Exhibit 2.1
EXHIBIT 2.1 -- MERGER AGREEMENT
AGREEMENT
and
PLAN OF REORGANIZATION AND MERGER
by and among
TUMBLEWEED COMMUNICATIONS CORP.,
VELOCITY ACQUISITION SUB, INC.
and
VALICERT, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I MERGER..................................................................................................2
Section 1.1 The Merger...................................................................................2
Section 1.2 Effective Time...............................................................................2
Section 1.3 Closing......................................................................................2
Section 1.4 Directors and Officers of the Surviving Corporation..........................................3
ARTICLE II CONVERSION OF SHARES...................................................................................3
Section 2.1 Conversion of Shares.........................................................................3
Section 2.2 Surrender of Certificates....................................................................3
Section 2.3 No Fractional Shares.........................................................................4
Section 2.4 No Dividends.................................................................................4
Section 2.5 Return to Parent.............................................................................5
Section 2.6 Company Option Plans.........................................................................5
Section 2.7 Company Warrants.............................................................................6
Section 2.8 Stock Transfer Books.........................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY.............................................................7
Section 3.1 Organization.................................................................................7
Section 3.2 Capitalization...............................................................................8
Section 3.3 Authorization; Validity of Agreement; Company Action.........................................9
Section 3.4 Consents and Approvals; No Violations.......................................................10
Section 3.5 SEC Reports and Financial Statements........................................................10
Section 3.6 Absence of Certain Changes..................................................................11
Section 3.7 No Undisclosed Liabilities..................................................................11
Section 3.8 Information in Proxy Statement/Prospectus...................................................12
Section 3.9 Employee Benefit Matters....................................................................12
Section 3.10 Litigation; Compliance with Law.............................................................14
Section 3.11 No Default..................................................................................14
Section 3.12 Taxes.......................................................................................15
Section 3.13 Contracts...................................................................................16
Section 3.14 Assets; Real Property.......................................................................16
Section 3.15 Environmental Matters.......................................................................17
Section 3.16 Product Liability...........................................................................17
Section 3.17 Intellectual Property.......................................................................18
Section 3.18 Proprietary Rights and Confidentiality Agreements; Consulting Agreements....................20
Section 3.19 Insurance...................................................................................20
Section 3.20 Suppliers and Customers.....................................................................20
Section 3.21 Labor Matters...............................................................................21
Section 3.22 Accounts Receivable; Inventory..............................................................22
Section 3.23 Transactions with Affiliates................................................................22
Section 3.24 Opinion of Financial Advisor................................................................22
Section 3.25 Brokers or Finders..........................................................................22
Section 3.26 Tax Matters.................................................................................23
Section 3.27 State Takeover Statutes.....................................................................23
Section 3.28 Key Employee Compensation...................................................................23
Section 3.29 Option Liability............................................................................23
Section 3.30 Full Disclosure.............................................................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB......................................................24
Section 4.1 Organization................................................................................24
Section 4.2 Capitalization..............................................................................24
Section 4.3 Authorization; Validity of Agreement; Company Action........................................25
Section 4.4 Consents and Approvals; No Violations.......................................................25
Section 4.5 Information in Proxy Statement/Prospectus...................................................26
Section 4.6 SEC Reports and Financial Statements........................................................26
Section 4.7 Absence of Certain Changes..................................................................27
Section 4.8 No Undisclosed Liabilities..................................................................27
Section 4.9 Litigation; Compliance with Law.............................................................27
Section 4.10 Brokers or Finders..........................................................................28
Section 4.11 Taxes.......................................................................................28
Section 4.12 Tax Matters.................................................................................29
Section 4.13 Operations of Sub...........................................................................29
Section 4.14 Full Disclosure.............................................................................29
ARTICLE V COVENANTS..............................................................................................29
Section 5.1 Interim Operations of the Company...........................................................29
Section 5.2 Interim Operations of Parent................................................................32
Section 5.3 Access to Information.......................................................................33
Section 5.4 Consents and Approvals......................................................................33
Section 5.5 Employment Agreements.......................................................................34
Section 5.6 No Solicitation by the Company..............................................................34
Section 5.7 Stockholders' Meeting.......................................................................36
Section 5.8 Proxy Statement/Prospectus; Registration Statement..........................................36
Section 5.9 Additional Agreements.......................................................................37
Section 5.10 Publicity...................................................................................37
Section 5.11 Notification of Certain Matters.............................................................38
Section 5.12 Directors' and Officers' Insurance and Indemnification......................................38
Section 5.13 Affiliate Agreements........................................................................39
Section 5.14 Cooperation.................................................................................39
Section 5.15 Plan of Reorganization......................................................................40
Section 5.16 Consents of Accountants.....................................................................40
Section 5.17 Commercially Reasonable Efforts and Further Assurances......................................41
Section 5.18 Nasdaq Qualification........................................................................41
Section 5.19 Employee Plans and Arrangements.............................................................41
Section 5.20 Grant of New Options........................................................................42
Section 5.21 Payroll Tax Matters.........................................................................42
