AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ARIBA, INC.
XXX MERGER CORPORATION
AND
XXXXXXXXXXXXXX.XXX, INC.
JUNE 21, 2000
TABLE OF CONTENTS
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Page
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ARTICLE I 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 Adjustments to Exchange Ratio.......................................................................4
1.8 Fractional Shares...................................................................................4
1.9 Outstanding Company Shares..........................................................................5
1.10 Dissenting Shares..................................................................................5
1.11 Surrender of Certificates..........................................................................6
1.12 No Further Ownership Rights in Company Capital Stock...............................................8
1.10 Lost, Stolen or Destroyed Certificates.............................................................8
1.11 Tax and Accounting Consequences....................................................................8
1.12 Taking of Necessary Action; Further Action.........................................................8
1.13 Stock Restriction Agreements.......................................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.............................................................8
2.1 Organization, Standing and Power....................................................................9
2.2 Capital Structure...................................................................................9
2.3 Authority..........................................................................................10
2.4 Financial Statements...............................................................................11
2.5 Absence of Certain Changes.........................................................................11
2.6 Absence of Undisclosed Liabilities.................................................................12
2.7 Accounts Receivable................................................................................12
2.8 Litigation.........................................................................................12
2.9 Restrictions on Business Activities................................................................13
2.10 Governmental Authorization........................................................................13
2.11 Title to Property.................................................................................13
2.12 Intellectual Property.............................................................................13
2.13 Environmental Matters.............................................................................15
2.14 Taxes.............................................................................................15
2.15 Employee Benefit Plans............................................................................17
2.16 Employees and Consultants.........................................................................19
2.17 Related-Party Transactions........................................................................20
2.18 Insurance.........................................................................................20
2.19 Compliance with Laws..............................................................................21
2.20 Brokers' and Finders' Fees........................................................................21
2.21 Vote Required.....................................................................................21
2.22 Trade Relations...................................................................................21
2.23 Customers and Suppliers...........................................................................21
2.24 Material Contracts................................................................................21
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2.25 No Breach of Material Contracts...................................................................23
2.26 Third-Party Consents..............................................................................23
2.27 Minute Books......................................................................................23
2.28 Complete Copies of Materials......................................................................23
2.29 Expenses..........................................................................................23
2.30 Stockholder Agreement.............................................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................................24
3.1 Organization, Standing and Power...................................................................24
3.2 Capital Structure..................................................................................24
3.3 Authority..........................................................................................25
3.4 SEC Documents; Financial Statements................................................................26
3.5 Litigation.........................................................................................26
3.6 Compliance with Laws...............................................................................26
3.7 Certificate of Incorporation and By-Laws...........................................................26
3.8 Absence of Certain Changes or Events...............................................................27
3.9 Operations of Merger Sub...........................................................................27
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..................................................................27
4.1 Conduct of Business of Company and Parent..........................................................27
4.2 Notices............................................................................................30
ARTICLE V ADDITIONAL AGREEMENTS.................................................................................30
5.1 No Solicitation....................................................................................30
5.2 Securities Issuances...............................................................................31
5.3 Stockholders Meeting or Consent Solicitation.......................................................34
5.4 Access to Information..............................................................................34
5.5 Confidentiality....................................................................................35
5.6 Public Disclosure..................................................................................35
5.7 Consents; Cooperation..............................................................................35
5.8 Update Disclosure; Breaches........................................................................36
5.9 Non-competition Agreements.........................................................................36
5.10 Legal Requirements................................................................................36
5.11 Blue Sky Laws.....................................................................................37
5.12 Stock Options.....................................................................................37
5.13 Escrow Agreement..................................................................................38
5.14 Listing of Additional Shares......................................................................38
5.15 Additional Agreements; Reasonable Best Efforts....................................................38
5.16 Employee Benefits.................................................................................38
5.17 Parachute Payments................................................................................38
5.18 Necessary Actions.................................................................................39
5.19 Proprietary Information Agreement.................................................................39
5.20 HSR Filing........................................................................................39
5.21 Non-Solicitation..................................................................................39
5.22 Stockholder Agreements............................................................................39
5.23 Directors'and Officers' Indemnification...........................................................40
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5.24 Tax-Free Reorganization Covenant..................................................................40
5.25 Intentionally Omitted.............................................................................40
5.26 Acceleration of Vesting; Lapse of Repurchase Right................................................40
5.27 Existing Employee Options.........................................................................41
5.28 Option Grants to New Employees....................................................................41
5.29 Employee Status...................................................................................41
ARTICLE VI CONDITIONS TO THE MERGER.............................................................................41
6.1 Conditions to Obligations of Each Party to Effect the Merger.......................................41
6.2 Additional Conditions to Obligations of Company....................................................42
6.3 Additional Conditions to Obligations of Parent.....................................................43
ARTICLE VII TERMINATION, EXPENSES, AMENDMENT AND WAIVER.........................................................45
7.1 Termination........................................................................................45
7.2 Effect of Termination..............................................................................46
7.3 Expenses...........................................................................................46
7.4 Amendment..........................................................................................46
7.5 Extension; Waiver..................................................................................46
ARTICLE VIII ESCROW AND INDEMNIFICATION.........................................................................47
8.1 Survival of Representations, Warranties and Covenants..............................................47
8.2 Indemnity..........................................................................................47
8.3 Escrow Fund........................................................................................48
8.4 Damage Threshold...................................................................................48
8.5 Escrow Period......................................................................................48
8.6 Claims upon Escrow Fund............................................................................49
8.7 Objections to Claims...............................................................................49
8.8 Resolution of Conflicts; Arbitration...............................................................50
8.9 Shareholders' Agent................................................................................50
8.10 Distribution Upon Termination of Escrow Period....................................................51
8.11 Actions of the Shareholders' Agent................................................................51
8.12 Third-Party Claims................................................................................52
8.13 Maximum Liability and Remedies....................................................................53
ARTICLE IX GENERAL PROVISIONS...................................................................................53
9.1 Notices............................................................................................53
9.2 Interpretation.....................................................................................54
9.3 Counterparts.......................................................................................55
9.4 Entire Agreement; No Third Party Beneficiaries.....................................................55
9.5 Severability.......................................................................................55
9.6 Remedies Cumulative................................................................................56
9.7 Governing Law......................................................................................56
9.8 Assignment.........................................................................................56
9.9 Rules of Construction..............................................................................56
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SCHEDULES
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Company Disclosure Letter
Parent Disclosure Letter
Option Schedule
Schedule 2.12 Company Intellectual Property
Schedule 2.15 Company Employee Plans
Schedule 2.16 Company Employees
Schedule 2.18 Company Insurance
Schedule 2.24 List of Material Contracts
Schedule 2.26 Company's Third Party Consents
Schedule 2.29(a) Company Professional Fees
Schedule 2.29(b) Company Financial Advisory Fees
Schedule 2.30 Principal Stockholders
Schedule 4.1 Conduct of Business
Schedule 5.9 Key Company Employees
Schedule 6.2(d) Material Parent Third Party Consents
Schedule 6.3(d) Material Company Third Party Consents
EXHIBITS
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Exhibit A Certificate of Merger
Exhibit B Stock Restriction Agreement
Exhibit C-1 Xxxxx 0 Xxx-Xxxxxxxxxxx Xxxxxxxxx
Xxxxxxx X-0 Xxxxx 0 Non-Competition Agreement
Exhibit D Escrow Agreement
Exhibit E Form of Legal Opinion of Parent's Legal Counsel
Exhibit F Form of Legal Opinion of Company's Legal Counsel
Exhibit G FIRPTA Notice
Exhibit H Stockholders Agreement
Appendix I Glossary
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of June 21, 2000, by and among Ariba, Inc., a Delaware
corporation ("Parent"), Xxx Merger Corporation, a Delaware corporation ("Merger
Sub") and XxxxxxxxXxxxxx.xxx Inc., a Delaware corporation ("Company").
RECITALS
A. The Boards of Directors of Company, Parent and Merger Sub believe it
is in the best interests of their respective companies and stockholders of their
respective companies that Company and Merger Sub combine into a single company
through the statutory merger of Merger Sub with and into Company (the "Merger")
and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, each outstanding share
of capital stock of Company, par value $.001 per share ("Company Capital
Stock"), shall be converted into shares of common stock of Parent, $0.002 par
value per share ("Parent Common Stock"), as provided below. Parent will assume
all outstanding options to purchase Company Capital Stock, all outstanding
warrants to purchase Company Capital Stock, and all other outstanding rights to
acquire Company Capital Stock, in each case whether or not contingent or earned,
as provided below.
C. Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. 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)(E) of
the Code.
E. In addition, as an inducement to Parent to enter into this
Agreement, Xxxxxxxx Xxxxxxxxx and Xxxx Xxxxxx (each a "Founder" and
collectively, the "Founders") each have entered into Stock Restriction
Agreements with Parent and each Key Company Employee (as defined in Section 5.9)
have entered into a Non-Competition Agreement with Parent.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
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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 attached hereto as EXHIBIT A (the "Certificate of Merger") and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Merger Sub shall be merged with and into
Company, the separate corporate existence of Merger Sub shall cease and Company
shall continue as the surviving corporation and as a wholly owned subsidiary of
the Parent. Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 CLOSING; EFFECTIVE TIME. Unless the Agreement is earlier terminated
pursuant to Article VII, the closing of the transactions contemplated hereby
(the "Closing") will take place as soon as practicable after the satisfaction or
waiver of each of the conditions set forth in Article VI hereof but in any event
no later than September 30, 2000 (the date on which the Closing shall occur, the
"Closing Date"). The Closing shall take place at the offices of Xxxxxxxxx
Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxxxxxxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxxx 00000. On the Closing Date, the parties hereto 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 and date of such filing being the
"Effective Time" and the "Effective Date," respectively).
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Company shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Company 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;
provided, however, that Article I of such Certificate of Incorporation shall be
amended to read as follows: "The name of the corporation is XxxxxxxxXxxxxx.xxx,
Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, to hold office until such time as such directors resign,
are removed or their respective successors are duly elected or appointed and
qualified. The officers of Merger Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, to hold office until such
time as such officers resign, are removed or their respective successors are
duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. The total number of shares of Parent
Common Stock to be issued ("Total Parent Shares") in exchange for the
acquisition by Parent of (i) all shares of Company Capital Stock outstanding
immediately prior to the Effective Time, (ii) all unexpired and unexercised
options to purchase common stock of Company outstanding
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immediately prior to the Effective Time ("Company Options"), (iii) all
unexpired and unexercised warrants to Purchase capital stock of Company
outstanding immediately prior to the Effective Time ("Company Warrants") and
(iv) all other subscriptions, rights to purchase or commitments to issue
Company Capital Stock outstanding immediately prior to the Effective Time
("Other Company Stock Rights") shall be equal to the sum of (w) 6,230,764 and
(x) the Additional Parent Shares (as defined in Section 1.9 hereof) less (y)
an amount of shares of Parent Common Stock equal to (A) Expense Deductions
(as defined below) divided by (B) $68.20993 and less (z) the Company
Financial Advisory Fee Shares (as defined in Section 2.29) (the number of
shares of Parent Common Stock referred to in clauses (w),(x), and (y) and the
Share price referred to in clause (B) as appropriately adjusted for stock
splits, stock dividends, combinations, recapitalizations, reorganizations,
reclassifications and the like of such Parent Common Stock subsequent to the
date hereof and prior to the Effective Time). The "Expense Deductions" shall
equal the sum of (i) the Company Financial Advisory Cash Fees (as defined in
Section 2.29), (ii) fifty percent (50%) of Company Professional Fees (as
defined in Section 2.29) under $500,000, and (iii) all Company Professional
Fees over $500,000, in each case as determined or estimated as of the Closing
upon receipt of an itemized invoice releasing Parent and the Surviving
Corporation from any further liability therefor from each service provider.
The Total Parent Shares shall be issuable in respect of Outstanding Company
Shares (as defined below) and, except as provided herein, no adjustment shall
be made in the number of shares of Parent Common Stock issued in the Merger,
including, without limitation, as a result of (x) any increase or decrease in
the market price of Parent Common Stock prior to the Effective Time, or (y)
any cash proceeds received by Company from the date hereof to the Closing
Date pursuant to the exercise of currently outstanding Company Options or
Company Warrants or pursuant to any Other Company Stock Rights.
By virtue of the Merger, at the Effective Time, and without any action
on the part of Parent, Merger Sub, Company or the holders of any of Company's
securities:
(a) CONVERSION OF COMPANY COMMON STOCK/EXCHANGE RATIO. Each
share of Company Common Stock outstanding immediately prior to the Effective
Time shall be exchanged into the number of shares of Parent Common Stock
determined by dividing (i) the Total Parent Shares by (ii) the Outstanding
Company Shares, rounded to eight decimal points (the "Exchange Ratio").
(b) CANCELLATION OF COMPANY CAPITAL STOCK OWNED BY PARENT OR
COMPANY. All shares of Company Capital Stock that are owned by Company as
treasury stock, immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) COMPANY STOCK OPTION PLAN. Company's 1999 Stock Option
Plan (the "Company Stock Option Plan") and all Company Options then outstanding
under the Company Stock Option Plan, whether or not exercisable, shall be
assumed by Parent in accordance with Section 5.12.
(d) COMPANY WARRANTS. Each Company Warrant outstanding
immediately prior to the Effective Time, whether or not contingent or earned,
which does not terminate by its terms at the Effective Time shall be converted
into warrants to acquire Parent
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Common Stock in accordance with its terms. Each warrant so converted shall
continue to have, and be subject to, the same terms and conditions set forth in
such warrant immediately prior to the Effective Time, except that (i) such
warrant shall be exercisable for that number of whole shares of Parent Common
Stock equal to the product of the number of shares Company Common Stock that
were issuable upon exercise of such warrant immediately prior to the Effective
Time (without regard to vesting restrictions) multiplied by the Exchange Ratio
and rounded down to the nearest whole number of shares of Parent Common Stock,
and (ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed warrant shall be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such warrant was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest whole cent.
(e) OTHER COMPANY STOCK RIGHTS. Each Other Company Stock Right
outstanding immediately prior to the Effective Time, whether or not or
contingent or earned, shall be assumed by Parent. Each such right so assumed by
Parent under this Agreement shall continue to have, and be subject to, the same
terms and conditions set forth in such right immediately prior to the Effective
Time, except that (i) such right shall represent that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable pursuant to such right immediately prior to the
Effective Time multiplied by the Exchange Ratio and rounded down to the nearest
whole number of shares of Parent Common Stock, and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed option shall be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
(f) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock,
$.01 par value, of Merger Sub ("Merger Sub Common Stock"), issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock, $.01 par value, of the Surviving Corporation. 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.
1.7 ADJUSTMENTS TO EXCHANGE RATIO. The number of shares to be issued
pursuant to Section 1.6 shall be adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend, reorganization, recapitalization or
other like change with respect to Parent Common Stock or Company Capital Stock
occurring after the date hereof and prior to the Effective Time.
1.8 FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued, but in lieu thereof each holder of shares of Company Capital
Stock who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock to be
received by such holder) shall receive from Parent for such fraction of a share
one (1) full share of Parent Common Stock.
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1.9 OUTSTANDING COMPANY SHARES. The term "Outstanding Company Shares"
shall be equal to the sum of (i) the aggregate number of shares of Company
Common Stock (as defined in Section 2.2 below) outstanding immediately prior to
the Effective Time, including shares of Company Common Stock issuable upon
conversion of Company Preferred Stock (as defined in Section 2.2 below) prior to
the Effective Time, (ii) the aggregate number of shares of Company Common Stock
issuable upon the exercise of any Company Options outstanding immediately prior
to the Effective Time, whether or not contingent or earned, provided, however,
that (A) shares of Company Common Stock issuable upon the exercise of any
Company Options granted by the Company pursuant to Section 5.27 hereof in excess
of the sum of (I) an aggregate of 50% of the shares of Company Common Stock
issuable upon the exercise of any Company Options granted by the Company
pursuant to Section 5.27 hereof and (II) any Company Options cancelled or shares
of Company Common Stock repurchased by Company subsequent to the date hereof and
prior to the Effective Time, and (B) shares of Company Common Stock issuable
upon the exercise of any Company Options granted by the Company pursuant to
Section 5.28 hereof shall not be considered Outstanding Company Shares, (iii)
the aggregate number of shares of Company Common Stock issuable upon the
exercise of any Company Warrants outstanding immediately prior to the Effective
Time, whether or not contingent or earned, and (iv) the aggregate number of
shares of Company Common Stock issuable pursuant to any Other Company Stock
Rights outstanding immediately prior to the Effective Time, whether or not
contingent or earned, in the case of clauses (ii), (iii) and (iv) after giving
effect to the conversion of any securities convertible into Company Common
Stock. The number of shares of Parent Common Stock issuable upon the assumption
of Company Options by Parent pursuant to this Agreement of the Company Options
referred to in clauses (A) (as modified by subclauses I and II) and (B) of the
immediately preceding sentence are referred to as the "Additional Parent
Shares."
1.10 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
Delaware Law and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal or dissenters' rights ("Dissenting Shares") shall not be
converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by Delaware Law. Any Dissenting Shares shall be included for purposes of
determining the number of Outstanding Company Shares.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Company Capital Stock who demands appraisal of such shares under
Delaware Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive the Parent Common Stock,
without interest thereon, upon surrender of the certificate representing such
shares.
(c) Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Stock, withdrawals of such
demands, and any other instruments served pursuant to Delaware Law and received
by Company and (ii) Company
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agrees that, except with the prior written consent of Parent, or as required
under Delaware Law, it will not make any payment with respect to, or settle or
offer to settle any claim, demand, or other liability with respect to any
Dissenting Shares.
