on behalf of Merger Sub by its
President or its Chief Financial Officer to the effect that, as of the Effective
Time, each of the conditions set forth in Section 6.1(a) has been satisfied with
respect to Merger Sub.
(ii) CERTIFICATE OF SECRETARY OF MERGER SUB. Target
shall have been provided with a certificate executed by the Secretary or
Assistant Secretary of Merger Sub certifying:
(A) Resolutions duly adopted by the Board of
Directors and the sole stockholder of Merger Sub authorizing the execution of
this Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby; and
(B) the incumbency of the officers of Merger Sub
executing this Agreement and all agreements and documents contemplated hereby.
(d) LEGAL OPINION. Target shall have received a legal opinion
from Acquiror's legal counsel substantially in the form of Exhibit H hereto.
(e) NO MATERIAL ADVERSE CHANGES. There shall not have occurred
any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Acquiror and its subsidiaries,
taken as a whole since the Acquiror Balance Sheet Date (it being understood that
none of the following shall be deemed, in and of itself, to constitute a
material adverse change in the financial condition, assets, liabilities,
operations or financial performance of the Acquiror since the Acquiror Balance
Sheet Date: (a) a change that results from conditions
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generally affecting the U.S. economy or the world economy, (b) a change that
results from conditions generally affecting the Acquiror's industry, (c) a
change that results from the announcement or pendency of the transactions
contemplated hereby and (d) a change that results from the taking of any action
required by this Agreement).
(f) GOOD STANDING. Target shall have received a certificate or
certificates of the Secretary of State of the State of Delaware and any
applicable franchise tax authority of such state, certifying as of a date no
more than 5 business days prior to the Effective Time that each of Acquiror and
Merger Sub has filed all required reports, paid all required fees and taxes and
is, as of such date, in good standing and authorized to transact business as a
domestic corporation.
(g) CLOSING OF RELATED TRANSACTIONS. Acquiror shall have
closed its Series D Preferred Stock financing.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND MERGER
SUB. The obligations of Acquiror and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Each of the
representations and warranties of Target in this Agreement that is expressly
qualified by a reference to materiality shall be true in all respects as so
qualified, and each of the representations and warranties of Target in this
Agreement that is not so qualified shall be true and correct in all material
respects, on and as of the Effective Time as though such representation or
warranty had been made on and as of such time (except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date), and (ii) Target shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Effective Time.
(b) NO MATERIAL ADVERSE CHANGES. There shall not have occurred
any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Target and its subsidiaries,
taken as a whole since the Target Balance Sheet Date (it being understood that
none of the following shall be deemed, in and of itself, to constitute a
material adverse change in the financial condition, assets, liabilities,
operations or financial performance of Target since the Target Balance Sheet
Date: (a) a change that results from conditions generally affecting the U.S.
economy or the world economy, (b) a change that results from conditions
generally affecting Target's industry, (c) a change that results from the
announcement or pendency of the transactions contemplated hereby and (d) a
change that results from the taking of any action required by this Agreement).
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(c) Certificates of Target.
(i) COMPLIANCE CERTIFICATE OF TARGET. Acquiror and
Merger Sub shall have been provided with a certificate executed on behalf of
Target by its President or (see 6.2) its Chief Financial Officer to the effect
that, as of the Effective Time, each of the conditions set forth in Section
6.3(a) and (b) above has been satisfied.
(ii) CERTIFICATE OF SECRETARY OF TARGET. Acquiror and
Merger Sub shall have been provided with a certificate executed by the Secretary
of Target certifying:
(A) Resolutions duly adopted by the Board of
Directors and the stockholders of Target authorizing the execution of this
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby;
(B) The Articles of Incorporation and Bylaws of
Target, as in effect immediately prior to the Effective Time, including all
amendments thereto; and
(C) the incumbency of the officers of Target
executing this Agreement and all agreements and documents contemplated hereby.
(d) THIRD PARTY CONSENTS. Acquiror shall have been furnished
with evidence satisfactory to it that Target has obtained those consents,
waivers, approvals or authorizations of those Governmental Entities and third
parties whose consent or approval are required in connection with the Merger.