Section 5.22 Netherlands Lease...........................................................................42
Section 5.23 Reseller Practices..........................................................................42
Section 5.24 Rescission Offer............................................................................43
Section 5.25 Board of Directors..........................................................................43
ARTICLE VI CONDITIONS............................................................................................43
Section 6.1 Conditions to the Obligations of Each Party.................................................43
Section 6.2 Conditions to the Obligations of Parent and Sub.............................................44
Section 6.3 Conditions to the Obligations of the Company................................................45
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER....................................................................46
Section 7.1 Termination.................................................................................46
Section 7.2 Effect of Termination.......................................................................47
Section 7.3 Amendment...................................................................................48
Section 7.4 Extension; Waiver...........................................................................48
ARTICLE VIII MISCELLANEOUS.......................................................................................48
Section 8.1 Fees and Expenses...........................................................................48
Section 8.2 Nonsurvival of Representations and Warranties...............................................49
Section 8.3 Notices.....................................................................................49
Section 8.4 Interpretation..............................................................................50
Section 8.5 Counterparts................................................................................50
Section 8.6 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.........................50
Section 8.7 Severability................................................................................50
Section 8.8 Governing Law...............................................................................51
Section 8.9 Assignment..................................................................................51
EXHIBITS
--------
A Form of Company Voting Agreement
B Form of Employment Agreements
B-1 Form of Non-Competition Agreement
C Form of Parent Voting Agreement
D Form of Certificate of Merger
E Form of Affiliate Agreement
F-1 Form of Xxxx Xxxx Xxxx & Freidenrich LLP Opinion
F-2 Form of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP Opinion
SCHEDULES
---------
A Company Voting Agreement Signatories
B Company Employees Entering into Employment Agreements
C Parent Voting Agreement Signatories
INDEX OF DEFINED TERMS
Section
-------
Acquisition Agreement...............................................................................5.6(b)
Affected Payroll Items..............................................................................5.21
Agreement...........................................................................................Preamble
Alternative Transaction.............................................................................5.6(a)
Ancillary Agreements................................................................................Recitals
Assertion...........................................................................................5.12(a)
Assumed Company Option Plans........................................................................2.6
Audit...............................................................................................3.12(l)
Certificate of Merger...............................................................................1.2
Certificates........................................................................................2.1(d)
Closing.............................................................................................1.3
Closing Date........................................................................................1.3
Code................................................................................................Recitals
Company.............................................................................................Preamble
Company Agreement...................................................................................3.4
Company Balance Sheet...............................................................................3.22
Company Benefit Plans...............................................................................3.9(a)
Company Board.......................................................................................3.3(b)
Company Common Stock................................................................................2.1(a)
Company Designee....................................................................................5.24(a)
Company Disclosure Schedule.........................................................................Article III
Company Financial Statements........................................................................3.5
Company License Agreements..........................................................................3.17(b)
Company Options.....................................................................................2.6
Company Option Plans................................................................................2.6
Company Reseller....................................................................................5.23
Company SEC Documents...............................................................................3.5
Company Special Meeting.............................................................................5.7(a)
Company Stockholder Approval........................................................................3.3(a)
Company Stockholders Agreements.....................................................................Recitals
Company Warrants ...................................................................................2.7
Confidentiality Agreement...........................................................................5.3
Corporations Code...................................................................................5.24
Consulting Agreement ...............................................................................3.18
Continuing Employees................................................................................5.20
DGCL................................................................................................1.1
Effective Time......................................................................................1.2
Employment Agreements...............................................................................Recitals
Environmental Claims................................................................................3.15(b)
Environmental Laws..................................................................................3.15(a)
ERISA...............................................................................................3.9(a)
ERISA Affiliate.....................................................................................3.9(a)
ESPP................................................................................................2.6
ESPP Date...........................................................................................2.6
Exchange Act........................................................................................3.4
Exchange Agent......................................................................................2.2
Exchange Ratio......................................................................................2.1(a)
GAAP................................................................................................3.5
Governmental Entity.................................................................................3.4
Xxxx Xxxx...........................................................................................5.15(b)
HMO.................................................................................................3.9(d)
Indemnified Liability...............................................................................5.12(a)
Indemnified Parties.................................................................................5.12(a)
Indemnified Party...................................................................................5.12(a)
Indemnitors.........................................................................................5.12(a)
Intellectual Property...............................................................................3.17(a)