1.11 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Bank Boston, N.A. (or its successor) shall
act as exchange agent (the "Exchange Agent") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the
Effective Time, but in any event within ten (10) business days, Parent shall
make available to the Exchange Agent for exchange in accordance with this
Article I, through such reasonable procedures as Parent may adopt, the shares of
Parent Common Stock issuable pursuant to Section 1.6(a) in exchange for shares
of Company Capital Stock outstanding immediately prior to the Effective Time
less the number of shares of Parent Common Stock to be deposited into the Escrow
Fund (as defined in Section 8.3 hereof) pursuant to the requirements of Article
VIII hereof.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time,
Parent shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock, whose shares were
converted into the right to receive shares of Parent Common Stock pursuant to
Section 1.6, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Exchange Agent, and shall be in
such form and have such other customary provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock. In addition Parent shall cause to be mailed to Broadview International
LLC ("Broadview") a Certificate for the Company Financial Advisory Fee Shares in
accordance with instructions provided to Parent by Broadview which are
reasonably acceptable to Parent. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock which such holder
has the right to receive pursuant to Section 1.6, less the number of shares of
Parent Common Stock to be deposited in the Escrow Fund on such holder's behalf
pursuant to Article VIII hereof, and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding Certificate that,
prior to the Effective Time, represented shares of Company Capital Stock will be
deemed from and after the Effective Time, for all corporate purposes, other than
the payment of dividends, to evidence the ownership of the number of full shares
of Parent Common Stock into which such shares of Company Capital Stock shall
have been so converted. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Section 8.3 hereof, Parent
shall cause to be delivered to the Escrow Agent (as defined in Section 8.3
hereof) a certificate or certificates representing ten percent (10%) of the
Total Parent Shares ("Escrow Shares") which shall be registered in the name of
the Escrow Agent as nominee for the holders of Certificates cancelled pursuant
to this Section 1.11. The Escrow Shares shall be comprised entirely of Shares of
Parent Common Stock
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that are not subject to any vesting restriction or repurchase right. The entire
portion of Escrow Shares shall be contributed in respect of Total Parent Shares
issuable to Former Company Stockholders pursuant to Section 1.6(a) other than
(A) such stockholders who acquired all of his or her shares of Company Capital
Stock via exercise of employee stock options issued by Company and (B) the
stockholder other than the Founders, who is an employee of the Company and
acquired all of his shares of Company Capital stock via a restricted stock grant
by the Company. Such shares shall be beneficially owned by such holders and
shall be held in escrow and shall be available to compensate Parent for certain
damages as provided in Article VIII. The Escrow Shares will appear as issued and
outstanding on Parent's balance sheet and will be legally outstanding under
applicable state law. All dividends paid on Escrow Shares (excluding any shares
of Parent Capital Stock paid in connection with a stock split or stock dividend)
will be distributed currently to each of the exchanging Former Company
Stockholders, and all voting rights of the Escrow Shares will be exercisable by
or on behalf of each such Former Company Stockholder. To the extent not used for
such purposes, such shares shall be released, all as provided in Article VIII
hereof.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate surrenders
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
which would have been previously payable (but for the provisions of this Section
1.11(d)) with respect to such shares of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered is
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.11, 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.
(g) DISSENTING SHARES. The provisions of this Section 1.11
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Parent under this Section 1.11 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 number of shares of Parent Common Stock
to which such holder is entitled pursuant to Section 1.6 hereof.
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1.12 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All shares
of Parent Common Stock issued upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Company Capital Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Capital Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.13 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock as may be required pursuant to Section 1.6; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.14 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code.
1.15 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 Company, the officers and directors of Company and Merger Sub
are fully authorized in the name of their respective corporations or otherwise
to take, and shall take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.
1.16 STOCK RESTRICTION AGREEMENTS. As of the date hereof, each of the
Founders shall have entered into a Stock Restriction Agreement substantially in
the form of attached hereto as EXHIBIT B.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
-----------------------------------------
The Company represents and warrants to Parent and Merger Sub that the
statements contained in this Article II are true and correct, except as set
forth in the disclosure letter delivered by Company to Parent prior to the
execution and delivery of this Agreement (the "Company Disclosure Letter"). The
Company Disclosure Letter shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article II, and the
disclosure in any paragraph shall qualify only the corresponding paragraph in
this Article II. Any reference in this Article II to an agreement being
"enforceable" shall be deemed to be qualified to the extent such enforceability
is subject to (i) laws of general application relating to
8
bankruptcy, insolvency, moratorium and the relief of debtors, and (ii) the
availability of specific performance, injunctive relief and other equitable
remedies.
2.1 ORGANIZATION, STANDING AND POWER. Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Company has the corporate power to own its
properties and to carry on its business as currently 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 (as defined in Section 9.2) on Company.
Company has delivered to Parent a true and correct copy of the Certificate of
Incorporation and Bylaws of Company including any amendments thereto. Company is
not in violation of any of the provisions of its Certificate of Incorporation or
Bylaws. Company does not directly or indirectly own any capital stock or similar
equity interest in, or any interest convertible or, exchangeable or exercisable
for, any capital stock or similar equity interest in, any corporation,
partnership, limited liability company, or other business association or entity.
2.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital
stock of Company consists of 85,000,000 shares of Common Stock, par value $0.001
per share ("Company Common Stock"), and 22,652,913 shares of Preferred Stock,
par value $0.001 per share, of which there were issued and outstanding,
10,150,863.5 shares of Common Stock disregarding any option exercises following
June 14, 2000, 6,562,873 shares of Series A Preferred Stock (the "Series A
Preferred"), and 16,040,039 shares of Series B Preferred Stock (the "Series B
Preferred," together with the Series A Preferred, the "Company Preferred
Stock"). As of the date hereof, there are no other outstanding shares of Company
Capital Stock disregarding any option exercises following June 14, 2000. All
outstanding shares of Company 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 except as set forth on Section 2.2 of the Company Disclosure Letter are not
subject to preemptive rights, rights of first refusal, rights of first offer or
similar rights created by statute, the Certificate of Incorporation or Bylaws of
Company or any agreement to which Company is a party or by which it is bound. As
of the date hereof, Company has reserved (i) 13,225,746 shares of Company Common
Stock for issuance upon conversion of the Series A Preferred, (ii) 8,020,020
shares of Company Common Stock for issuance upon conversion of the Series B
Preferred, (iii) 6,551,924 shares of Company Common Stock for issuance to
employees, directors, consultants and other persons pursuant to the Company
Stock Option Plan (of which 291,618 shares have been issued pursuant to option
exercises or direct stock purchases through June 14, 2000, and 4,355,315 shares
are subject to outstanding, unexercised options as of June 14, 2000), (iv)
818,030 shares of Company Common Stock for issuance upon exercise of the Company
Warrants, of which none are subject to outstanding Company Warrants, and (v) no
shares of Company Common Stock issuable pursuant to Other Company Stock Rights,
of which none are subject to outstanding Other Company Stock Rights. Section 2.2
of the Company Disclosure Letter contains a complete list of all Company Options
granted to non-employees that are subject to vesting and any shares of Company
Capital Stock held by non-employees that are subject to a right of repurchase in
favor of the Company. As of the date hereof, except for (i) the rights
contemplated by this Agreement and the Stock Restriction Agreements, (ii)
Company's right to repurchase any unvested shares under the Company Stock Option
Plan, (iii) shares of Company Common Stock issuable upon exercise of outstanding
Company Options and
9
Company Warrants, as specified in clauses (iii) and (iv) of the immediately
preceding sentence, and (iv) 50,000 shares of Series A Preferred Stock issuable
pursuant to outstanding warrants to purchase Series A Preferred Stock, there are
no other options, warrants, calls, rights, commitments or agreements of any
character (whether or not contingent or earned) to which Company is a party or
by which it is bound obligating Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of Company Capital Stock or obligating Company to grant, extend,
accelerate the vesting or lapse of a repurchase right of, change the price of,
or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. As of the date hereof, except as contemplated by this
Agreement, there are no currently effective contracts, commitments or agreements
relating to the voting, purchase or sale of Company Capital Stock (i) between or
among Company and any of its stockholders and (ii) to Company's knowledge, among
any of Company's stockholders or between any of Company's stockholders and any
third party except for the stockholders delivering the Stockholders Agreement
attached hereto as EXHIBIT H. The terms of the Company Stock Option Plan permit
the assumption of the Company Stock Option Plan by Parent as provided in this
Agreement, without the consent or approval of the holders of the outstanding
options, the Company stockholders, or otherwise and without any acceleration of
the exercise schedule or vesting provisions or lapse of repurchase rights (or
eligibility for such acceleration or lapse by virtue of the Merger) in effect
for such options. True and complete copies of all agreements and instruments
evidencing all outstanding Company Options issued under the Company Stock Option
Plan have been furnished to Parent, and such agreements and instruments have not
been amended, modified or supplemented, except where any such modification has
been supplied to Parent, and there are no agreements to amend, modify or
supplement such agreements or instruments from the form made available to
Parent. All outstanding shares of Company Capital Stock and outstanding Company
Options, Company Warrants and Other Company Stock Rights were issued in
compliance with all applicable federal and state securities laws.
2.3 AUTHORITY.
(a) Company has all requisite corporate power and authority to
execute and deliver this Agreement and the Escrow Agreement (collectively, the
"Transaction Documents") and to perform its obligations hereunder and
thereunder, subject to obtaining necessary approvals of the Company's
stockholders. The execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Company, subject
only to the approval of the Merger by Company's stockholders as contemplated by
Section 6.1(a). The Transaction Documents have been duly executed and delivered
by Company and, assuming the due authorization, execution and delivery by the
other parties hereto and thereto, constitute the valid and binding obligations
of Company enforceable against Company in accordance with their terms.
(b) The execution and delivery of the Transaction Documents by
Company do not, and the consummation of the transactions contemplated hereby and
thereby 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 material obligation or loss of
any material benefit under (i) any provision of the Certificate of
10
Incorporation, as amended (the "Company Certificate"), or Bylaws of Company, as
amended (the "Company Bylaws"), (ii) any Material Contract (as defined in
Section 2.24), permit, concession, franchise, license, judgment, orders or
decree, or (iii) any statute, law, ordinance, rule or regulation applicable to
Company or any of its properties or assets subject to obtaining the approval and
adoption of the Agreement and the Merger by the stockholders of Company and
compliance with the requirements of subsection (c) below.
(c) 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 to be obtained or made by or with respect to Company in
connection with the execution and delivery of the Transaction Documents or the
consummation of the transactions by Company contemplated hereby or thereby,
except for (i) the filing of the Certificate of Merger, as provided in Section
1.2; (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal or state
securities laws and the securities laws of any foreign country; (iii) such
filings as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended ("HSR"); (iv) the filing of an application for
qualification by permit with the California Department of Corporations pursuant
to Section 5.2 hereof or the filing of a Registration Statement to the extent
such permit is not issued; and (v) any such other consent, approval, order or
authorization where any failure to obtain the same would not have a Material
Adverse Effect on Company and would not prevent, materially alter or delay by
more than five (5) business days any of the transactions contemplated by the
Transaction Documents.
2.4 FINANCIAL STATEMENTS. Company has delivered to Parent its audited
financial statements (balance sheet, statement of operations, statement of
stockholders' equity and statement of cash flows) for the fiscal year ended
December 31, 1999 and its unaudited financial statements (balance sheet,
statement of operations, statement of stockholders' equity and statement of cash
flows) as of, and for the five (5) month period ended May 31, 2000
(collectively, the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles as in
effect in the United States on the date hereof ("GAAP") (except that the
unaudited financial statements do not have notes thereto) applied on a
consistent basis throughout the periods indicated and with each other. Company
believes that its current revenue recognition policy complies with the
guidelines contained in SAB 101 (Revenue Recognition in Financial Statements).
The Financial Statements fairly present in all material respects the financial
condition and operating results of Company as of the dates, and for the periods,
indicated therein, subject, in the case of the unaudited financial statements,
to normal year-end audit adjustments. Company maintains a standard system of
accounting established and administered in accordance with GAAP.
2.5 ABSENCE OF CERTAIN CHANGES. Except as permitted under Section 4.1
of this Agreement for changes occurring after the date hereof, since May 31,
2000, (the "Company Balance Sheet Date"), Company has conducted its business in
the ordinary course and there has not occurred: (i) any change, event or
condition (whether or not covered by insurance) that has had, or might
reasonably be expected to have, a Material Adverse Effect on Company; (ii) any
acquisition, sale or transfer of any material asset of Company; (iii) any change
in accounting methods or practices (including any change in depreciation or
amortization policies or rates) by
11
Company or any revaluation by Company of any of its assets; (iv) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to the shares of Company, or any direct or indirect redemption, purchase
or other acquisition by Company of any of its shares of capital stock; (v) any
Material Contract entered into by Company, or any material amendment or
termination of, or default under, any Material Contract to which Company is a
party or by which it is bound in each case other than as set forth in Schedule
2.24; (vi) any amendment or change to the Certificate of Incorporation or Bylaws
of Company; (vii) any increase in or modification of the compensation or
benefits payable or to become payable by Company to any of its directors,
employees or consultants other than compensation adjustments and stock options
granted to Company employees pursuant to Section 4.1; or (viii) any negotiation
or agreement by Company to do any of the things described in the preceding
clauses (i) through (vii) (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Company 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 as of the Company Balance Sheet Date (the "Company Balance
Sheet"), (ii) those incurred in the ordinary course of business prior to the
Company Balance Sheet Date and not required to be set forth in the Company
Balance Sheet under GAAP, (iii) those incurred in the ordinary course of
business since the Company Balance Sheet Date, and (iv) those incurred in
connection with the execution of this Agreement.
2.7 ACCOUNTS RECEIVABLE. The accounts receivable shown on the Company
Balance Sheet arose in the ordinary course of business. Allowances for doubtful
accounts have been prepared in accordance with GAAP, and to the Company's
knowledge are adequate. The accounts receivable of the Company arising after the
Company Balance Sheet Date and prior to the date hereof arose, and the accounts
receivable arising prior to the Effective Time will arise, in the ordinary
course of business. None of the accounts receivable of the Company are subject
to any material claim of offset or recoupment, or counterclaim, and Company has
no knowledge of any specific facts that would be reasonably likely give rise to
any such claim. No material amount of accounts receivable of the Company are
contingent upon the performance by Company of any obligation. No material
agreement for deduction or discount has been made with respect to any accounts
receivable of the Company.
2.8 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court, tribunal or other entity, foreign or domestic, or, to the knowledge of
Company, threatened (or, to the knowledge of the Company, any reasonable basis
for any such action, suit, proceeding, claim, arbitration or investigation,
including allegations that could form the basis for future action) against
Company or any of its properties or officers or directors (in their capacities
as such), nor does Company have any reason to expect that any such activity,
threat or allegation will be forthcoming. There is no judgment, decree or order
against Company, or, to the knowledge of Company, any of its directors or
officers (in their capacities as such), that could prevent, enjoin, or
materially alter or delay by more than five (5) business days any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Company. All litigation to which
Company is a party (or, to the knowledge of Company, threatened to
12
become a party) is disclosed in the Company Disclosure Letter. Company does not
have any plans to initiate any litigation, arbitration or other proceeding
against any third party.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree, including any exclusive or non-exclusive
arrangement, binding upon Company that has or could reasonably be expected to
have the effect of prohibiting or impairing any current or proposed business
practice of Company, any acquisition of property by Company or the conduct of
business by Company as currently conducted or as proposed to be conducted by
Company.
2.10 GOVERNMENTAL AUTHORIZATION. Company 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 Company's business or the holding of any such interest in any of its
properties ("Company Authorizations"), and all of such Company Authorizations
are in full force and effect, except where the failure to obtain or have any
such Company Authorizations could not reasonably be expected to have a Material
Adverse Effect on Company.
2.11 TITLE TO PROPERTY. Company has (a) good and marketable title to
all of its properties, interests in properties and assets, real and personal,
necessary for the conduct of its business as presently conducted or which are
reflected in the Company Balance Sheet or acquired after the Company Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of in the ordinary course of business since the Company
Balance Sheet Date), or (b) with respect to leased properties and assets, valid
leasehold interests therein, in each case free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except (as to
both (a) and (b)) (i) the lien of current taxes not yet due and payable, (ii)
liens securing debt that are reflected on the Company Balance Sheet and (iii)
imperfections of title and encumbrances, if any, which are not material in
character or amount. The property and equipment of Company that are used in the
operations of its business are in good operating condition and repair,
reasonable wear and tear excepted. All properties used in the operations of
Company are reflected in the Company Balance Sheet to the extent GAAP require
the same to be reflected. The Company does not own any real property.
2.12 INTELLECTUAL PROPERTY.
(a) Company owns or is licensed for, or in any event possesses
sufficient and legally enforceable rights with respect to, all Intellectual
Property (defined below) that is used, exercised, or exploited ("Used") in, or
that may be necessary for, its business as currently conducted ("Company
Intellectual Property," which term will also include all other Intellectual
Property owned by or licensed to Company now or in the past) without to
Company's knowledge any conflict with or infringement or misappropriation of any
rights or property of others ("Infringement"). Such ownership, licenses and
rights are exclusive (A) except with respect to Inventions (defined below) in
the public domain that are not important differentiators of Company's business
or proposed business and (B) except with respect to standard, generally
commercially available, "off-the-shelf" third party products that are not part
of any current or product, service or Intellectual Property offering of Company.
No Company Intellectual Property (excluding Intellectual Property licensed to
Company only on a
13
nonexclusive basis) was conceived or developed directly or indirectly with or
pursuant to government funding or a government contract. "Intellectual Property"
means (i) inventions; trade names, trade marks, service marks, URLs ("Marks");
works of authorship; mask works; technology; know-how; trade secrets, and
information designs; formulas; algorithms; processes; schematics; computer
software (in source code and/or object code form); and all other intellectual
and industrial property of any sort ("Inventions") and (ii) patent rights; Xxxx
rights; copyrights; mask work rights; SUI GENERIS database rights; trade secret
rights; moral rights; and all other intellectual and industrial property rights
of any sort throughout the world, and all applications, registrations, issuances
and the like with respect thereto ("IP Rights"). All copyrightable matter within
Company Intellectual Property has been created by persons who were employees of
Company at the time of creation and no third party has or will have "moral
rights" or rights to terminate any assignment or license with respect thereto.
Company has not received any written communication alleging or suggesting that
or questioning whether Company has been or may be (whether in its business as
currently conducted or proposed to be conducted or otherwise) engaged in, liable
for or contributing to any Infringement, nor does Company have any reason to
expect that any such communication will be forthcoming.