(e) LEGAL OPINION. Acquiror shall have received a legal
opinion from Target's legal counsel, in substantially the form of Exhibit I.
(f) FIRPTA CERTIFICATES. Each Target Stockholder shall, prior
to the Closing Date, provide Acquiror with a properly executed FIRPTA
Certificate
(g) STOCKHOLDER'S REPRESENTATION AGREEMENTS. Acquiror shall
have received from the holders of the Target Capital Stock, outstanding
immediately prior to the Effective Time, duly executed and delivered the
Stockholder's Representation Agreements.
(h) NON-COMPETITION AGREEMENTS. Each of the Target
Stockholders shall have executed a Non-Competition Agreement.
(i) GOOD STANDING. Acquiror shall have received a certificate
or certificates of the Secretary of State of the State of Minnesota and any
applicable franchise tax authority of such state, certifying as of a date no
more than 5 business days prior to the Effective Time that Target and has filed
all required reports, paid all required fees and taxes and is, as of such date,
in good standing and authorized to transact business as a domestic corporation.
(j) RELEASE. Target shall deliver to Acquiror (i) a release
from each of Xxxxx X. Xxxxx and Xxxx X. Xxxxx (the "Secured Party") of all of
Target's obligations to the Secured Party under the Promissory Note in favor of
the Secured Party, dated July 1, 1994, in the principal amount of $619,255.80
and the Pledge Agreement of even date therewith and
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(ii) evidence of termination, without cost to Target, of the Consulting
Agreement between Target and Xx Xxxxx dated as of January 1, 1994.
(k) PLAN TERMINATION. Target, without liability to Acquiror,
shall have terminated the Xxxxx Systems, Inc. 401(K) Plan and delivered evidence
of such termination to Acquiror.
(l) TARGET COMMON STOCK CERTIFICATES. The Target Stockholders
shall deliver to Acquiror for cancellation the stock certificates, in form
suitable for transfer, evidencing all the issued and outstanding shares of
Target Common Stock, endorsed in blank or with an executed blank stock transfer
power attached thereto.
(m) VOTING AGREEMENT; CO-SALE AGREEMENT. Each of the Target
Stockholders shall have executed and delivered to Acquiror an Amended and
Restated Voting Agreement and an Amended and Restated Right of First Refusal and
Co-Sale Agreement, substantially in the forms of the Second Amended Voting
Agreement and the Second Amended and Restated Right of First Refusal and Co-Sale
Agreement, delivered to Target's counsel on February 17, 2000.
SECTION SEVEN
7. TERMINATION, AMENDMENT AND WAIVER.
7.1 TERMINATION. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the stockholders of Target, this Agreement may be terminated and the Merger
may be abandoned:
(a) by mutual consent duly authorized by the Boards of
Directors of each of Acquiror and Target;
(b) by either Acquiror or Target, if, without fault of the
terminating party;
(i) the Effective Time shall not have occurred on or
before March 1, 2000 (or such later date as may be agreed upon in writing by the
parties); or
(ii) there shall be any applicable federal or state law
that makes consummation of the Merger illegal or otherwise prohibited or if any
court of competent jurisdiction or Governmental Entity shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable.
(c) by Acquiror, if Target shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within 2 business days of receipt by Target of written notice of
such breach, provided that Acquiror is not in material breach of any of its
representations, warranties or obligations
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hereunder, and provided further, that no cure period shall be required for a
breach which by its nature cannot be cured;
(d) by Target, if Acquiror shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within 2 business days following receipt by Acquiror of written
notice of such breach, provided that Target is not in material breach of any of
its representations, warranties or obligations hereunder, and provided further,
that no cure period shall be required for a breach which by its nature cannot be
cured.
7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror, Merger
Sub or Target or their respective officers, directors, stockholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of Section 5.4
(Confidentiality), Section 7.3 (Expenses) and this Section 7.2 shall remain in
full force and effect and survive any termination of this Agreement.