IRS.................................................................................................3.9(a)
Liens...............................................................................................3.2(c)
material adverse effect.............................................................................3.1
Materials of Environmental Concern..................................................................3.15(a)
Merger..............................................................................................1.1
Merger Consideration................................................................................2.1(a)
Merger Filing.......................................................................................1.2
Netherlands Lease...................................................................................5.22
Non-Competition Agreements..........................................................................Recitals
Parent..............................................................................................Preamble
Parent Board........................................................................................5.7(b)
Parent Common Stock.................................................................................2.1(a)
Parent Disclosure Schedule..........................................................................Article IV
Parent Preferred Stock..............................................................................4.2(a)
Parent Registration Statement.......................................................................5.8(a)
Parent SEC Documents................................................................................4.6
Parent Special Meeting..............................................................................5.7(b)
Parent Stockholder Approval.........................................................................4.3(a)
Parent Stockholders Agreements......................................................................Recitals
Proprietary Rights and Confidentiality Agreement ...................................................3.18
Proxy Statement/Prospectus..........................................................................5.8(a)
Real Property.......................................................................................3.14
Recipient Parties...................................................................................5.3
Representatives.....................................................................................5.3
Requisite Regulatory Approvals......................................................................5.4
Restraints..........................................................................................6.1(c)
Rights..............................................................................................3.2(b)
SEC.................................................................................................3.5
Secretary of State..................................................................................1.2
Securities Act......................................................................................3.5
Skadden, Arps.......................................................................................5.15(b)
Software............................................................................................3.17(a)
SoundView...........................................................................................3.24
Special Meetings....................................................................................5.7(b)
Sub.................................................................................................Preamble
Subsequent Determination............................................................................5.6(b)
Subsidiary..........................................................................................3.1
Superior Proposal...................................................................................5.6(b)
Surviving Corporation...............................................................................1.1
Tax ................................................................................................3.12(l)
Tax Authority.......................................................................................3.12(l)
Tax Returns.........................................................................................3.12(l)
Taxes...............................................................................................3.12(l)
Third Party.........................................................................................5.6(a)
Third Party Expenses................................................................................8.1
Trade Secrets.......................................................................................3.17(a)
Trademarks..........................................................................................3.17(a)
WARN................................................................................................3.21(b)
Written Offer.......................................................................................5.24
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
-----------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (this "Agreement"),
dated as of February 18, 2003, by and among Tumbleweed Communications Corp., a
Delaware corporation ("Parent"), Velocity Acquisition Sub, Inc., a Delaware
corporation and a direct wholly-owned subsidiary of Parent ("Sub"), and
Valicert, Inc., a Delaware corporation (the "Company").
WITNESSETH:
-----------
WHEREAS, the Boards of Directors of Parent and Sub have approved, and
deem it advisable and in the best interests of their respective stockholders
to consummate, a strategic business combination between the Company and Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company, having determined
that such combination is desirable, has approved the transactions contemplated
by this Agreement and the Ancillary Agreements (as defined below);
WHEREAS, as a condition and inducement to Parent's and Sub's
willingness to enter into this Agreement and incur the obligations set forth
herein, concurrently with the execution and delivery of this Agreement, (i)
Parent and certain stockholders of the Company identified on Schedule A hereto
have entered into a voting and lock-up agreement in the form of Exhibit A
hereto (the "Company Stockholders Agreements"), pursuant to which, among other
things, such stockholders agree to vote in favor of approval and adoption of
this Agreement and to restrict transfer or disposition of shares of Parent
Common Stock (as defined in Section 2.1(a) hereof) receivable under this
Agreement, subject and pursuant to the terms therein; and (ii) Parent and
certain key employees of the Company identified in Schedule B hereto have
entered into employment agreements (the "Employment Agreements") in the forms
of Exhibit B hereto, in each case, on terms proposed by Parent, the
effectiveness of which are conditioned upon the consummation of the
transactions contemplated hereby, and three of such key employees have entered
into a non-competition agreement with the Company (the "Non-Competition
Agreements"), on terms proposed by Parent, in the form of Exhibit B-1 hereto,
the effectiveness of which is conditioned upon the consummation of the
transaction contemplated hereby;
WHEREAS, as a condition and inducement to the Company's willingness
to enter into this Agreement and incur the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, (i) the
Company and certain stockholders of Parent identified in Schedule C hereto
have entered into a voting agreement in the form of Exhibit C hereto (the
"Parent Stockholders Agreements"), pursuant to which, among other things, such
stockholders agree to vote in favor of approval and adoption of this Agreement
(the Company Stockholders Agreements, the Parent Stockholders Agreements, the
Non-Competition Agreement and the Employment Agreements are collectively
referred to herein as the "Ancillary Agreements"); and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger (as defined in Section 1.1 hereof) shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
(the "Code"), and this Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements, and other good and
valuable consideration, set forth herein and in the Ancillary Agreements, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), the
Company and Sub shall consummate a merger (the "Merger") pursuant to which (a)
Sub shall be merged with and into the Company and the separate corporate
existence of Sub shall thereupon cease, (b) the Company shall be the successor
or surviving corporation (the "Surviving Corporation") in the Merger and shall
continue to be governed by the laws of the State of Delaware and (c) the
separate corporate existence of the Company, with all its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the Merger.