(b) To the extent included in Company Intellectual Property,
SCHEDULE 2.12 lists (by name, number, jurisdiction, owner and, where applicable,
the name and address of each inventor) all patents and patent applications; all
registered and material unregistered Marks; and all registered and, if material,
unregistered copyrights and mask works; and all other issuances, registrations,
applications and the like with respect to those or any other IP Rights. No
cancellation, termination, expiration or abandonment of any of the foregoing
(except natural expiration or termination at the end of the full possible term,
including extensions and renewals) is anticipated by Company. To Company's
knowledge, there are no questions or challenges (or any specific basis therefor)
with respect to the validity of any of the foregoing issued or registered IP
Rights (or any part or claim thereof) or with respect to the patentability of
any claim of any of the foregoing patent applications.
(c) There is, to the knowledge of Company, no unauthorized Use,
disclosure, infringement or misappropriation of any Company Intellectual
Property by any third party, including, without limitation, any current or
former employee or consultant of Company.
(d) Company has taken all reasonable steps that are necessary and
appropriate to protect and preserve the confidentiality of all Company
Intellectual Property trade secrets that is not otherwise disclosed in published
patents or patent applications or registered copyrights ("Company Confidential
Information"). All use by and disclosure to employees, consultants or others of
Company Confidential Information has been pursuant to the terms of valid and
binding written confidentiality and nonuse/restricted-use agreements. Except as
set forth in SCHEDULE 2.12, Company has not disclosed or delivered to any third
party, or permitted the disclosure or delivery to any escrow holder or other
person any part of any Source Materials (defined in Section 2.24(m)).
(e) Each current and former employee and consultant of Company has
executed and delivered (and to the knowledge of Company is in compliance with)
an agreement in substantially the form of Company's standard Proprietary
Information and Inventions Agreement (in the case of an employee) or other
disclosed agreements (in the case of a
14
contractor) other agreements which agreement provides valid written assignments
of all title and rights to any Company Intellectual Property conceived or
developed thereunder, or otherwise in connection with his or her consulting or
employment, but not already owned by Company by operation of law and to the
knowledge of the Company each such agreement is enforceable in accordance with
its terms.
(f) To Company's knowledge, Company is not Using, and it will not
be necessary to Use, (i) any Inventions of any of its past or present employees
or contractors (or people currently intended to be hired) made prior to or
outside the scope of their employment by Company or (ii) any confidential
information or trade secrets of any former employer of any such person.
2.13 ENVIRONMENTAL MATTERS. Company is and has at all times operated
its business in material compliance with all Environmetnal Laws and to
Company's knowledge, no material expenditures are or will be required in
order to comply with such Environmental Laws. "Environmental Laws" means all
applicable statutes, rules, regulations, ordinances, orders, decrees,
judgments, permits, licenses, consents, approvals, authorizations, and
governmental requirements or directives or other obligations lawfully imposed
by governmental authority under federal, state or local law pertaining to the
protection of the environment, protection of public health, protection of
worker health and safety, the treatment, emission and/or discharge of
gaseous, particulate and/or effluent pollutants, and/or the handling of
hazardous materials, including without limitation, the Clean Air Act, 42
U.S.C. Section 7401, et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Section 9601, et
seq., the Federal Water Pollution Control Act, 33 U.S.C. Section 1321, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. ("RCRA"), and the Toxic Substances Control Act, 15 U.S.C. Section 2601,
et seq.
2.14 TAXES.
(a) All Tax returns, statements, reports, declarations and other
forms and documents (including without limitation estimated Tax returns and
reports and material information statements, returns and reports) required to be
filed with any Tax authority with respect to any Taxable period ending on or
before the Effective Time, by or on behalf of Company (collectively, "Tax
Returns" and individually a "Tax Return"), have been or will be completed and
filed when due (including any extensions of such due date) and all amounts shown
due on such Tax Returns and, to the knowledge of the Company, any other Taxes
due on or before the Effective Time have been or will be paid on or before such
date. The Company Balance Sheet (i) fully accrues in accordance with GAAP all
actual and contingent liabilities for Taxes with respect to all periods through
the Company Balance Sheet Date, and Company has not and will not incur any Tax
liability (determined in accordance with GAAP) in excess of the amount reflected
on such Company Balance Sheet with respect to such periods (excluding any amount
thereof that reflects timing differences between the recognition of income for
purposes of GAAP and for Tax purposes), and (ii) properly accrues in accordance
with GAAP all material liabilities for Taxes with respect to periods after the
Company Balance Sheet Date. No material Tax liability since the Company Balance
Sheet Date has been or will be incurred by Company
15
other than in the ordinary course of business, and adequate provision has been
made by Company for all Taxes since that date in accordance with GAAP on at
least a quarterly basis.
(b) Company has previously provided or made available to Parent
true and correct copies of all Tax Returns. Company has withheld and paid to the
applicable financial institution or Tax authority all amounts required to be
withheld. To the best knowledge of Company, none of its Tax Returns have been
examined and closed. Company (or any member of any affiliated or combined group
of which Company has been a member) has not granted any extension or waiver of
the limitation period applicable to any Tax Returns that is still in effect.
There is no material claim, audit, action, suit, proceeding, or investigation
now pending to the knowledge of Company with respect to Company in respect of
any Tax or assessment of the Company. No notice of deficiency or similar
document of any Tax authority has been received by Company, and to the knowledge
of the Company there are no material liabilities for Taxes (including
liabilities for interest, additions to Tax and penalties thereon and related
expenses) with respect to the issues that have been raised (and are currently
pending) by any Tax authority that could, if determined adversely to Company,
materially and adversely affect the liability of Company for Taxes. There are no
liens for Taxes (other than for current Taxes not yet due and payable) upon the
assets of Company. Company has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code. Company is in
compliance in all material respects with all the terms and conditions of any Tax
exemptions or other Tax-sharing agreement or order of a foreign government and
the consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption or other Tax-sharing
agreement or order. Neither Company nor any person on behalf of Company has
entered into or will enter into any agreement or consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income tax law) apply to any disposition of any asset owned by
Company. None of the assets of Company directly or indirectly secures any debt
the interest on which is tax-exempt under Section 103(a) of the Code. Company
has never been a party (either as a distributing corporation or as a corporation
that has been distributed) to any transaction intended to qualify under Section
355 of the Code or any corresponding provision of state law. To the Company's
knowledge, no Company stockholder is other than a United States person within
the meaning of the Code. Company does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable tax treaty or
convention between the United States of America and such foreign country.
Company has never elected to be treated as an S-corporation under Section 1362
of the Code or any corresponding provision of federal or state law. There is no
agreement, contract or arrangement to which Company is a party that could,
individually or collectively, result in the payment of any amount that would not
be deductible by reason of Sections 162(a) (by reason of being unreasonable in
amount), 162 (b) through (p) or 404 of the Code, except where the failure of
such payment to be deductible would not have a Material Adverse Effect with
respect to the Company. Except as may arise pursuant to leases or licensing
arrangements, Company is not a party to or bound by any Tax indemnity, Tax
sharing or Tax allocation agreement (whether written or unwritten or arising
under operation of federal law as a result of being a member of a group filing
consolidated Tax returns, under operation of certain state laws as a result of
being a member of a unitary group, or under comparable laws of other states or
foreign jurisdictions) which includes a party other than Company, nor does
Company
16
owe any amount under any such Agreement. Other than by reason of the Merger,
Company has not been and will not be required to include any adjustment in
Taxable income for any Tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions, events or accounting methods employed prior to the
Merger, except where such adjustment would not have a Material Adverse Effect
with respect to the Company.
(c) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means any and all taxes including, without limitation, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, value added, net worth, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profit tax, custom, duty or other like assessment, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Tax authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period or as
the result of being a transferee or successor thereof and (iii) any liability
for the payment of any amounts of the type described in (i) or (ii) as a result
of any express or implied obligation to indemnify any other person. As used in
this Section 2.14, the term "Company" means Company and any entity included in,
or required under GAAP to be included in, any of the Company Financial
Statements.
2.15 EMPLOYEE BENEFIT PLANS.
(a) For all purposes under this Section 2.15, "ERISA Affiliate"
shall mean each person (as defined in Section 3(9) of ERISA), that, together
with Company, is treated as a single employer under Section 4001(b) of ERISA or
Section 414 of the Code. Except for the plans and agreements listed in SCHEDULE
2.15 (collectively, the "Plans"), Company and its ERISA Affiliates do not
maintain, are not a party to, do not contribute to and are not obligated to
contribute to any of the following for the benefit of employees or former
employees of Company and its ERISA Affiliates and their dependents or survivors
(whether or not set forth in a written document):
(A) Any employee benefit plan, as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(B) Any bonus, deferred compensation, incentive, restricted
stock, stock purchase, stock option, stock appreciation right, phantom stock,
supplemental pension, executive compensation, cafeteria benefit, dependent care,
director or employee loan, fringe benefit, sabbatical, severance, termination
pay or similar plan, program, policy, agreement or arrangement; or
(C) Any plan, program, agreement, policy, commitment or other
arrangement relating to the provision of any benefit described in section 3(1)
of ERISA to former employees or directors or to their survivors, other than
procedures intended to comply with the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA").
17
(b) Neither Company nor any ERISA Affiliate has, since January 1,
1996, terminated, suspended, discontinued contributions to or withdrawn from any
employee pension benefit plan, as defined in section 3(2) of ERISA, including
(without limitation) any multiemployer plan, as defined in section 3(37) of
ERISA.
(c) Company has provided to Parent complete, accurate and current
copies of each of the following:
(A) The text (including amendments) of each of the Plans, to
the extent reduced to writing;
(B) A summary of each of the Plans, to the extent not
previously reduced to writing;
(C) With respect to each Plan that is an employee benefit plan
(as defined in section 3(3) of ERISA), the following:
(i) The most recent summary plan description, as described
in section 102 of ERISA;
(ii) Any summary of material modifications that has been
distributed to participants but has not been incorporated in an updated summary
plan description furnished under Subparagraph (i) above; and
(iii) The annual report, as described in section 103 of
ERISA, and (where applicable) actuarial reports, for the three most recent plan
years for which an annual report or actuarial report has been prepared.
(d) With respect to each Plan that is an employee benefit plan
(as defined in section 3(3) of ERISA), the requirements of ERISA applicable to
such Plan have been materially satisfied.
(e) With respect to each Plan that is subject to COBRA, the
requirements of COBRA applicable to such Plan have been materially satisfied.
(f) With respect to each Plan that is subject to the Family
Medical Leave Act of 1993, as amended, the requirements of such Act applicable
to such Plan have been materially satisfied.
(g) None of the Plans is intended to be a tax-qualified Plan
described in Section 401(a) of the Code.
(h) Neither Company nor any ERISA Affiliate has any
accumulated funding deficiency under section 412 of the Code or any termination
or withdrawal liability under Title IV of ERISA.
(i) All contributions, premiums or other payments due from
Company to (or under) any Plan have been fully paid or adequately provided for
on the books and financial
18
statements of Company. All accruals (including, where appropriate, proportional
accruals for partial periods) have been made in accordance with prior practices.
(j) All Company Options vest over a four year period and are
subject to a six month minimum service requirement.
2.16 EMPLOYEES AND CONSULTANTS.
(a) SECTION 2.16 of the Company Disclosure Letter contains a true
and complete list of all individuals employed by the Company as of the date
hereof and the position and base compensation payable to each such individual.
The Company Disclosure Letter contains a description of any written or oral
employment agreements, consulting agreements or termination or severance
agreements to which Company is a party, including any provisions providing for
acceleration of payment or vesting of any benefit or lapse of repurchase rights
(or eligibility for such acceleration or lapse by virtue of the Merger).
(b) Company is not a party to or subject to a labor union or a
collective bargaining agreement or arrangement and is not a party to any labor
or employment dispute.
(c) The consummation of the transactions contemplated herein will
not result in (i) any amount becoming payable to any employee, director or
independent contractor of Company, (ii) the acceleration of payment or vesting
of any benefit or lapse of repurchase rights (or eligibility for such
acceleration or lapse by virtue of the Merger), option or right to which any
employee, director or independent contractor of Company may be entitled, (iii)
the forgiveness of any indebtedness of any employee, director or independent
contractor of Company or (iv) any cost becoming due or accruing to Company or
the Parent with respect to any employee, director or independent contractor of
Company.
(d) Except as set forth on SECTION 2.16 of the Company Disclosure
Letter, Company is not obligated and upon consummation of the Merger will not be
obligated to make any payment or transfer any property that would be considered
a "parachute payment" under section 280G(b)(2) of the Code.
(e) As of the date of this Agreement, to Company's knowledge, no
employee of Company has been injured in the work place or in the course of his
or her employment except for injuries which are covered by insurance or for
which a claim has been made under workers' compensation or similar laws.
(f) Company has complied in all material respects with the
verification requirements and the record-keeping requirements of the Immigration
Reform and Control Act of 1986 ("IRCA"); to the knowledge of Company, the
information and documents on which Company relied to comply with IRCA are true
and correct; and there have not been any discrimination complaints filed against
Company pursuant to IRCA, and to the knowledge of Company, there is no basis for
the filing of such a complaint. Attached to SECTION 2.16 of the Company
Disclosure Letter is a true and complete list of all employees who, to the
Company's knowledge, are not U.S. citizens, along with a description of the
legal status under which each such individual is permitted to work in the United
States.
19
(g) Company has not received or been notified of any complaint by
any employee, applicant, union or other party of any discrimination or other
conduct forbidden by law or contract, nor to the knowledge of Company, is there
a reasonable basis for any complaint.
(h) Company's action in complying with the terms of this Agreement
will not violate any agreements with any of Company's employees.
(i) Company has filed all required reports and information with
respect to its employees that are due prior to the date of this Agreement and
the Closing Date and otherwise has complied in its hiring, employment,
promotion, termination and other labor practices with all applicable federal and
state law and regulations, including without limitation those within the
jurisdiction of the United States Equal Employment Opportunity Commission,
United States Department of Labor and state and local human rights or civil
rights agencies. Company has filed and shall file any such reports and
information that are required to be filed prior to the Closing Date.
(j) To the knowledge of Company none of Company's employees or
contractors is obligated under any agreement, commitments, judgment, decree,
order or otherwise (an "Employee Obligation") that could reasonably be expected
to interfere with the use of his or her best efforts to promote the interests of
Company or that could reasonably be expected to conflict with any of Company's
business as currently conducted or proposed to be conducted. Neither the
execution nor delivery of this Agreement nor the conduct of Company's business
as currently conducted or proposed, will, to Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any Employee Obligation.
2.17 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
Company or member of his or her immediate family is indebted to Company, nor is
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them except for any advances in the ordinary course of business not
exceeding $5,000 per individual. To the knowledge of the Company, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which Company is affiliated or with which Company has a business
relationship, or any firm or corporation that competes with Company, except to
the extent that employees, officers, or directors of Company and members of
their immediate families own stock in a publicly traded company representing
less than one percent (1%) of the outstanding stock of such company. No member
of the immediate family of any officer or director of Company is directly or
indirectly interested in any Material Contract.
2.18 INSURANCE. Attached hereto as SCHEDULE 2.18 is a list of policies
of insurance and bonds of Company. 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 Company is
otherwise in compliance with the terms of such policies and bonds. Company has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
20
2.19 COMPLIANCE WITH LAWS. Company has complied with, is not in
violation of, and has 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 will not have a Material Adverse
Effect on Company.
2.20 BROKERS' AND FINDERS' FEES. Company 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.
2.21 VOTE REQUIRED. The affirmative vote of the holders of a majority
of each class and each series of the shares of Company Capital Stock outstanding
on the record date set for the Company Stockholders Consent (as defined in
Section 5.3(a)) is the only vote of the holders of any of Company's Capital
Stock necessary to approve this Agreement and the transactions contemplated
hereby.
2.22 TRADE RELATIONS. Company has not since inception terminated its
relationship with any supplier participating in its Internet-based marketplace
(the "Marketplace") which had theretofore paid or been obligated to pay Company
in excess of $10,000 or any buyer participating in the Marketplace that has
submitted requests for quotes resulting in revenue to the Company in excess of
$2,500. All of the prices charged by Company in connection with the marketing or
sale of any products or services have been in compliance with all applicable
laws and regulations. No claims have been communicated or, to Company's
knowledge, threatened against Company with respect to wrongful termination of
any dealer, distributor or any other marketing entity, discriminatory pricing,
price fixing, unfair competition, false advertising, or any other material
violation of any laws or regulations relating to anti-competitive practices or
unfair trade practices of any kind, and, to Company's knowledge, no specific
situation, set of facts, or occurrence provides any reasonable basis for any
such claim.
2.23 BUYERS AND SUPPLIERS. As of the date hereof, no buyer that has
submitted requests for quotes resulting in revenue to the Company in excess of
$2,500 in the Marketplace and no supplier in the Marketplace which individually
accounted for more than $5,000 of Company's gross revenues during any quarter
preceding the date hereof, has to the knowledge of the Company canceled or
otherwise terminated, or to the knowledge of the Company made any threat to
Company to cancel or otherwise terminate its relationship with Company or the
Marketplace for any reason including, without limitation the consummation of the
transactions contemplated hereby, and to Company's knowledge, no such buyer or
supplier intends to cancel or otherwise terminate its relationship with Company
or the Marketplace, as the case may be. Company has not knowingly breached, so
as to provide a benefit to Company that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any buyer
or supplier participating in the Marketplace.