7.3 EXPENSES. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated including, without limitation, filing fees and the fees and
expenses of advisors, accountants, legal counsel and financial printers, shall
be paid by Acquiror.
7.4 AMENDMENT. The boards of directors of the parties may cause this
Agreement to be amended at any time by execution of an instrument in writing
signed on behalf of each of the parties; provided that an amendment made
subsequent to adoption of the Agreement by the stockholders of Target or Merger
Sub shall not (i) alter or change the amount or kind of consideration to be
received on conversion of the Target Capital Stock, (ii) alter or change any
term of the Certificate of Incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and conditions
of the Agreement if such alteration or change would adversely affect the
stockholders of Target or Merger Sub.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any
party 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, (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 to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
SECTION EIGHT
8. ESCROW AND INDEMNIFICATION.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants to be
performed prior to the Effective Time, and all representations and warranties in
this Agreement
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or in any instrument delivered pursuant to this Agreement shall survive the
consummation of the Merger and continue until the 12 month anniversary of the
Closing Date (the "Escrow Termination Date"), except for the representations and
warranties contained in Sections 2.3 and 2.15 which shall survive the Closing
Date until 30 days after the expiration of the applicable statue of limitations,
giving effect to any extension thereof (the "Tax Indemnity Termination Date");
provided that if any claims for indemnification have been asserted with respect
to any such representations and warranties prior to the Escrow Termination Date
or, with respect to the representations and warranties contained in Sections 2.3
and 2.15, the Tax Indemnity Termination Date, the representations and warranties
on which any such claims are based shall continue in effect until final
resolution of any claims. All covenants to be performed after the Effective Time
shall continue indefinitely.
8.2 ESCROW FUND. At the Effective Time, Subordinated Promissory
Notes of the Acquiror in the amount of 10% of the aggregate Merger Consideration
shall, without any act of any stockholder of Target, be registered in the name
of, and be deposited with, Merger Sub as escrow agent (the "Escrow Agent"), such
deposit (together with principal paid thereon prior to the Escrow Termination
Date) to constitute the escrow fund (the "Escrow Fund"), to be governed by the
terms set forth herein. In the event that any Damages (as defined below) arise,
the Escrow Fund shall be available to compensate the Indemnified Persons
(defined below) pursuant to the indemnification obligations of the stockholders
of the Target pursuant to Section 8.3.
8.3 INDEMNIFICATION BY TARGET AND TARGET SHAREHOLDERS.
(a) INDEMNIFIED DAMAGES. Subject to the limitations set forth
in this Section 8, from and after the Effective Time, Target (in the event that
Merger does not Close) and Target Stockholders shall jointly and severally
protect, defend, indemnify and hold harmless Acquiror and the Surviving
Corporation and their respective affiliates, officers, directors, employees,
representatives and agents (Acquiror, Surviving Corporation and each of the
foregoing persons or entities is hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
any and all losses, costs, damages, liabilities, fees (including without
limitation attorneys' fees) and expenses (collectively, the "Damages"), that any
of the Indemnified Persons incurs by reason of or in connection with any claim,
demand, action or cause of action alleging misrepresentation, breach of, or
default in connection with, any of the representations, warranties, covenants or
agreements of Target contained in this Agreement, including any exhibits or
schedules attached hereto, and the Certificate of Merger, which becomes known to
Acquiror during the Escrow Period or, with respect to the representations and
warranties contained in Sections 2.3 and 2.15, the Tax Indemnity Termination
Date. Damages in each case shall be net of the amount of any insurance proceeds
and indemnity and contribution actually recovered by Acquiror or the Surviving
Corporation.