Pursuant to the Merger, (a) the Certificate of Incorporation of Sub,
as in effect immediately prior to the Effective Time (as defined in Section
1.2 hereof), shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate
of Incorporation, and (b) the By-laws of Sub, as in effect immediately prior
to the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, such Certificate of Incorporation and
such By-laws. The Merger shall have the effects set forth in the Delaware
General Corporation Law (the "DGCL").
Section 1.2 Effective Time. Parent, Sub and the Company will cause a
certificate of merger (the "Certificate of Merger") in the form of Exhibit D
hereto, to be filed on the Closing Date (as defined in Section 1.3 hereof), or
on such other date as Parent and the Company may agree, with the Secretary of
State of the State of Delaware (the "Secretary of State") as provided in the
DGCL. The Merger shall become effective on the date on which the Certificate
of Merger pursuant to Section 251 of the DGCL and any other documents
necessary to effect the Merger in accordance with the DGCL are duly filed with
the Secretary of State (the "Merger Filing") or such time as is agreed upon by
the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
Section 1.3 Closing. The closing of the Merger (the "Closing") will
take place at 8:00 a.m., local time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000
Xxxxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or such other date or place as
agreed to in writing by the parties hereto.
Section 1.4 Directors and Officers of the Surviving Corporation. The
directors and officers of the Sub at the Effective Time shall, from and after
the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares.
(a) Each share of common stock, $.001 par value per share (the
"Company Common Stock"), of the Company issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled pursuant to
Section 2.1(c) hereof) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive .385
(the "Exchange Ratio") of a fully paid and nonassessable share (the "Merger
Consideration") of common stock, par value $.001 per share, of Parent (the
"Parent Common Stock").
(b) Each share of common stock, par value $.001 per share, of
Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Parent, be
converted into one fully paid and nonassessable share of common stock, $.001
par value per share, of the Surviving Corporation.
(c) Any shares of Company Common Stock that are owned by Parent,
Sub or any other wholly owned Subsidiary (as defined in Section 3.1) of Parent
shall be canceled and retired and shall cease to exist and no Parent Common
Stock or other consideration shall be delivered in exchange therefor.
(d) On and after the Effective Time, holders of certificates
(the "Certificates"), which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock, shall cease to have
any rights as stockholders of the Company, except the right to receive,
subject to Section 2.5 hereof, the Merger Consideration (and cash in lieu of
any fractional share as contemplated by Section 2.3) for each share of Company
Common Stock held by them. Any restrictions (including, but not limited to,
forfeiture or repurchase rights in favor of the Company) on shares of Company
Common Stock in effect immediately prior to the Effective Time (the "Company
Restricted Stock"), shall continue in full force from and after the Effective
Time; provided, however, that, from and after the Effective Time, all
references to the Company shall be deemed to refer to Parent.
Section 2.2 Surrender of Certificates. At or promptly after the
Effective Time, Parent shall make available to Equiserve L.P., or a bank
reasonably acceptable to the Company (the "Exchange Agent"), in trust for the
benefit of the holders of shares of Company Common Stock for exchange in
accordance with this Article II, (i) cash in an amount sufficient to pay cash
in lieu of fractional shares pursuant to Section 2.3, and (ii) certificates
representing the aggregate number of shares of Parent Common Stock issuable
pursuant to Section 2.1 hereof. As promptly as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a Certificate
or Certificates 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 proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing Parent Common Stock and cash in lieu of
fractional shares, if applicable. Upon surrender of a Certificate or
Certificates to the Exchange Agent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each share of Company Common
Stock formerly represented by such Certificate or Certificates, and the
Certificate(s) so surrendered shall forthwith be canceled. Until surrendered
as contemplated by this Article II, from and after the Effective Time each
Certificate shall be deemed to represent only the right to receive the Merger
Consideration (and cash in lieu of any fractional share as contemplated by
Section 2.3) for each share of Company Common Stock formerly represented by
such Certificate, and shall not evidence any interest in, or any right to
exercise the rights of a stockholder of, Parent. If a certificate representing
Parent Common Stock is to be issued or a cash payment in lieu of fractional
share interests is to be made to a person other than the one in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition to such issuance or payment that such Certificate be properly
endorsed (or accompanied by an appropriate instrument of transfer) and
accompanied by evidence that any applicable stock transfer taxes have been
paid or provided for.
Section 2.3 No Fractional Shares.
(a) No certificates representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests shall not entitle the owner thereof to
vote or to any other rights of a stockholder of Parent. In lieu of such
fractional shares, any holder of Company Common Stock who would otherwise be
entitled to receive a fraction of a share of Parent Common Stock (after
aggregating all shares of Parent Common Stock issuable to such holder) shall,
upon surrender of such holder's Certificate or Certificates, be paid in cash
the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of
Parent Common Stock as quoted on The Nasdaq National Market System on the
Closing Date.