2.24 MATERIAL CONTRACTS. Except for the material contracts described in
SCHEDULE 2.24 (collectively, the "Material Contracts"), Company is not a party
to or bound by any material contract, including without limitation:
21
(a) any distributor, sales, advertising, agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contract more
than $50,000 over the life of the contract;
(c) any contract that Company may not terminate without material
penalty within one year from the date of this Agreement (including any period of
time during which such contract may be renewed by any person other than the
Company) and that expires more than one year from the date of this Agreement
(including any period of time during which such contract may be renewed by any
person other than the Company);
(d) any trust indenture, mortgage, promissory note, loan agreement
or other contract for the borrowing of money, any currency exchange, commodities
or other hedging arrangement or any leasing transaction of the type required to
be capitalized in accordance with GAAP;
(e) any contract for capital expenditures in excess of $100,000 in
the aggregate;
(f) any contract limiting the freedom of the Company to engage in
any line of business or to compete with any other Person as that term is defined
in the Securities Exchange Act of 1934, as amended (the "Exchange Act");
(g) any contract pursuant to which Company leases any real
property;
(h) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property;
(i) any contract with any person who is an Affiliate of the
Company (as defined below);
(j) any agreement of guarantee, assumption or endorsement of, or
any similar commitment with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of any other Person
other than software licensees or professional services contracts entered in the
ordinary course of business;
(k) any license, sublicense or other agreement to which Company is
a party (or by which it or any Company Intellectual Property is bound or
subject) and pursuant to which any person has been or may be assigned,
authorized to Use, or given access to any Company Intellectual Property;
(l) any license, sublicense or other agreement pursuant to which
Company has been or may be assigned or authorized to Use, or has or may have
incurred any obligation in connection with, (A) any third party Intellectual
Property that is incorporated in or form a part of any current or proposed
product, service or Intellectual Property offering of Company or (B) any Company
Intellectual Property;
22
(m) any agreement pursuant to which Company has deposited or is
required to deposit with an escrow holder or any other person or entity, all or
part of the source code (or any algorithm or documentation contained in or
relating to any source code) of any Company Intellectual Property ("Source
Materials"); and
(n) any agreement (other than an agreement to license
"off-the-shelf" software that is readily available at established commercial
rates) to indemnify, hold harmless or defend any other person with respect to
any assertion of personal injury, damage to property or Intellectual Property
infringement, misappropriation or violation or warranting the lack thereof.
2.25 NO BREACH OF MATERIAL CONTRACTS. The Company has performed all
material obligations required to be performed by it and is entitled to all
material benefits under, and is not alleged to be in default in respect of any
Material Contract. Each of the Material Contracts is in full force and effect,
and there exists no default or event of default or event, occurrence, condition
or act, with respect to Company or to Company's knowledge with respect to the
other contracting party, or otherwise that, with or without the giving of
notice, the lapse of the time or the happening of any other event or conditions,
could reasonably be expected to (A) become a default or event of default under
any Material Contract or (B) result in the loss or expiration of any right or
option by Company (or the gain thereof by any third party) under any Material
Contract or (C) the release, disclosure or delivery to any third party of any
part of the Source Materials (as defined in Section 2.24(m)). True, correct and
complete copies of all Material Contracts have been delivered to the Parent.
2.26 THIRD-PARTY CONSENTS. SCHEDULE 2.26 lists all Material Contracts
that require (a) a novation or consent to assignment, as the case may be, prior
to the Effective Time so that the Surviving Corporation shall be made a party in
place of Company or as assignee or (b) a consent of any third party to the
Merger or any change of control of Company.
2.27 MINUTE BOOKS. The minutes and consents of Company made available
to Parent contain a complete and accurate summary in all material respects of
all meetings of directors and stockholders or actions by written consent since
the time of incorporation of Company through the date of this Agreement, and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.28 COMPLETE COPIES OF MATERIALS. Company has delivered or made
available true and complete copies of each document, which has been requested by
Parent or its counsel in connection with their legal and accounting review of
Company.
2.29 EXPENSES. All financial advisory and investment banking fees and
expenses that have been or may be incurred by Company in connection with the
negotiation and effectuation of the terms and conditions of this Agreement (the
"Company Financial Advisory Fees") are set forth on SCHEDULE 2.29(a), consisting
of fees payable in Parent Shares ("Company Financial Advisory Fee Shares") and
fees payable in cash ("Company Financial Advisory Cash Fees"). All legal,
accounting, consulting and other professional fees and expenses (other than
Company Financial Advisory Fees) that have been or may be incurred by Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement (the "Company Professional Fees") are set forth on SCHEDULE
2.29(b).
23
2.30 STOCKHOLDER AGREEMENT. Principal Stockholders of Company (as set
forth in Schedule 2.30), representing the majority of each class and each series
of outstanding shares of Company Capital Stock have agreed in writing to vote
for approval of the Merger pursuant to voting agreements attached hereto as
EXHIBIT H ("Stockholder Agreement").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
Parent and Merger Sub represent and warrant to Company that the
statements contained in this Article III are true and correct, except as set
forth in the Disclosure Letter delivered by Parent to Company prior to the
execution and delivery of this Agreement (the "Parent Disclosure Letter"). The
Parent Disclosure Letter shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III, and the
disclosure in any paragraph shall qualify only the corresponding paragraph in
this Article III. Any reference in this Article III to an agreement being
"enforceable" shall be deemed to be qualified to the extent such enforceability
is subject to (i) laws of general application relating to bankruptcy,
insolvency, moratorium and the relief of debtors, and (ii) the availability of
specific performance, injunctive relief and other equitable remedies.
3.1 ORGANIZATION, STANDING AND POWER. Each of Parent and each of its
subsidiaries which is a significant subsidiary within the meaning of Rule
1-02(w) of Regulation S-X under the Securities Act (an "Parent Significant
Subsidiary") is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Parent and
its Parent Significant Subsidiaries 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 Parent. Parent has made available a true
and correct copy of the Certificate of Incorporation and Bylaws of Parent and
Merger Sub, each as amended to date, to Company. Neither Parent nor Merger Sub
(or any other subsidiary) is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws. Parent is the owner of all outstanding
shares of capital stock of each of its Parent Significant Subsidiaries and all
such shares are duly authorized, validly issued, fully paid and nonassessable.
All of the outstanding shares of capital stock of each such subsidiary are owned
by Parent free and clear of all liens, charges, claims or 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 such subsidiary, or otherwise obligating Parent or any
such subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire
any such securities.
3.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital
stock of Parent consists of (i) 600,000,000 shares of Parent Common Stock and
(ii) 20,000,000 shares of preferred stock, par value $0.002 per share ("Parent
Preferred Stock"). As of June 16, 2000, (i) 237,803,651 shares of Parent Common
Stock were issued and outstanding, all of which are validly issued, fully paid
and non-assessable, (ii) 44,863,904 shares of Parent Common Stock were reserved
for future issuance pursuant to outstanding options to purchase Parent Common
24
Stock and (iii) shares of Parent Common Stock were reserved for issuance
pursuant to outstanding warrants to purchase Parent Common Stock, as
described in the Parent SEC Documents (as defined in Section 3.4). As of the
date hereof, no shares of Parent Preferred Stock were issued and outstanding.
As of June 16, 2000, except for outstanding options and warrants referred to
in clauses (ii) and (iii) of the first sentence of this Section 3.2, there
are no outstanding options or warrants, or agreements relating to the
issuance of capital stock of Parent or obligating Parent to issue or sell any
shares of its capital stock. The shares of Common Stock to be issued pursuant
to the Merger will be duly authorized, validly issued, fully paid, and
non-assessable, will not be subject to any preemptive or other statutory
right of stockholders and, will be free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders
thereof. There are no contracts, commitments or agreements relating to
voting, registration, purchase or sale of Parent's capital stock (i) between
or among Parent and any of its stockholders or (ii) to Parent's knowledge,
between or among any of Parent's stockholders or between any of Parent's
stockholders and any third party.
3.3 AUTHORITY.
(a) Each of Parent and Merger Sub has all requisite corporate
power and authority to execute and deliver this Agreement and the other
Transaction Documents and to perform its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of each of
Parent and Merger Sub. This Agreement and the other Transaction Documents have
been duly executed and delivered by each of Parent and Merger Sub and constitute
the valid and binding obligations of each of Parent and Merger Sub.
(b) The execution and delivery of this Agreement and the other
Transaction Documents do not, and the consummation of the transactions
contemplated hereby and thereby 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 Parent or any Parent Significant Subsidiaries, 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 Parent
or any Parent Significant Subsidiaries or their properties or assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Parent or any Parent Significant Subsidiaries in
connection with the execution and delivery of this Agreement or the other
Transaction Documents by Parent or the consummation by Parent of the
transactions contemplated hereby or thereby, except for (i) the filing of the
Certificate of Merger as provided in Section 1.2, (ii) any filings as may be
required under applicable federal and state securities laws, including, but not
limited to, qualification pursuant to Section 25121 of the California Law (as
defined in Section 5.2 below) and the securities laws of any foreign country,
(iii) the filing with the Nasdaq National Market of a Notification Form for
Listing of Additional Shares with respect to the Parent Total Shares, (iv) such
filings as may be required under HSR; and (v) such other consents,
authorizations, filings, approvals and registrations which, if not
25
obtained or made, would not have a Material Adverse Effect on Parent and would
not prevent, materially alter or delay any of the transactions contemplated by
this Agreement or the other Transaction Documents.
3.4 SEC DOCUMENTS. Parent has made available to Company a true and
complete copy of each statement, report, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement, and other filing filed with the SEC by Parent since
June 23, 1999, and, prior to the Effective Time, Parent will have made available
Company with true and complete copies of any additional documents filed with the
SEC by Parent prior to the Effective Time (collectively, the "Parent SEC
Documents"). All documents required to be filed as exhibits to the Parent SEC
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired in accordance with
their terms, and neither Parent nor any of its subsidiaries is in default
thereunder where default would not reasonably be expected to have a Material
Adverse Effect on Parent. As of their respective filing dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed Parent SEC Document. The
financial statements of Parent, including the notes thereto, included in the
Parent SEC Documents (the "Parent Financial Statements") were complete and
correct in all material respects as of their respective dates, complied as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with GAAP applied on a
basis consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q of the SEC). The Parent Financial Statements fairly present the
consolidated financial condition and operating results of Parent and its
subsidiaries at the dates and during the periods indicated therein (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments).
3.5 LITIGATION. Except as may be set forth in the Parent SEC Documents,
there is no private or governmental action, suit, proceeding, claim, arbitration
or investigation pending before any agency, court, tribunal or other entity,
foreign or domestic, or to the knowledge of Parent, threatened against Parent or
any of its respective properties or any of its respective officers or directors
(in their capacities as such) required to be disclosed pursuant to Item 103
Regulation S-K under the Security Act that is not so disclosed.
3.6 COMPLIANCE WITH LAWS. Parent has complied with, is not in violation
of, and has 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 be reasonably expected to have a
Material Adverse Effect on Parent.
3.7 CERTIFICATE OF INCORPORATION AND BY-LAWS. Parent has heretofore
made available to the Company a complete and correct copy of the Certificate of
Incorporation and the
26
By-Laws of Parent and the Certificate of Incorporation and By-Laws of Merger
Sub. Such Certificates of Incorporation and By-Laws are in full force and
effect. Neither Parent nor Merger Sub is in violation of any of the provisions
of its Certificate of Incorporation or By-Laws.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1999, except
as contemplated by or as disclosed in this Agreement, or as disclosed in any
Parent SEC Report filed since June 23, 1999, there has not occurred any material
adverse change in the condition (financial or otherwise but excluding
prospects), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of Parent and its subsidiaries,
taken as a whole; other than (i) a material adverse change generally affecting
the industry in which the Parent operates, (ii) a material adverse change in
capital markets, (iii) any changes resulting from or arising in connection with
changes in the market price or trading volume of Parent Common Stock or the
failure of Parent to meet or exceed research analysts' projections of operating
results, (iv) stockholder class action or other stockholder litigation alleging
breach of fiduciary or other duty or violation of securities or other laws or
(v) changes in, or in the Parent application of, GAAP.
3.9 OPERATIONS OF MERGER SUB. Merger Sub is a wholly owned subsidiary
of Parent, was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations solely as contemplated by this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
-----------------------------------
4.1 CONDUCT OF BUSINESS OF COMPANY AND PARENT. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, Company agrees (except to the extent
expressly contemplated by this Agreement or as consented to in writing by
Parent), to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted. Company further agrees to
(i) pay Taxes when due subject to good faith disputes over such debts or Taxes,
(ii) pay all debts and amounts due or other outstanding obligations, except for
those owed to vendors of the Company in the ordinary course of business, when
due subject to good faith disputes over such amounts or obligations, (iii)
subject to Parent's consent which cannot be unreasonably withheld and must be
timely given the filing of material Tax Returns if applicable, to pay or perform
other obligations when due, and (iv) to use commercially reasonable efforts to
preserve intact its present business organizations, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, to the end that its goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Company agrees to promptly notify
Parent of any event or occurrence not in the ordinary course of its business,
and of any event which could have a Material Adverse Effect on Company. Without
limiting the foregoing, except as expressly contemplated by the provisions of
this Agreement other than Sections 5.26, 5.27 and 5.28 and except for those
items set forth on SCHEDULE 4.1, Company shall not do, cause or permit any of
the following, without the prior written consent of Parent:
27
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its
Certificate 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;
(c) MATERIAL CONTRACTS. Enter into any material contract,
agreement, license or commitment, or violate, amend or otherwise modify or waive
any material terms of any of its material contracts, agreements or licenses
other than in the ordinary course of business;
(d) STOCK OPTION PLAN. Except as disclosed in the Company
Disclosure Letter, accelerate, amend or change the period of exercisability or
vesting of options or other rights granted under the Company Stock Option Plan,
authorize cash payments in exchange for any options or other rights granted
under such plan or otherwise amend such plan;
(e) ISSUANCE OF SECURITIES. Except as allowed pursuant to Section
4.1(f), 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 (i) 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 and (ii) the issuance of shares of Company Common Stock issuable upon
conversion of Company Preferred Stock. Without limiting the forgoing, take any
actions to effect an initial public offering of Company Common Stock.
(f) GRANTS OF STOCK OPTIONS. Grant any options, subscriptions,
rights or warrants to purchase any shares of its capital stock or securities
convertible into its capital stock, including, but not limited to, options
granted pursuant to Sections 5.27 and 5.28;
(g) INTELLECTUAL PROPERTY. Transfer to or license any person or
entity or otherwise extend, amend or modify any rights to its Intellectual
Property other than the grant of non-exclusive licenses in the ordinary course
of business;
(h) EXCLUSIVE RIGHTS. Enter into or amend any material agreements
pursuant to which any other party is granted exclusive marketing, manufacturing,
distribution or other exclusive rights of any type or scope with respect to any
of its products or technology;
(i) 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 business, taken as a whole;
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(j) INDEBTEDNESS. Incur or commit to 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;
(k) LEASES. Enter into any operating lease requiring payments in
excess of $50,000;
(l) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an amount
in excess of $50,000 in any one case or $200,000 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 Company Financial Statements;
(m) CAPITAL EXPENDITURES. Incur or commit to incur any capital
expenditures in any time period in excess of $50,000;
(n) TERMINATION OR WAIVER. Terminate or waive any right of
substantial value other than in the ordinary course of business;
(o) INSURANCE. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(p) EMPLOYEE BENEFITS; SEVERANCE. Take any of the following
actions: (i) increase or agree to increase the compensation payable or to become
payable to its officers or employees, except for increases in salary or wages of
non-officer employees in the ordinary course of business (but not to exceed five
percent (5%) of such employees existing salary or wages), (ii) grant any
additional severance or termination pay to, or enter into any employment or
severance agreements with, any officer or employee, (iii) enter into any
collective bargaining agreement, (iv) establish, adopt, enter into or amend in
any material respect any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other similar plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees except with
respect to matters set forth in Section 4.1(p) of the Disclosure Letter, or (v)
pay any bonus in excess of $500 per person;
(q) LAWSUITS. Commence a lawsuit or arbitration proceeding other
than (i) for the routine collection of bills or (ii) for a breach of this
Agreement or (iii) where the failure to commence such lawsuit or arbitration
proceeding would immediately result in the permanent impairment or loss of any
material benefit or right of the Company or incurrence of any material liability
to the Company (provided that whenever possible the Company shall consult with
Parent at least five (5) business days before commencing such lawsuit or
proceeding);
(r) 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 business, taken as a whole;
29
(s) TAXES. Make any material tax election other than in the
ordinary course of business, change any material tax election, adopt any tax
accounting method other than in the ordinary course of business, change any tax
accounting method, file any tax return (other than any estimated tax returns,
immaterial information returns, payroll tax returns or sales tax returns) or any
amendment to a tax return, enter into any closing agreement, settle any Tax
claim or assessment or consent to any Tax claim or assessment provided that
Parent shall not unreasonably withhold or delay approval of any of the foregoing
actions; or
(t) OTHER. Voluntarily or intentionally take or agree in writing
or otherwise to take, any of the actions described in Sections 4.1(a) through
(s) 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.
4.2 NOTICES. Company shall give all notices and other information
required to be given to the employees of Company, any collective bargaining unit
representing any group of employees of Company, and any applicable government
authority under the National Labor Relations Act, the Internal Revenue Code, the
Consolidated Omnibus Budget Reconciliation Act, and other applicable law in
connection with the transactions provided for in this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
5.1 NO SOLICITATION.
(a) From and after the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement in accordance with
Section 7, except a termination pursuant to Section 7.1(c) hereof, Company shall
not, directly or indirectly, through any officer, director, employee,
representative, affiliate or agent, (i) solicit, initiate, seek, entertain,
encourage or support any inquiry, proposal or offer that constitute, or could
reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale or license of all or substantially all
of the assets, sale of shares of capital stock (including without limitation by
way of a tender offer) or similar transactions involving Company, other than the
transactions contemplated by this Agreement (any of the foregoing inquiries or
proposals being referred to in this Agreement as a "Takeover Proposal"), (ii)
engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Takeover Proposal, or (iii)
agree to approve or recommend any Takeover Proposal.
(b) Company shall notify Parent immediately (and no later than 24
hours) after receipt by Company (or its advisors or agents) of any Takeover
Proposal or any request for information in connection with a Takeover Proposal
or for access to the employees, properties, books or records of Company by any
person or entity that informs Company that it is considering making, or has
made, a Takeover Proposal. Such notice shall be made orally and in writing and
shall indicate in reasonable detail the identity of the offeror and the terms
and conditions of such proposal, inquiry or contact.
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5.2 SECURITIES ISSUANCES.