(b) EXCLUSIVE CONTRACTUAL REMEDY AND LIMITATIONS. Acquiror,
the former stockholders of Target and Target each acknowledge that Damages, if
any, would relate to unresolved contingencies existing at the Effective Time,
which if resolved at the Effective Time would have led to a reduction in the
total consideration Acquiror would have agreed to pay in connection with the
Merger. Resort to the Escrow Fund shall be the exclusive contractual remedy of
Acquiror and Surviving Corporation for any Damages if the Merger closes except
as
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hereinafter provided. The maximum liability of any former holder of the Target
Capital Stock for any breach of a representation, warranty or covenant of the
Target shall be limited to the Escrow Fund in which such holder has an interest;
provided, however, that nothing herein shall limit the liability: (i) of Target
for any breach of representation, warranty or covenant if the Merger does not
close, (ii) of any Target Stockholder in connection with any breach by such
stockholder of the Stockholder Representation Agreement, (iii) of Target or
Target Stockholders in connection with any breach of any of the representations
and warranties contained in Sections 2.1, 2.3, 2.4 and 2.15 and (iv) of any
officer, director or Target Stockholder for such person's or entity's fraud or
intentional misrepresentation.
8.4 DAMAGES THRESHOLD. Notwithstanding the foregoing, Acquiror may
not receive any amount from the Escrow Fund unless and until a certificate
signed by an officer of Acquiror (an "Officer's Certificate") identifying
Damages in the aggregate amount in excess of $100,000 has been delivered to the
Escrow Agent and such amount is determined pursuant to this Section 8 to be
payable, in which case Acquiror shall receive a proportional amount of escrowed
shares and escrowed cash from the Escrow Fund equal in value to the full amount
of such Damages without deduction. In determining the amount of any Damages
attributable to a breach, any materiality standard contained in any
representation, warranty or covenant of Target and Target Shareholders shall be
disregarded.
8.5 ESCROW PERIOD. Subject to the following requirements, the Escrow
Fund shall remain in existence until the Escrow Termination Date (the "Escrow
Period"). Upon the expiration of the Escrow Period, the Escrow Fund shall
terminate; provided, however, that the amount of escrowed cash and escrowed
notes in the Escrow Fund, which, in the reasonable judgment of Acquiror, subject
to the objection of the Stockholders' Representative (as defined in Section 8.8
below) and the subsequent arbitration of the claim in the manner provided
herein, are necessary to satisfy any unsatisfied claims specified in any
Officer's Certificate delivered to the Escrow Agent prior to the expiration of
such Escrow Period with respect to facts and circumstances existing on or prior
to the Escrow Termination Date shall remain in the Escrow Fund (and the Escrow
Fund shall remain in existence) until such claims have been resolved. As soon as
all such claims have been resolved, the Escrow Agent shall deliver to Target
Stockholders all escrowed cash and escrowed notes remaining in the Escrow Fund
and not required to satisfy such claims. Deliveries of from the Escrow Fund to
Target Stockholders pursuant to this Section 8.5 shall be made in proportion to
their respective original contributions to the Escrow Fund.
8.6 METHOD OF ASSERTING CLAIMS. All claims for indemnification by
the Surviving Corporation or any other Indemnified Person pursuant to this
Section 8 shall be made in accordance with the provisions of this Agreement.
8.7 REPRESENTATIVE OF THE STOCKHOLDERS; POWER OF ATTORNEY. The
Target Stockholders hereby appoint Xxxxxxx Xxxxx as agent and attorney-in-fact
(collectively, the "Stockholders' Representative") for each Target Stockholder
(except such stockholders, if any, as shall have perfected their appraisal
rights under Minnesota Law), for and on behalf of Target Stockholders, to give
and receive notices and communications on behalf of Target Stockholders, to
authorize delivery to Acquiror of escrowed subordinated Promissory Notes from
the Escrow Fund in satisfaction of claims by Acquiror or any other Indemnified
Person, to object to such
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deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of Stockholders' Representative for the
accomplishment of the foregoing. The Stockholders' Representative shall act by
vote or written action or consent of a majority of the members of the Committee.