(b) As promptly as practicable following the Effective Time, the
Exchange Agent shall deliver the Merger Consideration, whether in the form of
Parent Common Stock or cash in lieu of fractional shares, or both to each
holder of a Certificate or Certificates which have been surrendered.
Section 2.4 No Dividends. No dividends or other distributions
declared or made after the Effective Time with respect to shares of 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 Parent Common
Stock represented thereby until the holder of such Certificate shall surrender
such Certificate. Dividends or other distributions with a record date after
the Effective Time payable in respect of shares of Parent Common Stock held by
the Exchange Agent shall be held in trust for the benefit of such holders of
unsurrendered Certificates. Following surrender of any previously
unsurrendered Certificate, there shall be paid to the holder of the
certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the date of payment of any dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender, the amount of such
dividends or other distributions payable with respect to such whole shares of
Parent Common Stock.
Section 2.5 Return to Parent. Any shares of Parent Common Stock made
available to the Exchange Agent and not exchanged for Certificates within six
(6) months after the Effective Time and any dividends and distributions held
by the Exchange Agent for payment or delivery to the holders of unsurrendered
Certificates formerly representing shares of Company Common Stock and
unclaimed within six (6) months after the Effective Time shall be redelivered
or repaid by the Exchange Agent to Parent, after which time any holder of
Certificates who has not theretofore delivered or surrendered such
Certificates to the Exchange Agent, subject to applicable law, shall look as a
general creditor only to Parent for payment of the Merger Consideration, cash
in lieu of fractional share interests, and any such dividends or distributions
with respect to its shares of Parent Common Stock. Notwithstanding the
foregoing, none of Parent, the Exchange Agent, the Surviving Corporation or
any other party shall be liable to any holder of a Certificate formerly
representing shares of Company Common Stock for any Merger Consideration, cash
in lieu of fractional share interests or dividends or distributions properly
delivered to a public official pursuant to applicable property, escheat or
similar laws. If Certificates are not surrendered prior to two (2) years after
the Effective Time, unclaimed Merger Consideration (or funds with respect to
fractional shares) payable with respect to such shares of Company Common Stock
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
Section 2.6 Company Option Plans. At the Effective Time, all options
then outstanding, whether or not vested and exercisable, under the Company's
2001 Non-Statutory Stock Plan, Xxxxxxx.xxx Stock Plan, 1998 Stock Plan and
1996 Equity Incentive Plan (collectively, the "Company Option Plans") other
than stock purchase rights outstanding pursuant to the 2000 Employee Stock
Purchase Plan (the "ESPP") (collectively, the "Company Options"), in each
case, as in effect on the date hereof, shall be assumed by Parent. Each
Company Option assumed by Parent, shall be subject to, and exercisable upon,
the same terms and conditions as under the applicable Company Option Plan and
the applicable option agreement issued thereunder, except that (a) each such
assumed Company Option shall be exercisable for, and represent the right to
acquire, that number of shares of Parent Common Stock (rounded down to the
nearest whole share) equal to (i) the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time
multiplied by (ii) the Exchange Ratio; and (b) the option price per share of
Parent Common Stock subject to each such assumed Company Option shall be an
amount equal to (i) the option price per share of Company Common Stock subject
to such Company Option in effect immediately prior to the Effective Time
divided by (ii) the Exchange Ratio (rounded up to the nearest whole cent). The
Company represents and warrants that each of the foregoing actions may be
taken and effected by the Company without the consent of any holder of Company
Options. As of the Effective Time, Parent shall assume in full each
outstanding Company Option and all of the other rights and obligations of the
Company Option Plans, other than the Xxxxxxx.xxx Stock Plan, as provided
herein (the "Assumed Company Option Plans").
As of a date prior to the Effective Time, as selected by the Company
(the "ESPP Date"), all offering and purchase periods in progress under the
ESPP shall be terminated and no new offering or purchase period shall be
commenced. The rights of the participants in the ESPP with respect to any such
offering or purchase period shall be determined by treating the ESPP Date as
the Purchase Date (as defined in the ESPP) of such offering and purchase
periods, but otherwise treating such shortened offering and purchase periods
as fully effective and completed in accordance with the terms of the ESPP
effective as of the ESPP Date. The Company shall take all action necessary
terminate the rights of all participants under the ESPP effective as of the
ESPP Date.
The adjustment provided herein with respect to stock options shall be
and is intended to be effected in a manner which is consistent with Section
424(a) of the Code. The duration, vesting schedule, exercisability and other
terms of each option immediately after the Effective Time shall be the same as
the corresponding terms in effect immediately before the Effective Time,
except that all references to Company in the Company Option Plans (and the
corresponding references in the option agreement documenting such option)
shall be deemed to be references to Parent. Except as set forth in Section
3.2(d) of the Company Disclosure Schedule (as defined in Article III hereof),
vesting of Company Options shall not be accelerated as a result of the Merger.