(a) The shares of Parent Common Stock to be issued in connection
with the Merger are expected to be securities exempt from registration under the
Securities Act by reason of Section 3(a)(10) thereof and are intended to be
issued pursuant to a fairness hearing (the "Hearing") conducted pursuant to
Section 25142 of the California Corporate Securities Laws of 1968, as amended
(the "California Law") and under applicable state blue sky laws. Subject to this
Section 5.2, Parent shall use commercially reasonable efforts to file with the
California Department of Corporations (the "Department"), as promptly as
practical after the execution of this Agreement (and in no event later than 14
days following the date hereof) an Application for Qualification of Securities
under Section 25121 of the California Law, a proposed Notice of the Hearing and
a request for the Hearing to be held by the Department to consider the terms,
conditions and fairness of the transactions contemplated by this Agreement and
the Merger pursuant to Section 25142 of the California Law including all
required exhibits thereto (the "Application"). Parent and Company shall use
commercially reasonable efforts to obtain a permit pursuant to Section 25121 of
the California Law and the Application to issue such shares (the "Permit") as
promptly as practicable (and in no event later than 51 days following the date
hereof).
(b) Parent shall use commercially reasonable efforts to prepare,
with the cooperation of the Company, as promptly as practicable after the
execution of this Agreement (and in no event later than 14 days following the
date hereof) the Application. Parent and the Company shall each use commercially
reasonable efforts to cause the Permit Application to comply with the
requirements of applicable federal and state laws. Each of Parent and the
Company agrees to provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable judgment of
the providing party or its counsel, may be required or appropriate for inclusion
in the Application, or in any amendments or supplements or exhibits thereto, and
to cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Application. The Company will promptly advise
Parent, and Parent will promptly advise the Company, in writing if at any time
prior to the Effective Time either the Company or Parent shall obtain knowledge
of any facts that might make it necessary or appropriate to amend or supplement
the Application in order to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law. Anything to
the contrary contained herein notwithstanding, Parent shall not include in the
Application any information with respect to the Company or its affiliates or
associates, the form and content of which information shall not have been
approved by the Company prior to such inclusion. Each party shall cause an
officer of such party who has been substantively involved with the negotiations
of the Merger to attend and participate in the Hearing.
(c) The Company shall use commercially reasonable efforts to
prepare, with the cooperation of Parent, as promptly as practicable (but in no
event later than 14 days following the date hereof) an information statement to
be sent to stockholders of Company in connection with their consideration of
approval of the Merger and this Agreement (as amended or supplemented, the
"Information Statement"). The Information Statement shall constitute a
disclosure document for the offer and issuance of the shares of Parent Common
Stock to be received by the holders of Company Capital Stock in the Merger.
Parent and the
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Company shall each use commercially reasonable efforts to cause the Information
Statement to comply with applicable federal and state securities laws
requirements. Each of Parent and the Company agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. The Company will promptly advise Parent, and Parent will
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or Parent shall obtain knowledge of any facts that might
make it necessary or appropriate to amend or supplement the Information
Statement in order to make the statements contained or incorporated by reference
therein not misleading or to comply with applicable law. The Information
Statement shall contain the recommendation of the Board of Directors of the
Company that the Company stockholders approve the Merger and this Agreement and
the conclusion on the Board of Directors that the terms and conditions of the
Merger are advisable and fair and reasonable to the shareholders of the Company.
Anything to the contrary contained herein notwithstanding, the Company shall not
include in the Information Statement any information with respect to Parent or
its affiliates or associates, the form and content of which information shall
not have been approved by Parent prior to such inclusion.
(d) Company and Parent will notify each other promptly of the
receipt of any comments from the Department or its staff and of any request by
the Department or any other government officials for amendments or supplements
to any of the documents filed therewith or any other filing or for additional
information and will supply each other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the Department,
or its staff or any other government officials, on the other hand, with respect
to the filing.
(e) The information supplied by the Company for inclusion in the
Application shall not at the time the Hearing is held and the time the
qualification of such securities is effective under Section 25122 of the
California Law contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The information supplied by the Company for inclusion in
the Information Statement shall not, on the date the Information Statement is
first mailed to the Company's stockholders, at the time of the Company
Stockholders Consent and at the Effective Time, contain any statement which, at
such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Consent which has become false or
misleading. Notwithstanding the foregoing, the Company makes no representation,
warranty or covenant with respect to any information supplied by Parent or
Merger Sub which is contained in the Application or the Information Statement.
(f) The information supplied by Parent and Merger Sub for
inclusion in the Application shall not, at the time the Hearing is held and the
time the qualification of such securities is effective under Section 25122 of
the California Law, contain any untrue statement of
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a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The information supplied by Parent for inclusion in the
Information Statement shall not, on the date the Information Statement is first
mailed to the Company's stockholders, at the time of the Consent Company
Stockholders and at the Effective Time, contain any statement which, at such
time, is false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which it is made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the Consent Solicitation which has become false or
misleading. Notwithstanding the foregoing, Parent and Merger Sub make no
representation, warranty or covenant with respect to any information supplied by
the Company which is contained in any of the foregoing documents.
(g) In the event that, (i) within thirty-five (35) days after the
date hereof the Department has not scheduled a date for the Hearing or (ii) the
Hearing has not been held and concluded and the Permit has not been issued by
the Department on or within fifty-one (51) days after the date hereof, then, in
each case at the Company's election, Parent shall immediately commence efforts
to prepare with the cooperation of Company, and file, with the SEC a
registration statement of Form S-4 (as amended and supplemented, the
"Registration Statement") in which the Information Statement shall be included
as part of a prospectus, in connection with the registration under the
Securities Act of the shares of Parent Common Stock to be issued to the
stockholders of the Company pursuant to the Merger. The Parent shall (i) file
the Registration Statement as promptly as reasonable practicable, and in any
event no later than twenty-one (21) days after the date Parent is requested in
writing to commence preparation of the Registration Statement pursuant to this
Section 5.2(g), and (ii) shall use commercially reasonable efforts to have or
cause the Registration Statement to become effective as promptly as practicable,
and shall take any action required under any applicable federal or state
securities laws in connection with the issuance of shares of Parent Common Stock
pursuant to the Merger. The Company shall furnish all information concerning the
Company as Parent may reasonably request in connection with such actions and the
preparation of the Registration Statement. Parent shall furnish all information
concerning Parent and Merger Sub as the Company may reasonably request in
connection with such actions and the preparation of the Information Statement.
As promptly as practicable after the Registration Statement shall have become
effective, the Company shall mail the Information Statement to its stockholders.
(h) The Registration Statement and the information supplied by
Parent for inclusion in the Information Statement shall not, at (i) the time the
Registration Statement is declared effective by the SEC; (ii) the time the
Information Statement is first mailed to the stockholders of the Company; (iii)
the time of the Company Stockholders Consent; and (iv) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any event or
circumstance relating to Parent or any of its subsidiaries, or their respective
officers or directors, should be discovered by Parent which should be set forth
in amendment or a supplement to the Registration Statement or Information
Statement, Parent shall promptly inform the Company. The Registration Statement
and Information Statement shall comply in all material respects as to form and
substance with the requirements of the Securities Act, the Exchange Act and the
rules and regulations thereunder.
33
Notwithstanding the foregoing, Parent and Merger Sub make no representation or
warranty with respect to any information supplied by the Company which is
contained, or furnished in connection with the preparation of, any of the
foregoing documents.
(i) The Information Statement and the information supplied by the
Company for inclusion in the Registration Statement shall not, at (i) the time
the Registration Statement is declared effective by the SEC; (ii) the time the
Information Statement (or any amendment thereof or supplement thereto) is first
mailed to the stockholders the Company; (iii) the time of the Consent
Solicitation; and (iv) the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance relating to the
Company, or its officers or directors, should be discovered by the Company which
should be set forth in an amendment or supplement to the Registration Statement
or Information Statement, the Company shall promptly inform Parent. The
Information Statement shall comply in all material respects as to form and
substance with the requirements of the Securities Act, the Exchange Act and the
rules and regulations thereunder. The Information Statement shall contain the
recommendation of the Board of Directors of the Company that the Company
stockholders approve the Merger and this Agreement and the conclusion on the
Board of Directors that the terms and conditions of the Merger are advisable and
fair and reasonable to the shareholders of the Company. Notwithstanding the
foregoing, the Company makes no representations or warranty with respect to any
information supplied by Parent or Merger Sub which is contained in, or furnished
in connection with the preparation of, any of the foregoing documents.
5.3 STOCKHOLDERS MEETING OR CONSENT SOLICITATION. As soon as legally
practicable based on Section 5.2 above, Company shall promptly after the date
hereof take all actions necessary to either (i) call a meeting of its
stockholders to be held for the purpose of voting upon this Agreement and the
Merger (the "Company Stockholders Meeting") or (ii) commence a consent
solicitation to obtain such approvals (the "Company Stockholders Consent").
Company will, through its Board of Directors, recommend to its stockholders
approval of such matters as soon as practicable after the date hereof. Company
shall use its commercially reasonable efforts to solicit from its stockholders
proxies or consents in favor of such matters.
5.4 ACCESS TO INFORMATION.
(a) Company shall afford Parent 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 Company's employees,
properties, books, contracts, commitments and records provided, however, Parent
shall not contact any employee of Company holding an office lower than vice
president of Company without providing 24 hours advance notice to a vice
president of Company unless there exists a pre-existing relationship between
Parent and such employee, and (ii) all other information concerning the
business, properties and personnel of Company as Parent may reasonably request.
Company agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
34
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Parent and Company 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.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.4 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.
5.5 CONFIDENTIALITY. The parties acknowledge that Parent and Company
have previously executed a non-disclosure agreement dated May 18, 2000 (as
amended, the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
5.6 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement,
Parent and Company 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 written approval of the other (which approval shall
not be unreasonably withheld), except as may be required by Parent to comply
with the rules and regulations of the SEC or any obligations pursuant to any
listing agreement with any national securities exchange or with the NASD.
5.7 CONSENTS; COOPERATION.
(a) Each of Parent and Company shall promptly apply for or
otherwise seek, and use all reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR, and shall use all commercially reasonable
efforts to obtain all necessary consents, waivers and approvals under any of its
material contracts in connection with the Merger for the assignment thereof or
otherwise. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to HSR or any other federal or state
antitrust or fair trade law.
(b) Each of Parent and Company shall use all commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under the HSR, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of Parent
and Company shall cooperate and use all commercially reasonable efforts
vigorously to contest
35
and resist any such action or proceeding and to have vacated, lifted, reversed,
or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each an "Order"), that is in effect and
that prohibits, prevents, or restricts consummation of the Merger or any such
other transactions, unless by mutual agreement Parent and Company decide that
litigation is not in their respective best interests. Notwithstanding the
provisions of the immediately preceding sentence, it is expressly understood and
agreed that Parent shall have no obligation to litigate or contest any
administrative or judicial action or proceeding or any Order beyond the earlier
of (i) September 30, 2000 or (ii) the date of a ruling preliminarily enjoining
the Merger issued by a court of competent jurisdiction. Each of Parent and
Company shall use all commercially reasonable efforts to take such action as may
be required to cause the expiration of the notice periods under the HSR or other
Antitrust Laws with respect to such transactions as promptly as possible after
the execution of this Agreement.
(c) Notwithstanding the foregoing, neither Parent nor Company
shall be required to agree, as a condition to any Approval, to divest itself of
or hold separate any subsidiary, division or business unit which is material to
the business of such party and its subsidiaries, taken as a whole, or the
divestiture or holding separate of which would be reasonably likely to have a
Material Adverse Effect on (A) the business, properties, assets, liabilities,
financial condition or results of operations of such party and its subsidiaries,
taken as a whole or (B) significantly impair the benefits intended to be derived
as a result of the Merger.
5.8 UPDATE DISCLOSURE; BREACHES. From and after the date of this
Agreement until the Effective Time, each party hereto shall promptly notify the
other party, by written update to its Disclosure Letter, of (i) the occurrence
or non-occurrence of any event which would be likely to cause any condition to
the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, or (ii) the failure of
Company or Parent, as the case may be, to comply with or satisfy any
representation, warranty, covenant, condition or agreement to be complied with
or satisfied by it pursuant to this Agreement which would be likely to result in
any condition to the obligations of any party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied. The delivery of
any notice pursuant to this Section 5.8 shall not cure any breach of any
representation, warranty or covenant requiring disclosure of such matter prior
to the date of this Agreement or otherwise limit or affect the remedies
available hereunder to the party receiving such notice.
5.9 NON-COMPETITION AGREEMENTS. As of the date hereof, each of the
employee of Company listed on SCHEDULE 5.9 (each a "Key Company Employee" and
collectively, the "Key Company Employees"), shall have entered into a
Non-Competition Agreement substantially, in the form attached hereto as EXHIBIT
C-1 or EXHIBIT C-2 (the "Level 1 Non-Competition Agreement" and "Level 2
Non-Competition Agreement" respectively, each a "Non-Competition Agreement") as
set forth on SCHEDULE 5.9.
5.10 LEGAL REQUIREMENTS. Each of Parent and Company 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
36
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.
5.11 BLUE SKY LAWS. Parent 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 Parent Common Stock in connection with the
Merger. Company shall use its reasonable efforts to assist Parent 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 Parent Common Stock in
connection with the Merger.
5.12 STOCK OPTIONS. At the Effective Time, the Company Stock Option
Plan and each outstanding option to purchase shares of Company Common Stock
under the Company Stock Option Plan, whether vested or unvested, shall be
assumed by Parent. In addition, Company's rights to repurchase shares of Company
Common Stock under the Company Stock Option Plan or otherwise shall be assigned
to, and assumed by, Parent. Company has delivered to Parent a schedule (the
"Option Schedule") which sets forth a true and complete list as of the date
hereof of all holders of outstanding options under the Company Stock Option Plan
including the number of shares of Company Capital Stock subject to each such
option, the exercise or vesting schedule, the exercise price per share and the
term of each such option. On the Closing Date, Company shall deliver to Parent
an updated Option Schedule current as of such date. Each such option so assumed
by Parent under this Agreement shall continue to have, and be subject to, the
same terms and conditions set forth in the Company Stock Option Plan and the
Stock Option Grant Agreement applicable to each grant immediately without regard
to vesting restrictions prior to the Effective Time, except that (i) such option
shall be exercisable for that number of whole shares of Parent Common Stock
equal to the product of the number of shares of Company Common Stock that were
issuable upon exercise of such option immediately prior to the Effective Time
multiplied by the Exchange Ratio and rounded down to the nearest whole number of
shares of Parent Common Stock, and (ii) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed option
shall be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at which such option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent.
(a) It is the intention of the parties that the options so assumed
by Parent qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent such options qualified as
incentive stock options prior to the Effective Time. Within 30 business days
after the Effective Time, Parent will issue to each person who, immediately
prior to the Effective Time was a holder of an outstanding option under the
Company Stock Option Plan a document evidencing the foregoing assumption of such
option by Parent.
(b) Within 30 business days after the Effective Time, Parent shall
file a registration statement on Form S-8 (or any successor or other appropriate
forms) which will register the shares of Parent Common Stock subject to assumed
options to the extent permitted by Federal securities laws and shall use its
commercially reasonable efforts to maintain the
37
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
5.13 ESCROW AGREEMENT. On or before the Effective Time, the Escrow
Agent and the Stockholders' Agent (as defined in Article VIII hereto) will
execute the Escrow Agreement contemplated by Article VIII in substantially the
form attached hereto as EXHIBIT D (the "Escrow Agreement").
5.14 LISTING OF ADDITIONAL SHARES. Prior to issuance, Parent shall file
with Nasdaq a Notification Form for Listing of Additional Shares covering the
shares of Parent Common Stock issuable upon conversion of the Company Common
Stock in the Merger and upon exercise of the options under the Company Stock
Option Plans assumed by Parent.
5.15 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate vote of
stockholders of Company described in Section 5.3, including cooperating fully
with the other party, including by provision of information.
5.16 EMPLOYEE BENEFITS. Parent shall take such reasonable actions as
are necessary to allow eligible employees of Company to participate in the
benefit programs of Parent, or alternative benefit programs in the aggregate
substantially comparable to those applicable to employees of Parent on similar
terms, from and after the Effective Time of the Merger without any pre-existing
condition, actively-at-work or similar limitation or condition except to the
extent the affected eligible employee had been subject to and as of the
Effective Time had not yet satisfied a comparable limitation or condition under
the comparable Company plan. For purposes of satisfying any deductibles under
such programs, Parent shall give all credit for deductible amounts and similar
amounts paid during the current plan year by each participant under the
comparable Company plan. For purposes of satisfying the terms and conditions of
such programs, to the extent permitted by Parent's benefit programs, Parent
shall use reasonable efforts to give full credit for eligibility or vesting for
each participant's period of service with Company.
5.17 PARACHUTE PAYMENTS. Company shall use commercially reasonable
efforts to have those provisions in the agreements or arrangements specified in
SCHEDULE 5.17 that may result in the payment of any amount that would not be
deductible by reason of Section 280G of the Code approved by such percentage of
Company's outstanding voting securities as is required by the terms of Section
280G(b)(5)(B) of the Code and the proposed Treasury Regulations thereunder,
including, without limitation, Q-7 of Section 1.280G-1 of such proposed
regulations. In the event that Company does not obtain the requisite stockholder
approvals for such provisions of any of the agreements or arrangements specified
in SCHEDULE 5.17 prior to the Effective Time, Parent may immediately thereafter
make a claim against the Escrow Fund for any Damages, whether contingent or
otherwise, arising out of such provisions not being so approved (the "Parachute
Damages"), including, without limitation, Damages consisting of the loss of
future tax deductions arising from such parachute payments. Parent's computation
as to
38
the amount of any Parachute Damages shall be binding in the absence of manifest
error, but Company may dispute whether any such damages exist with respect to
any such provision. Parachute Damages shall not be subject to either the Basket
Amount (as defined in Section 8.4 hereof) or the Deductible Amount (as defined
in Section 8.4 hereof).
5.18 NECESSARY ACTIONS. Parent and Company shall execute and deliver at
the Closing all agreements and documents contemplated by this Agreement to be
executed and delivered by them at the Closing.
5.19 PROPRIETARY INFORMATION AGREEMENT. Company shall use commercially
reasonable efforts to cause all employees of Company to sign Parent's form of
proprietary information agreement prior to the Closing.
5.20 HSR FILING. As soon as may be reasonably practicable and no later
than fifteen (15) days following the date hereof, the Parent and Company each
shall file with the United States Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice ("DOJ")
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties. Parent and Company will
each pay fifty percent (50%) of the applicable HSR filing fees. Parent and
Company each shall promptly (a) supply the other with any information which may
be required in order to effectuate such filings and (b) supply any additional
information which reasonably may be required by the FTC, the DOJ or the
competition or merger control authorities of any other jurisdiction and which
the parties may reasonably deem appropriate.