8.8 INDEMNIFICATION BY ACQUIROR.
(a) INDEMNIFIED DAMAGES. Subject to the limitations set forth
in this Section 8, from and after the Effective Time, Acquiror shall protect,
defend, indemnify and hold harmless Target (in the event that Merger does not
Close) Target Stockholders and their respective affiliates, officers, directors,
employees, representatives and agents (Target, Target Stockholders and each of
the foregoing persons or entities is hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
any and all losses, costs, damages, liabilities, fees (including without
limitation attorneys' fees) and expenses (collectively, the "Damages"), that any
of the Indemnified Persons incurs by reason of or in connection with any claim,
demand, action or cause of action alleging misrepresentation, breach of, or
default in connection with, any of the representations, warranties, covenants or
agreements of Acquiror and Merger Sub contained in this Agreement, including any
exhibits or schedules attached hereto, and the Certificate of Merger, which
becomes known to Target or Target Shareholders during the Escrow Period. Damages
in each case shall be net of the amount of any insurance proceeds and indemnity
and contribution actually recovered by Target or Target Shareholders.
(b) LIMITATIONS. The maximum liability of Acquiror and Merger
Sub for any breach of a representation, warranty or covenant of Acquiror or
Merger Sub shall be limited to the amount of 10% of the aggregate Merger
Consideration; provided, however, that nothing herein shall limit the liability:
(i) of Acquiror for any breach of representation, warranty or covenant if the
Merger does not close, (ii) of Acquiror or Merger Sub in connection with any
breach of any of the representations and warranties contained in Sections 3.1,
3.2 and 3.3 and (iii) of any officer, director or Acquiror for such person's or
entity's fraud or intentional misrepresentation.
8.9 DAMAGES THRESHOLD. Notwithstanding the foregoing, Acquiror and
Merger Sub shall have any liability for any breach of a representation, warranty
or covenant of Acquiror or Merger Sub unless Damages in the aggregate amount in
excess of $100,000 is determined pursuant to this Section 8 to be payable. In
determining the amount of any Damages attributable to a breach, any materiality
standard contained in a representation, warranty or covenant of Acquiror shall
be disregarded.
SECTION NINE
9. GENERAL PROVISIONS.
9.1 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
48 hours after being deposited in the
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regular mail as certified or registered mail (airmail if sent internationally)
with postage prepaid, if such notice is addressed to the party to be notified at
such party's address or facsimile number as set forth below, or as subsequently
modified by written notice,
(a) if to Acquiror or Merger Sub, to:
printCafe, Inc.
Forty 00xx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to Target, to:
0000 XxxxXxxx Xxxxxxx
Xxxx Xxxxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxx, Plant, Xxxxx, Xxxxx & Xxxxxxx, P.A.
3400 City Center,
00 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(c) if to Target Shareholders, to:
the addresses set forth on the signature pages hereof
9.2 INTERPRETATION. When a reference is made in this Agreement to
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to 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 phrase "made
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available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date first set forth above. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
9.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.4 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Target Disclosure Schedule and the Acquiror Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a)-(c) and (g), 1.7. 1.8, 1.12; and (c) shall not be assigned by operation
of law or otherwise except as otherwise specifically provided.
9.5 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
9.6 REMEDIES CUMULATIVE. 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.
9.7 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation 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.
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9.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the parties or their
respective successors and assigns. Any amendment or waiver effected in
accordance with this Section 9.9 shall be binding upon the parties and their
respective successors and assigns.
[Signature Page Follows]
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Acquiror, Merger Sub, Target and Target Stockholders have executed this
Agreement as of the date first written above.
TARGET
XXXXX SYSTEMS, INC.
By:
--------------------------------
Name:
--------------------------------
(Print)
Title:
--------------------------------
Address:
--------------------------------
ACQUIROR
PRINTCAFE, INC.
By:
--------------------------------
Name:
--------------------------------
(Print)
Title:
--------------------------------
MERGER SUB:
PRINTCAFE SYSTEMS, INC.
By:
--------------------------------
Name:
--------------------------------
(Print)
Title:
--------------------------------
TARGET STOCKHOLDERS
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-----------------------------------------
XXXXXXX X. XXXXX
Address:
-----------------------------------------
XXXXXX X. XXXXXXXX
Address:
-----------------------------------------
XXXXXXXX X. XXXXXXXX
Address:
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