Continuous employment with the Company or its Subsidiaries shall be credited
to the optionee for purposes of determining the vesting of all assumed Company
Options after the Effective Time. As soon as reasonably practicable, but in no
event later than thirty (30) days after the Effective Time, Parent will issue
to each holder of an assumed Company Option notice of the foregoing assumption
by Parent.
Parent shall file with the SEC, no later than ten (10) business days
after the Effective Time, a Registration Statement on Form S-8 relating to the
shares of Parent Common Stock issuable with respect to the Company Options
assumed by Parent in accordance with this Section 2.6.
Section 2.7 Company Warrants. At the Effective Time, all warrants to
purchase Company Common Stock (the "Company Warrants") then outstanding,
whether or not exercisable, shall be assumed by Parent. Each Company Warrant
assumed by Parent shall be subject to, and exercisable upon, the same terms
and conditions as under the applicable warrant agreement issued thereunder,
except that (a) each assumed Company Warrant shall be exercisable for, and
represent the right to acquire, that number of shares of Parent Common Stock
(rounded down to the nearest whole share) equal to (i) the number of shares of
Company Common Stock subject to such Company Warrant immediately prior to the
Effective Time multiplied by (ii) the Exchange Ratio; and (b) the exercise
price per share of Parent Common Stock subject to each assumed Company Warrant
shall be an amount equal to (i) the price per share of Company Common Stock
subject to such Company Warrant in effect immediately prior to the Effective
Time divided by (ii) the Exchange Ratio (rounded up to the nearest whole
cent). The Company represents and warrants that each of the foregoing actions
may be taken and effected by the Company without the consent of any holder of
Company Warrants.
Section 2.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made. If, after the Effective Time,
certificates formerly representing shares of Company Common Stock are
presented to the Surviving Corporation, they shall be canceled and exchanged
for cash and/or certificates representing Parent Common Stock pursuant to this
Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure schedule prepared and signed by
the Company and delivered to Parent simultaneously with the execution hereof
(the "Company Disclosure Schedule"), the Company represents and warrants to
Parent and Sub all of the statements contained in this Article III. The
Company Disclosure Schedule shall be arranged in sections corresponding to the
numbered and lettered sections contained in Article III and shall qualify only
the corresponding sections in this Article and any other section hereof where
it is reasonably clear upon a reading of such disclosure without any
independent knowledge on the part of the reader regarding the matter
disclosed, that the disclosure is intended to apply to such other section.
Section 3.1 Organization. Each of the Company and its Subsidiaries is
a corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
requisite corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have a material adverse effect on the Company
and its Subsidiaries. The Company and each of its Subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, in the aggregate, have a material adverse effect on the
Company and its Subsidiaries. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding such partnerships
where such party or any Subsidiary of such party do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. As used in
this Agreement, any reference to any event, change or effect having a
"material adverse effect" on or with respect to any entity (or group of
entities taken as a whole) means such event, change or effect, individually or
in the aggregate with such other events, changes, or effects, which is
materially adverse to the financial condition, businesses, results of
operations, assets, liabilities or properties of such entity (or, if used with
respect thereto, of such group of entities taken as a whole), it being
understood that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a material adverse
effect: (i) in and of itself, a change in the market price or trading volume
of Company Common Stock or Parent Common Stock, as the case may be, (ii)
conditions affecting the economy of the United States of America as a whole,
(iii) conditions affecting generally the industry in which both the Parent and
the Company, as applicable, operate, (iv) the taking of any action expressly
required by the terms of this Agreement, (v) failure, in and of itself, and
excluding the cause of any such failure, by the Company or Parent, as
applicable, to meet the revenue or earnings prediction of equity analysts as
reflected in the First Call consensus estimate or any internal projections,
for any period ending (or for which earnings are released) on or after the
date of this Agreement and prior to the Closing Date, or (vi) any adverse
change, effect, event, occurrence or development to the extent primarily
attributable to the announcement or pendency of the Merger; provided, however,
the party invoking the exclusion shall bear the burden of showing that such
change, effect, event, occurrence or development which the Company or Parent,
as the case may be, claims does not constitute a material adverse effect is
primarily attributable to the announcement or pendency of the Merger. Section
3.1 of the Company Disclosure Schedule, sets forth a complete list of the
names, jurisdiction of incorporation or other formation and capitalization of
each of the Company's Subsidiaries and the jurisdictions in which the Company
and each of its Subsidiaries are qualified to do business.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock. As of the date two (2) days prior
to the date hereof, (i) 25,362,436 shares of Company Common Stock were issued
and outstanding, (ii) no shares of Company preferred stock were issued and
outstanding; (iii) 4,895,306 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Company Options pursuant to the
Company Option Plans; (iv) 1,029,430 shares of Company Common Stock were
reserved for issuance upon the exercise of Company Warrants; and (v) 23,327
shares of Company Restricted Stock. All of the issued and outstanding shares
of Company Common Stock are validly issued, fully paid and nonassessable, were
issued in compliance with applicable law, and are not subject to any
preemptive or similar rights. As of the date two (2) days prior to the date
hereof, 8,582,346 shares of Company Common Stock were reserved for issuance
under the Company's 1998 Stock Plan, of which 4,356,550 shares of Company
Common Stock were subject to outstanding Company Options, and 2,468,907 shares
of Company Common Stock remained available for subsequent grant. All Company
Options were issued in compliance with applicable securities laws.