5.21 NON-SOLICITATION. From the date of this Agreement until the
earlier of the Effective Time or one (1) year from the date of this Agreement:
Parent shall not, and shall ensure that its representatives soliciting employees
or consultants for Parent shall not, directly or indirectly, solicit, encourage,
induce or attempt to induce any employee or consultant of Company that has been
contacted, introduced or made known to Parent in connection with activities
relating to this Agreement, to terminate his or her employment with Company; and
Company shall not, and shall ensure that its representatives soliciting
employees or consultants for Company shall not, directly or indirectly, solicit,
encourage, induce or attempt to induce any employee or consultant of Parent that
has been contacted, introduced or made known to Company in connection with
activities relating to this Agreement, to terminate his or her employment with
Parent. Notwithstanding the foregoing, the restrictions set forth in this
Section 5.21 shall not apply to (i) the unsolicited inquiries made by an
employee of one party to the other party; (ii) the inquiries received from an
employee of one party as the result of a general notice or advertisement placed
by the other party; or (iii) the inquiries resulting from an employee's
utilization of an employment search firm.
5.22 STOCKHOLDER AGREEMENTS. Upon execution of this Agreement, Company
shall deliver or cause to be delivered to Parent from each of the Principal
Stockholders of Company, an executed Stockholder Agreement. SCHEDULE 2.30 sets
forth a list of the Principal Stockholders and each such Principal Stockholder's
holdings of Company Capital Stock. Parent shall be entitled to place appropriate
legends on the certificates evidencing any Parent Common
39
Stock to be received by Principal Stockholders of Company pursuant to the terms
of this Agreement, and to issue appropriate stock transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the terms of the
Stockholder Agreement.
5.23 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers in a form approved by the Company's board of
directors and furnished to Parent prior to the date hereof (copies of which have
been provided to Parent).
(b) Parent shall (i) assume, as of the Effective Time, and shall
perform, for a period of three (3) years from and after the Effective Time, all
obligations of the Company under Article Seven of the Company Certificate and
Article Five of the Company Bylaws, in each case as such instruments were in
effect on the date hereof and whether or not such instruments have thereafter
been amended or repealed, and (ii) shall pay all amounts that become due and
payable under such provisions (or would become due under such provisions if such
provisions had remained in force during such three-year period).
(c) This Section 5.23 shall survive the consummation of the
Merger, is intended to benefit the Company, the Surviving Company and each
indemnified party, shall be binding, jointly and severally, on all successors
and assigns of the Surviving Corporation and Parent, and shall be enforceable by
the indemnified persons.
(d) Notwithstanding anything to the contrary in this Section 5.23,
Parent and the Surviving Corporation shall not be liable to any officer or
director of Company for any amounts payable resulting from any claim or action
brought against Parent, Surviving Corporation or any of Parent's Affiliates by
such officer or director or the Company or any of their Affiliates.
(e) The Company hereby represents and warrants to Parent that no
claim for indemnification has been made by any director or officer of the
Company and, to the knowledge of the Company, no basis exists for any such claim
for indemnification.
5.24 TAX-FREE REORGANIZATION COVENANT. Parent and the Company shall
(and Parent shall cause its subsidiaries to) use commercially reasonable efforts
to qualify the Merger as a reorganization within the meaning of Section 368 of
the Code and not take any action that could reasonably be expected to cause the
Merger to fail to qualify as a reorganization within the meaning of Section 368
of the Code.
5.25 INTENTIONALLY OMITTED.
5.26 ACCELERATION OF VESTING; LAPSE OF REPURCHASE RIGHT. Company shall
cause each Company Option subject to vesting granted to any individual listed on
SCHEDULE 5.26 of the Company Disclosure Letter to fully vest on or before the
Effective Time and any right to repurchase shares of Company Common Stock held
by any individual listed on such SCHEDULE 5.26 to lapse on or before the
Effective Time. Company shall not grant any Company Warrants
40
subject to vesting after the date hereof unless such vesting fully accelerates
immediately prior to the Effective Time.
5.27 EXISTING EMPLOYEE OPTIONS. Company Options to purchase up to an
aggregate 2,450,120 shares of Company Common Stock shall be granted to existing
employees of the Company in compliance with applicable laws. Each Company Option
granted pursuant to this Section 5.27 shall vest and become exercisable with
respect to 25% of the Company Common Stock issuable pursuant to such option
after one year of service measured from the date of grant and shall vest and
become exercisable ratably over the following thirty six months of service
thereafter. Each option grant made by Company pursuant to this Section 5.27
shall be specifically identified in a letter from Company to Parent referencing
this Section 5.27. Such options shall not be considered issued pursuant to this
Section 5.27 until such letter is acknowledged in writing by Parent.
5.28 OPTION GRANTS TO NEW EMPLOYEES. Company Options shall be granted
to certain new employees of Company ("Additional Employees") in compliance with
applicable laws. Each such Additional Employee and each option grant made by
Company pursuant to this Section 5.28 shall be specifically identified in a
letter from Company to Parent referencing this Section 5.28. Such new employees
and such options shall not be considered Additional Employees or options issued
pursuant to this Section 5.28, respectively, until such letter is acknowledged
in writing by Parent.
5.29 EMPLOYEE STATUS. If Xxxx Xxxxxx is eligible to become an employee
of Company in compliance with applicable laws, Company shall use its
commercially reasonable efforts to cause him to become an employee of Company
prior the Effective Time.
ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of Parent and Company 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 agreement of Parent and
Company:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of stockholders of Company under
Delaware Law and the Certificate of Incorporation of Company and any other
applicable agreement or other instrument.
(b) 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
41
order enacted, entered, enforced or deemed applicable to the Merger, which makes
the consummation of the Merger illegal.
(c) GOVERNMENTAL APPROVAL. Parent and Company 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 such approvals, waivers and consents as may be required under the
Securities Act, under state Blue Sky laws, and under HSR.
(d) ESCROW AGREEMENT. Parent, Company, Escrow Agent and the
Stockholders' Agent (as defined in Article VIII hereto) shall have entered into
the Escrow Agreement.
(e) TAX OPINION. Each of Company and Parent shall have received a
written opinion from their respective counsel to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code, which
opinions shall be substantially identical in substance and reasonably acceptable
to the recipient. In preparing the Company and the Parent tax opinions, counsel
may rely on reasonable assumptions and may also rely on (and to the extent
reasonably required, the parties and Company's stockholders shall make)
reasonable representations related thereto.
(f) TRANSACTION EXEMPTION OR REGISTRATION EFFECTIVE. Either (i)
the Department shall have issued the Permit with respect to the Merger pursuant
to the Application after holding the Hearing and the shares of Parent Common
Stock to be issued hereunder shall be "exempt securities" under Section 3(a)(10)
of the Securities Act or (ii) the SEC shall have declared the Registration
Statement effective, no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened in writing by the SEC.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The
obligations of Company 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 Company:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) Except as
disclosed in the Parent Disclosure Letter, the representations and warranties of
Parent in this Agreement shall be true and correct in all material respects (if
not qualified by materiality) and in all respects (if qualified by materiality)
when made and (other than representations and warranties which by their express
terms are made solely as of a specified earlier date) on and as of the Effective
Time as though such representations and warranties were made on and as of such
time and (ii) Parent 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.
(b) LEGAL OPINION. Company shall have received a legal opinion
from Parent's legal counsel in substantially the form attached hereto as EXHIBIT
E.
42
(c) LISTING OF ADDITIONAL SHARES. The shares of Parent Common
Stock issuable upon conversion of the Company Common Stock in the Merger and
upon exercise of the options under the Company Stock Option Plan assumed by
Parent shall have been approved for quotation on the Nasdaq National Market
System, subject only to official notice of issuance.
(d) THIRD PARTY CONSENTS. Company shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the Merger under the
contracts of Purchaser set forth on SCHEDULE 6.2(d).
(e) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise but excluding
prospects), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of Parent and its subsidiaries,
taken as a whole; other than (i) a material adverse change generally affecting
the industry in which the Parent operates, (ii) a material adverse change in
capital markets, (iii) changes in, or in the Parent's application of, GAAP, (iv)
stockholder class action or other stockholder litigation alleging breach of
fiduciary or other duty or violation of securities or other laws, (v) any
changes resulting from or arising in connection with changes in the market price
or trading volume of Parent Common Stock or the failure of Parent to meet or
exceed research analysts' projections of operating results, or (vi) a material
adverse change in the Parent's condition (financial or otherwise but excluding
prospects), properties, assets (including intangible assets), liabilities,
business operations or results of operations which are primarily and directly
caused by the execution and delivery of and performance of obligations under
Sections 5.27 and 5.28 of this Agreement or the announcement and consummation of
the transactions contemplated hereby (it being understood that in any
controversy concerning the applicability of this clause (vi) the party claiming
the benefit of this clause (vi) shall have the burden of proof with respect to
the elements of such clause).
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of
Parent 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
Parent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as disclosed
in the Company Disclosure Letter and except as to the representation and
warranty contained in Section 2.5(ii), (i) the representations and warranties of
Company in this Agreement shall be true and correct in all material respects (if
not qualified by materiality) and in all respects (if qualified by materiality)
when made (other than representations and warranties which by their express
terms are made solely as of a specified earlier date) on and as of the Effective
Time as though such representations and warranties were made on and as of such
time and (ii) Company 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) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval
43
shall be required in connection with the Merger under the contracts of Company
set forth on SCHEDULE 6.3(b) hereto.
(c) LEGAL OPINION. Parent shall have received a legal opinion from
Company's legal counsel in substantially the form attached hereto as EXHIBIT F.
(d) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise but excluding
prospects), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of Company; other than (i) a
material adverse change generally affecting the industry in which the Company
operates, (ii) a material adverse change in capital markets and (iii) changes
in, or in the Company's applications of, GAAP, (iv) Stockholder class action or
other stockholder litigation alleging breach of fiduciary or other duty or
violation of applicable laws and (v) a material adverse change in the Company's
condition (financial or otherwise but excluding prospects), properties, assets
(including intangible assets), liabilities, business operations or results of
operations which are primarily and directly caused by the execution and delivery
of and performance of obligations under Sections 5.27 and 5.28 of this Agreement
or the announcement and consummation of the transactions contemplated hereby (it
being understood that in any controversy concerning the applicability of this
clause (v) the party claiming the benefit of this clause (v) shall have the
burden of proof with respect to the elements of such clause).
(e) FIRPTA CERTIFICATE. Company shall, prior to the Closing Date,
provide Parent with a properly executed FIRPTA Notification Letter,
substantially in the form of EXHIBIT G attached hereto, which states that shares
of capital stock of Company do not constitute "United States real property
interests" under Section 897(c) of the Code, for purposes of satisfying Parent's
obligations under Treasury Regulation Section 1.1445-2(c)(3). In addition,
simultaneously with delivery of such Notification Letter, Company shall have
provided to Parent, as agent for Company, a form of notice to the Internal
Revenue Service in accordance with the requirements of Treasury Regulation
Section 1.897-2(h)(2) and substantially in the form of EXHIBIT G attached hereto
along with written authorization for Parent to deliver such notice form to the
Internal Revenue Service on behalf of Company upon the Closing of the Merger.
(f) RESIGNATION OF DIRECTORS. The directors of Company in office
immediately prior to the Effective Time shall have resigned as directors of
Company effective as of the Effective Time.
(g) NON-COMPETITION AGREEMENT. The Non-Competition Agreements
between Parent and each of the Key Company Employees shall be effective and
shall not have been breached.
(h) STOCK RESTRICTION AGREEMENTS. The Stock Restriction Agreements
between the Company and each of the Founders shall be effective and shall not
have been breached.
(i) CONVERSION OF PREFERRED STOCK. Each share of Company Preferred
Stock shall have been converted into Company Common Stock prior to the Effective
Time.
44
(j) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the holders of at least ninety-five percent (95%)
of the shares of Company Capital Stock outstanding as of the record date set for
the Company Stockholders Meeting or the solicitation of stockholder consents to
approve the Merger.
(k) REGISTRATION RIGHTS. Except as provided in Sections 5.2 and
5.12 hereof, Parent shall not be obligated to register any shares of Parent
Common Stock issued or issuable pursuant to this Agreement, including but not
limited to any shares of Parent Common Stock issued upon exercise of Company
Warrants assumed by Parent pursuant to this Agreement.
ARTICLE VII
TERMINATION, EXPENSES, 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 Company, this Agreement may be terminated:
(a) by mutual consent duly authorized by the Board of Directors of
Parent and Company;
(b) by either Parent or Company, if the Closing shall not have
occurred on or before September 30, 2000 (provided, (i) this Agreement may not
be terminated prior to October 31, 2000 if the Registration Statement has been
filed with the SEC prior to September 30, 2000 and it has yet to be declared
effective, (ii) a later date may be agreed upon in writing by Parent and
Company, and (iii) the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose action or failure to act has
been the cause or resulted in the failure of the Merger to occur on or before
such date and such action or failure to act constitutes a breach of this
Agreement);
(c) by Parent, if (i) Company shall materially breach any
representation, warranty, obligation or agreement hereunder and such material
breach shall not have been cured within twenty (20) days of receipt by Company
of written notice of such breach, provided that the right to terminate this
Agreement by Parent under this Section 7.1(c)(i) shall not be available to
Parent where Parent is at that time in breach of this Agreement, (ii) the Board
of Directors of Company shall have withdrawn or modified its recommendation of
this Agreement or the Merger in a manner adverse to Parent or shall have
resolved to do any of the foregoing, provided that the right to terminate this
Agreement by Parent under this Section 7.1(c)(ii) shall not be available to
Parent where Parent is at that time in material breach of this Agreement, or
(iii) provided that the Hearing has been completed and the Permit has been
issued by the Department, for any reason Company fails to call and hold the
Company Stockholders Meeting within ten (10) days after the Permit is granted or
the Registration Statement is declared effective by the SEC or to commence
solicitation of stockholder consents within five (5) days after the Permit is
granted or the Registration Statement is declared effective by the SEC, provided
that the right to terminate this Agreement by Parent under this
45
Section 7.1(c)(iii) shall not be available to Parent where Parent is at that
time in material breach of this Agreement;
(d) by Company, if Parent shall materially breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within twenty (20) days following receipt by Parent of
written notice of such breach, provided that the right to terminate this
Agreement by Company under this Section 7.1(d) shall not be available to Company
where Company is at that time in material breach of this Agreement; or
(e) by (i) either Company or Parent, if any permanent injunction
or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable or (ii) by
Parent, if any required approval of the stockholders of Company shall not have
been obtained by reason of the failure to obtain the required stockholder
consents within fifteen (15) days of the commencement of the Consent
Solicitation or voted upon at a duly held meeting of the stockholders or any
adjournment thereof.
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 Parent or Company
or their respective officers, directors, stockholders or affiliates, except that
Parent and Company shall be liable to the extent that such termination results
from the breach by such party hereto of any of its representations, warranties
or covenants set forth in this Agreement; provided that, the provisions of
Section 5.5 (Confidentiality), Section 5.6 (Public Disclosure), Section 7.2
(Effect of Termination), and Section 7.3 (Expenses) shall remain in full force
and effect and survive any termination of this Agreement.
7.3 EXPENSES. Subject to Section 1.6(b), whether or not the Merger is
consummated, all costs, fees and expenses incurred in connection with the Merger
including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties incurred by a party
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses.
7.4 AMENDMENT. The boards of directors of Parent and Company may cause
this Agreement to be amended at any time prior to the Effective Time, by
execution of an instrument in writing signed on behalf of Parent and Company;
provided that an amendment made subsequent to adoption of the Agreement by the
stockholders of Company shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Company 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 holders of Company Capital Stock. Any amendments to this
Agreement after the Effective Time must be approved in writing by holders of a
majority of the Parent Stock issued in connection with the Merger measured as of
immediately after the Effective Time.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time Parent
or Company, to the extent legally allowed, may (i) extend the time for the
performance of any of
46
the obligations or other acts of Company or Parent, respectively, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
--------------------------
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Notwithstanding any investigation conducted before or after the Closing Date,
and notwithstanding any actual or implied knowledge or notice of any facts or
circumstances which any party hereto may have as a result of such investigation
or otherwise, such party will be entitled to rely upon the other Parties,
representations, warranties and covenants as provided in this Agreement. The
representations, warranties, agreements and covenants of Parent will survive the
Closing and continue in full force and effect until the date twelve (12) months
following the Closing Date at which time the representations, warranties,
agreements and covenants of Parent set forth in this Agreement will terminate;
provided, however that the covenant contained in Section 5.24 shall remain in
full force and effect for purposes of this Article VIII for the applicable tax
statute of limitations (and any extensions or waivers thereof) for each Former
Company Stockholder. Subject to the provisions of this Article VIII, the
obligations of Company with respect to its representations, warranties,
pre-Closing agreements and covenants will survive the Closing and continue in
full force and effect until the date twelve (12) months following the Closing
Date, at which time the representations, warranties and pre-Closing agreements
and covenants of Company set forth in this Agreement and any liability of the
holders of Company Capital Stock immediately prior to the Effective Time
(collectively, the "Former Company Stockholders") with respect to those
representations, warranties and pre-Closing agreements and covenants will
terminate.
8.2 INDEMNITY. From and after the Effective Time and subject to the
provisions of this Article VIII,
(a) Parent and the Surviving Corporation (on or after the
Effective Time) shall be indemnified and held harmless by the Former Company
Stockholders against, and reimbursed for, any actual liability, damage, loss,
obligation, demand, judgment, fine, penalty, cost or expense, including
reasonable attorneys' fees and expenses, and the costs of investigation incurred
in defending against or settling such liability, damage, loss, cost or expense
or claim therefor and any amounts paid in settlement thereof imposed on or
reasonably incurred (collectively, "Damages") as a result of any breach of any
representation, warranty, agreement or covenant on the part of Company under
this Agreement (collectively the "Parent Damages"). Parent Damages shall be
reduced by the amount of any insurance proceeds, if and when actually received
by Parent or Company; provided, however (i) Parent shall have the sole
discretion as to whether to seek reimbursement under any applicable insurance
policy and (ii) Parent's failure to seek reimbursement from applicable insurance
policies shall not reduce the amount of such Damages.
47
(b) Former Company Stockholders shall be indemnified and held
harmless by the Parent and Surviving Corporation against, and reimbursed for,
any Damages as a result of any breach of any representation, warranty,
pre-Closing agreement or covenant on the part of Parent or the Surviving
Corporation (on or after the Effective Time) under this Agreement.
"Damages" as used herein is not limited to matters asserted by third
parties, but includes Damages incurred or sustained by Parent, the Surviving
Corporation or Former Company Stockholders in the absence of claims by a third
party.
8.3 ESCROW FUND. As security for the indemnity provided for in Section
8.2(a) hereof, the Escrow Shares shall be deposited by Parent in an escrow
account with a mutually acceptable financial institution as Escrow Agent (the
"Escrow Agent"), as of the Closing Date, such deposit to constitute an escrow
fund (the "Escrow Fund") to be governed by the terms set forth in this Agreement
and the provisions of an Escrow Agreement to be executed and delivered pursuant
to Section 5.13. The Escrow Fund shall be allocated in whole numbers of Escrow
Shares among the Former Company Stockholders other than such stockholders who
acquired all of his or her shares of Company Capital Stock via exercise of
employee stock options issued by Company on a pro-rata basis in accordance with
the number of shares of Company Capital Stock held by the Former Company
Stockholders immediately prior to the Effective Time (excluding for purposes of
this calculation any Dissenting Shares). Upon compliance with the terms hereof
and subject to the provisions of this Article VIII, Parent and the Surviving
Corporation shall be entitled to obtain indemnity from the Escrow Fund for
Parent Damages covered by the indemnity provided for in Section 8.2 of this
Agreement.
8.4 DAMAGE THRESHOLD. Notwithstanding the foregoing, Parent may not
receive any shares from the Escrow Fund unless and until an Officer's
Certificate (as defined in Section 8.6 below) identifying Parent Damages the
aggregate amount of which exceeds $500,000 (the "Basket Amount") has been
delivered to the Escrow Agent as provided in Section 8.5 below and such amount
is determined pursuant to this Article VIII to be payable, in which case Parent
shall receive shares equal in value to the full amount of Parent Damages in
excess of $100,000 (the "Deductible Amount"); provided, however, that Parachute
Damages shall be paid out of the Escrow Fund without regard to the Basket Amount
and the Deductible Amount and provided further that the amount of Parachute
Damages shall count as Parent Damages in calculating the Basket Amount and the
Deductible Amount. In determining the amount of any Parent Damages attributable
to a breach, any materiality standard or knowledge qualifier contained in a
representation, warranty or covenant of Company shall be disregarded.
8.5 ESCROW PERIOD. Except as contemplated by Section 8.6 hereof, the
escrow period shall end, and all Escrow Shares in the Escrow Fund shall be
released, on the 12-month anniversary of the Closing Date (the "Termination
Date"). No claim for indemnification under this Article VIII may be made after
the Termination Date except for claims based on fraud.
48
8.6 CLAIMS UPON ESCROW FUND.
(a) Upon receipt by the Escrow Agent on or before the end of the
Termination Date of a certificate signed by an officer of Parent (an "Officer's
Certificate") and in accordance with the Escrow Agreement:
(A) stating that Parent or the Surviving Corporation has
incurred, paid or properly accrued (in accordance with GAAP) or knows of facts
giving rise to a reasonable probability that it will have to incur, pay or
accrue (in accordance with GAAP) Parent Damages in an aggregate stated amount
with respect to which Parent or the Surviving Corporation is entitled to payment
from the Escrow Fund pursuant to this Agreement; and
(B) specifying in reasonable detail the individual items of
Parent Damages included in the amount so stated, the date each such item was
incurred, paid or properly accrued (in accordance with GAAP), or the basis for
such anticipated liability, the specific nature of the breach to which such item
is related, the Escrow Agent shall, subject to the provisions of Section 8.7 of
this Agreement, deliver to Parent shares of Parent Common Stock in an amount
necessary to indemnify Parent for the Damages claimed. All shares of Parent
Common Stock subject to such claims shall remain in the Escrow Fund until Parent
Damages are actually incurred or paid or the Parent determines in its reasonably
good faith judgment that no Parent Damages will be required to be incurred or
paid (in which event such shares shall be distributed to the Former Company
Stockholders in accordance with Section 8.10 below).
(b) For the purpose of compensating Parent for Parent Damages
pursuant to this Agreement, the Parent Common Stock in the Escrow Fund shall be
valued at the average of the closing prices as reported in the edition of The
Wall Street Journal distributed in New York, NY of Parent Common Stock for the
thirty (30) trading days prior to the date of the final determination of the
amount of Parent Damages to which Parent or Surviving Corporation is entitled
pursuant to this Article VIII (the "Determination Price").
(c) The Stockholders' Agent shall have the option to compensate
Parent for any Parent Damages, or any portion of such Parent Damages, with cash
rather than Escrow Shares. Upon satisfaction of any claim with cash, a number of
Escrow Shares shall be released by the Escrow Agent to the Stockholders' Agent
equal to the total dollar amount of such cash compensated claim divided by the
Determination Price.
8.7 OBJECTIONS TO CLAIMS. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered to the Stockholders' Agent (defined in Section 8.9 below) and
for a period of thirty (30) days after such delivery to the Escrow Agent, the
Escrow Agent shall make no delivery of Parent Common Stock, cash, or other
property pursuant to Section 8.6 hereof unless the Escrow Agent shall have
received written authorization from the Stockholders' Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of the Parent Common Stock or other property in the Escrow
Fund in accordance with Section 8.6 hereof, provided that no such payment or
delivery may be made if the Stockholders' Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall
49
have been delivered to the Escrow Agent and to Parent prior to the expiration of
such thirty (30) day period.
8.8 RESOLUTION OF CONFLICTS; ARBITRATION.
(a) In case the Stockholders' Agent shall so object in writing to
any claim or claims by Parent made in any Officer's Certificate, the
Stockholders' Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Stockholders' Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and shall distribute the Parent Common Stock or other property from
the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholders' Agent may, by written notice to
the other, demand arbitration of the matter unless the amount of the Damage is
at issue in pending litigation with a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by the Arbitrator (as defined below) under the Commercial Arbitration
Rules of the American Arbitration Association. Within fifteen (15) days after
such written notice is sent, Parent and the Stockholders' Agent shall each
select one arbitrator, and the two arbitrators so selected shall select a third
arbitrator (the "Arbitrator").
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Mountain View, California under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 8.8, in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Parent shall be deemed to be the
Non-Prevailing Party unless the arbitrators award Parent more than one-half
(1/2) of the amount in dispute, plus any amounts not in dispute; otherwise, the
Former Company Stockholders for whom shares of Company Common Stock otherwise
issuable to them have been deposited in the Escrow Fund shall be deemed to be
the Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
its own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including without
limitation, attorneys' fees and costs, reasonably incurred by the other party to
the arbitration.
8.9 STOCKHOLDERS' AGENT.
(a) By virtue of Company stockholders' approval of the Merger,
Xxxxx Xxxx shall be constituted and appointed as agent ("Stockholders' Agent")
and attorney-in-fact for and on behalf of the Former Company Stockholders to
give and receive notices and communications, to execute the Escrow Agreement to
authorize delivery to Parent of the Parent Common Stock or other property from
the Escrow Fund in satisfaction of claims by Parent or satisfy claims by Parent
with cash, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate
50
in the judgment of the Stockholders' Agent for the accomplishment of the
foregoing. Such agency may be changed by the holders of a majority in interest
of the Escrow Fund from time to time upon not less than 10 days' prior written
notice to Parent. The Stockholders' Agent may resign upon thirty (30) days
notice to the parties to this Agreement and the Former Company Stockholders. No
bond shall be required of the Stockholders' Agent, and the Stockholders' Agent
shall receive no compensation for his services. Notices or communications to or
from the Stockholders' Agent shall constitute notice to or from each of the
Former Company Stockholders.
(b) The Stockholders' Agent shall not be liable for any act done
or omitted hereunder as Stockholders' Agent while acting in good faith and in
the exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Former
Company Stockholders shall severally indemnify the Stockholders' Agent and hold
him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Stockholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
(c) The Stockholders' Agent shall have reasonable access to
information about the Surviving Corporation and the reasonable assistance of
Company's former officers and employees for purposes of performing its duties
and exercising its rights hereunder, provided that the Stockholders' Agent shall
treat confidentially and not disclose any nonpublic information from or about
Surviving Corporation to anyone (except on a need to know basis to individuals
who agree to treat such information confidentially).
(d) The Stockholders' Agent shall be entitled to a distribution
from the Escrow Fund equal to any such indemnity claim which has not been
satisfied; provided, however, that no such distribution shall be made until all
claims of Parent set forth in any Officer's Certificate delivered to the Escrow
Agent on or prior to the Termination Date have been resolved.
8.10 DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD. Within five (5)
business days following the Termination Date, the Escrow Agent shall deliver to
the Former Company Stockholders all of the Escrow Shares in the Escrow Fund in
excess of any amount of such Escrow Shares reasonably necessary to satisfy any
unsatisfied or disputed claims for Parent Damages specified in any Officer's
Certificate delivered to the Escrow Agent on or before the Termination Date and
any unsatisfied or disputed claims by the Stockholders' Agent under Section 8.9.
As soon as all such claims have been resolved, the Escrow Agent shall deliver to
the Former Company Stockholders all Escrow Shares remaining in the Escrow Fund
and not required to satisfy such claims. Deliveries of Escrow Shares to the
Former Company Stockholders pursuant to this section shall be made in proportion
to the allocation set forth in Section 8.3.
8.11 ACTIONS OF THE STOCKHOLDERS' AGENT. A decision, act, consent or
instruction of the Stockholders' Agent shall constitute a decision of all Former
Company Stockholders for whom shares of Parent Common Stock otherwise issuable
to them are deposited in the Escrow Fund and shall be final, binding and
conclusive upon each such Former Company Stockholder, and the Escrow Agent and
Parent may rely upon any decision, act, consent or
51
instruction of the Stockholders' Agent as being the decision, act, consent or
instruction of each and every such Former Company Stockholder. The Escrow Agent
and Parent are hereby relieved from any liability to any person for any acts
done by them in accordance with such decision, act, consent or instruction of
the Stockholders' Agent.
8.12 THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall promptly notify the Stockholders' Agent of such claim.
Parent shall have the right to settle any such claim with the written consent of
the Stockholders' Agent, which consent shall not be unreasonably withheld;
provided, however, that the Stockholders' Agent may, at his or her option,
direct the settlement negotiations other than for claims related to (i) the
Company Intellectual Property or (ii) disputes or disagreements with customers
of Parent or Company. In the event that the Stockholders' Agent consents to any
such settlement, neither the Former Company Stockholders nor the Stockholders'
Agent shall have any power or authority to object under Section 8.7 or any other
provision of this Agreement to the amount of any claim by Parent against the
Escrow Fund for indemnity with respect to such settlement (provided that the
Former Company Stockholders and the Stockholders' Agent shall not be precluded
from objecting that the claim is not the type of claim (but without objections
to the amount of the claim) for which Parent is entitled to indemnification from
the Escrow Fund). If any proceeding is commenced, or if any claim, demand or
assessment is asserted, in respect of which a claim for indemnification is or
might be made against the Escrow Fund based on matters other than (i) the
Company Intellectual Property or (ii) claims made by customers of Parent or
Company, the Stockholders' Agent may, at his or her option, contest or defend
any such action, proceeding, claim, demand or assessment, with counsel selected
by the Stockholders' Agent who is reasonably acceptable to Parent; provided,
however, that if Parent shall reasonably object to such control, then the
Stockholders' Agent and Parent shall cooperate in the defense of such matter;
provided further, that the Stockholders' Agent shall not admit any liability
with respect thereto or settle, compromise, pay or discharge the same without
the prior written consent of Parent, which consent shall not be unreasonably
withheld. With respect to any claim for indemnification based on matters
relating to the Company Intellectual Property, or customers of Company or
Parent, Parent shall have the option to defend any such proceeding with counsel
reasonably satisfactory to the Stockholders' Agent; provided, however, that
Parent shall not admit any liability with respect thereto or settle, compromise,
pay or discharge the same without the prior written consent of the Stockholders'
Agent, which consent shall not be unreasonably withheld. In the event that the
Stockholders' Agent consents to any such settlement, neither the Former Company
Stockholders nor the Stockholders' Agent shall have any power or authority to
object under Section 8.7 or any other provision of this Agreement to the amount
of any claim by Parent against the Escrow Fund for indemnity with respect to
such settlement (provided that the Former Company Stockholders and the
Stockholders' Agent shall not be precluded from objecting that the claim is not
the type of claim (but without objections to the amount of the claim) for which
Parent is entitled to indemnification from the Escrow Fund). The Stockholders'
Agent or Parent, whichever is not controlling the defense of any matter, shall
be entitled to participate in such defense, at Parent's or the Former Company
Stockholders' expense. Any costs of defense of third party claims up to $250,000
and fifty percent (50%) of the costs thereafter (including attorneys' fees),
incurred on behalf of the Stockholders' Agent or Former Company Stockholders
(calculated on a cumulative basis for all third party claims to which this
Section 8.12 applies) shall be submitted to the Escrow Agent and reimbursed with
shares from the Escrow Fund. For
52
the purpose of reimbursing such costs, the Parent Common Stock in the Escrow
Fund shall be valued at the average of the closing prices of Parent Common Stock
for the thirty (30) trading days prior to the date that an invoice for such
costs is sent to the Escrow Agent.
8.13 MAXIMUM LIABILITY AND REMEDIES. The rights of the Parent to make
claims upon the Escrow Fund in accordance with this Article VIII shall be the
sole and exclusive remedy of Parent and the Surviving Corporation after the
Effective Time with respect to any breach by Company of any representation,
warranty or pre-Closing covenant or agreement made by Company under this
Agreement and no current or former stockholder, optionholder, warrantholder,
director, officer, employee or agent of Company shall have any personal
liability to Parent or the Surviving Corporation after the Effective Time as a
result of such breach; provided, however, that nothing herein limits any
potential remedies of Parent or the Surviving Corporation, arising under
applicable state and federal laws with respect to any fraudulent breaches of the
representations, warranties or covenants of Company made in or pursuant to this
Agreement. Nothing in this Agreement shall limit the liability of any Principal
Stockholder in connection with any breach by such stockholder of the Stockholder
Agreement.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or three (3) days after being mailed by
registered or certified mail (return receipt requested) or one (1) day after
being sent via facsimile (with confirmation of receipt) to the parties at the
following address (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Merger Sub, to:
Ariba, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer and Chief Financial Officer
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
53
(b) if to Company, to:
XxxxxxxxXxxxxx.xxx, Inc.
00 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
(c) if to Stockholders' Agent, to:
Xxxxx Xxxx
Fenway Partners
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX
Facsimile No.: (000) 000-0000
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
9.2 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit 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." In this Agreement, any reference to any event, change, condition
or effect being "material" with respect to any entity or group of entities
means any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations or results of operations of such
entity or group of entities. 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 is materially adverse to the condition
(financial or otherwise but excluding prospects), properties, assets
(including intangible assets), liabilities, business, operations or results
of operations of such entity and its subsidiaries, taken as a whole,
including any event that is materially adverse to such business by harming
the reputation of such entity or group of entities.
54
In this Agreement, any reference to a party's "knowledge" means (i) if such
party is an individual, the actual knowledge of such party, (ii) if such party
is a corporation, the actual knowledge of the directors, officers and other
individuals that have a similar position or have similar powers and duties as
the officers, and directors of such party (but excluding, in the case of
Company, Xxxxx Xxxxxxx, Xxxxxx Xxxxxxx and Xxxxxx Xxxxxx) and (iii) if such
party is another entity, the actual knowledge of the individuals that have
similar positions, powers or responsibilities as officers and/or directors of a
corporation. The phrase "made 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 June __, 2000. The term "Affiliate"
of a specified person means a person who directly or indirectly through one or
more intermediaries controls, is controlled by, or is under common control with
such specified person. The term "control" (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise. 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 one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
the other Transaction Documents and the documents and instruments and other
agreements specifically referred to herein or delivered pursuant hereto,
including the Exhibits, the Schedules, including the Company Disclosure
Letter and the Parent Disclosure Letter (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 and (b) are not intended to confer upon any other person any rights or
remedies hereunder, except for the rights of the holders of Company Capital
Stock, Company Options, Company Warrants and Other Company Stock Rights to
receive (a) the consideration set forth in Article I of this Agreement and
(b) indemnification as set forth in Article VIII of this Agreement.
9.5 SEVERABILITY. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
55
9.6 REMEDIES CUMULATIVE. Except to the extent that the Escrow is sole
remedy a Parent and the Surviving Corporation for breaches of representations,
warranties, agreements and covenants of the Company (subject to an in accordance
with Article VIII), 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 shall be governed by and construed
in accordance with the laws of the State of California without regard to
applicable principles of conflicts of law. Except as provided in Article VIII,
each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any court located within the State of California, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of California for such persons and waives and covenants not to
assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
9.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
9.9 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.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]
56
IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
ARIBA, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Print Name: Xxxxxx X. Xxxxxx
---------------------------------
Title: Chief Financial Officer, Executive
Vice-President-Finance, and
Administration and Secretary
(Principal Financial and Accounting
Officer)
--------------------------------------
XXXXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxxxx Xxxxxxxxx
------------------------------------------
Xxxxxxxx Xxxxxxxxx
Chief Executive Officer
XXX MERGER CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Print Name: Xxxxxx X. Xxxxxx
----------------------------------
Title: President
---------------------------------------
SIGNATURE PAGE
AGREEMENT AND PLAN OF REORGANIZATION
Appendix I
Glossary
Additional Employees.............................................. 5.28
Additional Parent Shares.......................................... 1.9
Agreement......................................................... Preamble
Antitrust Laws.................................................... 5.7(b)
Application....................................................... 5.2(a)
Arbitrator........................................................ 8.8(b)
Basket Amount..................................................... 8.4
California Law.................................................... 5.2(a)
CERCLA............................................................ 2.13
Certificate of Merger............................................. 1.1
Certificates...................................................... 1.8(c)
Closing........................................................... 1.2
Closing Date...................................................... 1.2
COBRA............................................................. 2.15(a)(C)
Code.............................................................. Recital
Company........................................................... Preamble
Company Authorizations............................................ 2.10
Company Balance Sheet............................................. 2.6
Company Balance Sheet Date........................................ 2.5
Company Bylaws.................................................... 2.3(b)
Company Capital Stock............................................. Recital
Company Certificate............................................... 2.3(b)
Company Common Stock.............................................. 2.2
Company Confidential Information.................................. 2.12(d)
Company Disclosure Letter......................................... Article II
Company Financial Advisory Cash Fees 2.29
Company Financial Advisory Fee Shares............................. 2.29
Company Financial Advisory Fees................................... 2.29
Company Intellectual Property..................................... 2.12(a)
Company Options................................................... 1.6
Company Preferred Stock........................................... 2.2
Company Professional Fees......................................... 2.29
Company Stock Option Plan......................................... 1.6(c)
Company Stockholders Consent...................................... 5.3
Company Stockholders Meeting...................................... 5.3
Company Warrants.................................................. 1.6
Confidentiality Agreement......................................... 5.5
Damages........................................................... 8.2(a)
Deductible Amount................................................. 8.4
Delaware Law...................................................... 1.1
Department........................................................ 5.2(a)
A-1
Determination Price............................................... 8.6(b)
Dissenting Shares................................................. 1.10
DOJ............................................................... 5.20
Effective Date.................................................... 1.2
Effective Time.................................................... 1.2
Employee Obligation............................................... 2.16(j)
Environmental Laws................................................ 2.13
ERISA............................................................. 2.15(a)(A)
ERISA Affiliate................................................... 2.15(a)
Escrow Agent...................................................... 8.3
Escrow Agreement.................................................. 5.13
Escrow Fund....................................................... 8.3
Escrow Shares..................................................... 1.11(c)
Exchange Act...................................................... 2.24(f)
Exchange Agent.................................................... 1.11(a)
Exchange Ratio.................................................... 1.6(a)
Expense Deductions................................................ 1.6
Financial Statements.............................................. 2.4
Former Company Stockholders....................................... 8.1
Founder........................................................... Recital
Founders.......................................................... Recital
FTC............................................................... 5.20
GAAP.............................................................. 2.4
Governmental Entity............................................... 2.3(c)
Hearing........................................................... 5.2(a)
HSR............................................................... 2.3(c)
Information Statement............................................. 5.2(c)
Infringement...................................................... 2.12(a)
Intellectual Property............................................. 2.12(a)
Inventions........................................................ 2.12(a)
IP Rights......................................................... 2.12(a)
IRCA.............................................................. 2.16(f)
Key Company Employee.............................................. 5.9
Marketplace....................................................... 2.22
Marks............................................................. 2.12(a)
Material Contracts................................................ 2.24
Merger............................................................ Recital
Merger Sub........................................................ Preamble
Merger Sub Common Stock........................................... 1.6(f)
NonCompetition Agreement.......................................... 5.9
Officer's Certificate............................................. 8.6(a)
Option Schedule................................................... 5.12
Order............................................................. 5.7(b)
Other Company Stock Rights........................................ 1.6
Outstanding Company Shares........................................ 1.9
Parachute Damages................................................. 5.17
A-2
Parent............................................................ Preamble
Parent Common Stock............................................... Recital
Parent Damages.................................................... 8.2(a)
Parent Disclosure Letter.......................................... Article III
Parent Financial Statements....................................... 3.4
Parent Preferred Stock............................................ 3.2
Parent SEC Documents.............................................. 3.4
Parent Significant Subsidiary..................................... 3.1
Permit............................................................ 5.2(a)
Plans............................................................. 2.15(a)
Registration Statement............................................ 5.2(g)
RCRA.............................................................. 2.13
Series A Preferred................................................ 2.2
Series B Preferred................................................ 2.2
Source Materials.................................................. 2.24(m)
Stockholder Agreement............................................. 2.30
Stockholders Agent................................................ 8.9
Surviving Corporation............................................. 1.1
Takeover Proposal................................................. 5.1(a)
Tax............................................................... 2.14(c)
Tax Authority..................................................... 2.14(c)
Tax Returns....................................................... 2.14(a)
Termination Date.................................................. 8.5
Total Parent Shares............................................... 1.6
Transaction Documents............................................. 2.3(a)
Used.............................................................. 2.12(a)
A-3
AMENDMENT NO. 1 OF THE
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 1 OF THE AGREEMENT AND PLAN OF REORGANIZATION
("Amendment") is entered into as of June 29th, 2000, by and among Ariba, Inc., a
Delaware corporation ("Parent"), Xxx Merger Corporation, a Delaware corporation
("Merger Sub"), and XxxxxxxxXxxxxx.xxx, Inc., a Delaware corporation
("Company"). Capitalized terms not otherwise defined in this Amendment have the
meaning given them in the Agreement and Plan of Reorganization, dated June 21,
2000, by and among Parent, Merger Sub and Company (the "Agreement").
RECITALS
A. Pursuant to Section 7.4 of the Agreement, the Agreement may be
amended at any time prior adoption of the Agreement by the stockholders of
Company by execution of an instrument in writing signed by Parent and Company.
B. Parent, Merger Sub and Company desire to amend certain provisions of
the Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, Parent, Merger Sub and Company hereby agree as follows:
1. Pursuant to Section 7.4 of the Agreement, the first paragraph of
Section 5.12 of the Agreement is hereby amended and restated in its entirety to
read as follows:
STOCK OPTIONS. At the Effective Time, the Company Stock Option Plan and
each outstanding option to purchase shares of Company Common Stock under
the Company Stock Option Plan, whether vested or unvested, shall be assumed
by Parent. In addition, Company's rights to repurchase shares of Company
Common Stock under the Company Stock Option Plan or otherwise shall be
assigned to, and assumed by, Parent. Company has delivered to Parent a
schedule (the "Option Schedule") which sets forth a true and complete list
as of the date hereof of all holders of outstanding options under the
Company Stock Option Plan including the number of shares of Company Capital
Stock subject to each such option, the exercise or vesting schedule, the
exercise price per share and the term of each such option. On the Closing
Date, Company shall deliver to Parent an updated Option Schedule current as
of such date. Each such option so assumed by Parent under this Agreement
shall continue to have, and be subject to, the same terms and conditions
set forth in the Company Stock Option Plan and the Stock Option Grant
Agreement applicable to each grant immediately prior to the Effective Time,
except that (i) such option shall be exercisable for that number of whole
shares of Parent Common Stock equal to the product of the number of shares
of Company Common Stock that were issuable upon exercise of such option
without regard to vesting restrictions immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounded down to the nearest whole
number of shares of Parent Common Stock, and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed option shall be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
2. Pursuant to Section 7.4 of the Agreement, Section 1.6(a) of the
Agreement is hereby amended and restated in its entirety to read as follows:
(a) CONVERSION OF COMPANY COMMON STOCK/EXCHANGE RATIO. Each share of
Company Common Stock outstanding immediately prior to the Effective
Time shall be exchanged into the number of shares of Parent Common
Stock determined by dividing (i) the Total Parent Shares less the
Additional Parent Shares by (ii) the Outstanding Company Shares,
rounded to eight decimal points (the "Exchange Ratio").
3. Pursuant to Section 7.4 of the Agreement, Section 1.11(c) of the
Agreement is hereby amended and restated in its entirety to read as follows:
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent shall
cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock,
whose shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have
such other customary provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock. In addition Parent shall cause to be mailed to Broadview
International LLC ("Broadview") a Certificate for the Company Financial
Advisory Fee Shares in accordance with instructions provided to Parent
by Broadview which are reasonably acceptable to Parent. Upon surrender
of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common
Stock which such holder has the right to receive pursuant to Section
1.6, less the number of shares of Parent Common Stock to be deposited
in the Escrow Fund on such holder's behalf pursuant to Article VIII
hereof, and the Certificate so surrendered shall forthwith be canceled.
Until so surrendered, each outstanding Certificate that, prior to the
Effective Time,
2
represented shares of Company Capital Stock will be deemed from and
after the Effective Time, for all corporate purposes, other than the
payment of dividends, to evidence the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Capital
Stock shall have been so converted. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of
Section 8.3 hereof, Parent shall cause to be delivered to the Escrow
Agent (as defined in Section 8.3 hereof) a certificate or certificates
representing ten percent (10%) of the amount equal to (i) Total Parent
Shares less (ii) the Additional Parent Shares ("Escrow Shares") which
shall be registered in the name of the Escrow Agent as nominee for the
holders of Certificates cancelled pursuant to this Section 1.11. The
Escrow Shares shall be comprised entirely of Shares of Parent Common
Stock that are not subject to any vesting restriction or repurchase
right. The entire portion of Escrow Shares shall be contributed in
respect of Total Parent Shares less the Additional Parent Shares
issuable to Former Company Stockholders pursuant to Section 1.6(a)
other than (A) such stockholders who acquired all of his or her shares
of Company Capital Stock via exercise of employee stock options issued
by Company and (B) the stockholder other than the Founders, who is an
employee of the Company and acquired all of his shares of Company
Capital stock via a restricted stock grant by the Company. Such shares
shall be beneficially owned by such holders and shall be held in escrow
and shall be available to compensate Parent for certain damages as
provided in Article VIII. The Escrow Shares will appear as issued and
outstanding on Parent's balance sheet and will be legally outstanding
under applicable state law. All dividends paid on Escrow Shares
(excluding any shares of Parent Capital Stock paid in connection with a
stock split or stock dividend) will be distributed currently to each of
the exchanging Former Company Stockholders, and all voting rights of
the Escrow Shares will be exercisable by or on behalf of each such
Former Company Stockholder. To the extent not used for such purposes,
such shares shall be released, all as provided in Article VIII hereof.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5. This Amendment when executed by Parent, Merger Sub and Company as of
the date hereof shall have been effected in accordance with Section 7.4 of the
Agreement and accordingly shall be binding upon each such party.
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of California without regard to applicable principles of
conflicts of law.
3
7. The Agreement and this Amendment and the documents referred to
therein and herein constitute the entire agreement between the parties hereto
pertaining to the subject matter thereof and hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
ARIBA, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Print Name: Xxxxxx X. Xxxxxx
---------------------------------
Title: Chief Financial Officer, Executive
Vice-President--Finance, and
Administration and Secretary
(Principal Financial and Accounting
Officer)
--------------------------------------
XXXXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxxxx Xxxxxxxxx
------------------------------------------
Xxxxxxxx Xxxxxxxxx
Chief Executive Officer
XXX MERGER CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx
President
SIGNATURE PAGE TO AMENDMENT NO. 1 OF THE
AGREEMENT AND PLAN OF REORGANIZATION
AMENDMENT NO. 2 OF THE
AGREEMENT AND PLAN OF REORGANIZATION
AND WAIVER
THIS AMENDMENT NO. 2 OF THE AGREEMENT AND PLAN OF REORGANIZATION
AND WAIVER (this "Amendment") is entered into as of July 28, 2000, by and among
Ariba, Inc., a Delaware corporation ("Parent"), Xxx Merger Corporation, a
Delaware corporation ("Merger Sub"), and XxxxxxxxXxxxxx.xxx, Inc., a Delaware
corporation ("Company"). Capitalized terms not otherwise defined in this
Amendment have the meaning given them in the Agreement and Plan of
Reorganization, dated June 21, 2000, as amended and in effect by and among
Parent, Merger Sub and Company (the "Agreement").
RECITALS
A. Pursuant to Section 7.4 of the Agreement, the Agreement may be
amended at any time prior adoption of the Agreement by the stockholders of
Company by execution of an instrument in writing signed by Parent and Company.
B. Parent, Merger Sub and Company desire to amend certain
provisions of the Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, Parent, Merger Sub and Company hereby agree as
follows:
1. Pursuant to Section 7.4 of the Agreement, Section 1.4(a) of the
Agreement is hereby amended and restated in its entirety to read as follows:
"At the Effective Time, the Certificate of Incorporation of the
Surviving Corporation, as in effect immediately prior to the Effective
Time, shall be amended and restated in the form attached hereto as
Exhibit I to this Agreement until thereafter amended as provided by
Delaware Law and such certificate."
2. Pursuant to Section 7.4 of the Agreement, the second sentence
of Section 1.11(c) of the Agreement is hereby amended and restated in its
entirety to read as follows:
"In addition Parent shall cause to be mailed to (i) Broadview
International LLC ("Broadview") a Certificate for its share of the
Company Financial Advisory Fee Shares (as described in Amended Schedule
2.29(a)) in accordance with instructions provided to Parent by
Broadview which are reasonably acceptable to Parent, and (ii) Credit
Suisse First Boston Corporation ("CSFB") a Certificate for its share of
the Company Financial Advisory Fee Shares (as described in Amended
Schedule 2.29(a)) in accordance with instructions provided to Parent by
CSFB which are reasonably acceptable to Parent. "
3. Pursuant to Section 7.4 of the Agreement, the first sentence of
Section 2.29 of the Agreement is hereby amended and restated in its entirety to
read as follows:
"All financial advisory and investment banking fees and expenses that
have been or may be incurred by Company in connection with the
negotiation and effectuation of the terms and conditions of this
Agreement (the "Company Financial Advisory Fees") are set forth on
Amended SCHEDULE 2.29(a), consisting of fees payable to Broadview in
Parent Shares and fees payable to CSFB in Parent Shares (collectively,
the "Company Financial Advisory Fee Shares") and fees payable to
Broadview in cash ("Company Financial Advisory Cash Fees")."
4. Section 2.20 of the Company Disclosure Letter is hereby amended
and restated in its entirety to read as follows:
"Company owes fees in connection with this agreement to Xxxxxxxxx.xxx,
Inc. for investment banking services. Company has agreed to pay a
financial advisory fee to Credit Suisse First Boston Corporation in
connection with the transaction contemplated by this agreement. See
Amended Schedule 2.29(a) for the amount of these fees."
5. Pursuant to Section 7.4 of the Agreement, the first sentence of
Section 5.2(g) of the Agreement is hereby amended and restated in its entirety
to read as follows:
"In the event that, (i) within forty (40) days after the date hereof
the Department has not scheduled a date for the Hearing or (ii) the
Hearing has not been held and concluded and the Permit has not been
issued by the Department on or within sixty-one (61) days after the
date hereof, then, in each case at the Company's election, Parent shall
immediately commence efforts to prepare with the cooperation of
Company, and file, with the SEC a registration statement of Form S-4
(as amended and supplemented, the "Registration Statement") in which
the Information Statement shall be included as part of a prospectus, in
connection with the registration under the Securities Act of the shares
of Parent Common Stock to be issued to the stockholders of the Company
pursuant to the Merger."
6. Pursuant to Section 7.4 of the Agreement, the fourth sentence
of Section 5.2(i) of the Agreement is hereby amended and restated in its
entirety to read as follows:
"The Information Statement or other written materials sent to the
Company stockholders for soliciting their approval of the Merger and
this Agreement shall contain the recommendation of the Board of
Directors of the Company that the Company stockholders approve the
Merger and this Agreement and the conclusion on the Board of Directors
that the terms and conditions of the Merger are advisable and fair and
reasonable to the shareholders of the Company."
7. Pursuant to Section 7.4 of the Agreement, the second sentence
of Section 8.3 of the Agreement is hereby amended and restated in its entirety
to read as follows:
"The Escrow Fund shall be allocated in whole numbers of Escrow Shares
among the Former Company Stockholders pursuant to Section 1.6(a), other
than (A) such stockholders who acquired all of his or her shares of
Company Capital Stock via exercise of employee stock options issued by
Company and (B) the stockholder other than the
2
Founders, who is an employee of the Company and acquired all of his
shares of Company Capital stock via a restricted stock grant by the
Company, on a pro-rata basis in accordance with the number of shares of
Company Capital Stock held by such Former Company Stockholders
immediately prior to the Effective Time (excluding for purposes of this
calculation any Dissenting Shares)."
8. WAIVER AND ACKNOWLEDGMENT. Section 4.1(c) of the Agreement
provides that prior to the Closing, the Company may not enter into any material
agreements. In return for advisory services rendered to the Company, the Company
proposes to enter into a letter of engagement (the "CSFB ENGAGEMENT LETTER")
with Credit Suisse First Boston in the Form of EXHIBIT A for the payment of a
transaction upon the consummation of the Merger. Parent hereby waives the
following in connection with or as a result of the entering into the CSFB
Engagement Letter by Company:
a) Any failure of any condition outlined in Section 6.3 of the
Agreement;
b) Any right of Parent to terminate the Agreement prior to the
Effective Time pursuant to Section 7.1 of the Agreement; and
c) Any Parent Damages or right to indemnification pursuant to Article
VIII of the Merger Agreement, PROVIDED, HOWEVER, the Company
hereby acknowledges that the fee payable under the CSFB Engagement
Letter shall be considered part of the Company Financial Advisory
Fee Shares.
Each of Parent and Merger Sub agree and acknowledge that it has
received adequate written notice of the entering into the CSFB Engagement Letter
to the extent the Company is required to provide such notice under the
Agreement.
9. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10. This Amendment when executed by Parent, Merger Sub and Company
as of the date hereof shall have been effected in accordance with Section 7.4 of
the Agreement and accordingly shall be binding upon each such party.
11. This Amendment shall be governed by and construed in
accordance with the laws of the State of California without regard to applicable
principles of conflicts of law.
12. The Agreement and this Amendment and the documents referred to
therein and herein constitute the entire agreement between the parties hereto
pertaining to the subject matter thereof and hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
3
[Signature Page to Amendment No. 2 to Merger Agreement]
IN WITNESS WHEREOF, Parent, Merger Sub and Company have caused this
Amendment to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
ARIBA, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Print Name: Xxxxxx X. Xxxxxx
---------------------------------
Title: Chief Financial Officer, Executive
Vice-President--Finance, and
Administration and Secretary
(Principal Financial and Accounting
Officer)
--------------------------------------
XXXXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------------
Xxxx Xxxxxx
Chairman, President, Secretary
and Director
XXX MERGER CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Print Name: Xxxxxx X. Xxxxxx
Title: President