(b) There are not now, and at the Effective Time there will not
be, any (i) outstanding right, subscription, warrant, call, option or other
agreement or arrangement of any kind (collectively, "Rights") to purchase or
otherwise to receive from the Company or any of its Subsidiaries any of the
outstanding authorized but unissued or treasury shares of the capital stock or
any other security of the Company or any of its Subsidiaries, (ii) outstanding
security of any kind convertible into or exchangeable for such capital stock
or (iii) voting trust or other agreement or understanding to which the Company
or any of its Subsidiaries is a party or is bound with respect to the voting
of the capital stock of the Company or any of its Subsidiaries, and, in the
case of each of clause (i), (ii) and (iii), there is not now any agreement,
contract, commitment or arrangement to which the Company or any of its
Subsidiaries is a party or is bound to issue or enter into, as applicable, any
of the foregoing.
(c) Each outstanding share of capital stock of each Subsidiary
of the Company is duly authorized, validly issued, fully paid and
nonassessable and each such share is owned by the Company, free and clear of
any mortgage, pledge, assessment, security interest, lease, sublease, lien,
adverse claim, levy, charge, option, right of others or restriction (whether
on voting, sale, transfer, disposition or otherwise) or other encumbrance of
any kind, whether imposed by agreement, understanding, law or equity, or any
conditional sale contract, title retention contract or other contract to give
or to refrain from giving any of the foregoing (collectively, "Liens").
(d) Section 3.2(d) of the Company Disclosure Schedule sets forth
a listing of (i) all outstanding Company Options as of the date hereof, which
schedule shows the portion of each Company Option that is then vested, the
vesting and acceleration provisions thereof, if any, the date upon which each
Company Option expires and whether or not such Company Option is intended to
qualify as an "incentive stock option" within the meaning of Section 422 of
the Code; (ii) all outstanding Company Restricted Stock as of the date hereof;
(iii) all outstanding Company Warrants as of the date hereof, which schedule
shows the portion of each Company Warrant which is exercisable and the date
upon which each Company Warrant expires; and (iv) each outstanding Company
Option and Company Warrant that will accelerate, in whole or in part, pursuant
to its terms as a result of the transactions contemplated hereby, which
schedule summarizes the terms of acceleration pursuant to such Company Option,
Company Warrant or Company Option Plan.
Section 3.3 Authorization; Validity of Agreement; Company Action.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
a party and, subject to obtaining approval and adoption of this Agreement by
the affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock (the "Company Stockholder Approval"), to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Company of this Agreement and the Ancillary Agreements to
which the Company is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of the Company and, except for
obtaining the Company Stockholder Approval, no other corporate action on the
part of the Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the Ancillary Agreements to which it is a
party and the consummation of the transactions contemplated hereby and
thereby. Each of this Agreement and the Ancillary Agreements to which it is a
party have been duly executed and delivered by the Company and, assuming each
of this Agreement and such Ancillary Agreements constitutes a valid and
binding obligation of the other parties hereto and thereto, constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Board of Directors of the Company (the "Company Board")
has duly and validly approved and taken all corporate action required to be
taken by such Company Board for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, and resolved to
recommend that the stockholders of the Company approve and adopt this
Agreement. The Company Stockholder Approval is the only vote of the holders of
any class or series of Company capital stock necessary to approve this
Agreement and to consummate the Merger. The Company has taken all actions
necessary with respect to the entering into of this Agreement and the
Ancillary Agreements to which it is a party, the consummation of the Merger
and the other transactions contemplated by this Agreement and the Ancillary
Agreements so as to render inapplicable to such transactions the restrictions
on business combinations contained in Section 203 of the DGCL.
Section 3.4 Consents and Approvals; No Violations. Except for the
Company Stockholder Approval, the Merger Filing, and filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act and state blue sky laws, neither the
execution, delivery or performance of this Agreement or any Ancillary
Agreements by the Company nor the consummation by the Company of the
transactions contemplated hereby or thereby nor compliance by the Company with
any of the provisions hereof or thereof will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or by-laws or
similar organizational documents of the Company or of any of its Subsidiaries,
(ii) require any filing with, or permit, authorization, consent or approval
of, any court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental
Entity"), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or result in the
creation of any lien) under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound (a
"Company Agreement") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, including, but not limited to, the laws
of the state of California and the state of Delaware, except in the case of
clauses (ii), (iii) or (iv) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings, or where such
violations, breaches or defaults would not, individually or in the aggregate,
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole, and will not materially impair the ability of the Company to consummate
the transactions contemplated hereby or by the Ancillary Agreements.
Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to Parent true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
and its Subsidiaries since December 31, 2000 under the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
have been amended since the time of their filing, collectively, the "Company
SEC Documents"). As of their respective dates or, if amended, as of the date
of the last such amendment, the Company SEC Documents, including, without
limitation, any financial statements or schedules included therein (the
"Company Financial Statements") (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in
all material respects with the applicable requirements of the Exchange Act or
the Securities Act, as the case may be, the Xxxxxxxx-Xxxxx Act of 2002 and the
applicable rules and regulations of the SEC thereunder. The Company SEC
Documents include all the documents that the Company was required to file with
the SEC since December 31, 2000. The Company Financial Statements have been
prepared from, and are in accordance with, the books and records of the
Company and its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-Q of the SEC) and present fairly the consolidated financial
position and the consolidated results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the dates thereof or for the
periods presented therein.
Section 3.6 Absence of Certain Changes. Except as and to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, since September 30, 2002, the Company and its Subsidiaries have
conducted their respective businesses and operations in all material respects
consistent with past practice only in the ordinary and usual course. From
September 30, 2002 through the date of this Agreement, there has not occurred
(i) any event, change or effect (including the incurrence of any liabilities
of any nature, whether or not accrued, contingent or otherwise) having or,
which would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of
the Company or of any of its Subsidiaries; or (iii) any change by the Company
or any of its Subsidiaries in accounting principles or methods, except insofar
as may be required by a change in GAAP. Since September 30, 2002 neither the
Company nor any of its Subsidiaries has taken any of the actions prohibited by
Section 5.1 hereof.
Section 3.7 No Undisclosed Liabilities. Since December 31, 2002,
neither the Company nor any of its Subsidiaries has incurred any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
that (a) have, or would be reasonably likely to have, a material adverse
effect on the Company and its Subsidiaries or (b) would be required to be
reflected or reserved against on a consolidated balance sheet of the Company
and its Subsidiaries (including the notes thereto) prepared in accordance with
GAAP as applied in preparing the consolidated balance sheet of the Company and
its Subsidiaries as of the date hereof. Section 3.7 of the Company Disclosure
Schedule sets forth the amount of principal and unpaid interest outstanding
under each instrument evidencing indebtedness of the Company and its
Subsidiaries which will accelerate or become due or result in a right of
redemption or repurchase on the part of the holder of such indebtedness (with
or without due notice or lapse of time) as a result of this Agreement, any of
the Ancillary Agreements, the Merger or the other transactions contemplated
hereby or thereby.
Section 3.8 Information in Proxy Statement/Prospectus. The Proxy
Statement/Prospectus (as defined in Section 5.8 hereof) (or any amendment
thereof or supplement thereto) will not, at the date mailed to Company
stockholders or at the times of the Special Meetings (as defined in Section
5.7(b) hereof), 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
are made, not misleading, except that no representation is made by the Company
with respect to statements made therein based on information supplied by
Parent or Sub specifically for inclusion in the Proxy Statement/Prospectus.
None of the information supplied by the Company specifically for inclusion or
incorporation by reference in the Parent Registration Statement (as defined in
Section 5.8 hereof) will, at the date it becomes effective and at the times of
the Special Meetings, 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
are made, not misleading. The Proxy Statement/Prospectus specifically, as to
information supplied by the Company for inclusion therein, will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder and the laws of the state of California and the state
of Delaware.
Section 3.9 Employee Benefit Matters.
(a) All employee benefit plans and other incentive, compensation
or benefit agreements or arrangements (whether written or oral) covering any
current or former employee or director of, or consultant to, the Company, any
Subsidiary or any trade or business, whether or not incorporated, that
together with the Company or any of its Subsidiaries would be deemed a "single
employer" within the meaning of Section 4001(b)(1) of ERISA (each, an "ERISA
Affiliate") are listed in Section 3.9(a) of the Company Disclosure Schedule
(the "Company Benefit Plans"). True and complete copies of each Company
Benefit Plan, trust and report and summary required under the Code or the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the
favorable determination letter from the Internal Revenue Service (the "IRS")
for each plan intended to be qualified under Section 401(a) of the Code, have
been delivered to the Parent. Each Company Benefit Plan has been administered
and maintained in all material respects in compliance with its terms and with
all applicable laws, including, but not limited to, ERISA and the Code. Each
Company Benefit Plan intended to be qualified under Section 401(a) of the Code
has either obtained from the IRS favorable determination, opinion, advisory or
notification letter, as applicable, to its qualified status under the Code and
to the knowledge of the Company no event has occurred that could reasonably be
expected to adversely affect the qualified status of such Company Benefit
Plan. Neither the Company nor any of its Subsidiaries has incurred (and to the
knowledge of the Company no transaction has occurred which could reasonably be
expected to give rise to) any liability or penalty under Section 4975, 4976 or
4980 of the Code or Section 409 or 502(i) of ERISA with respect to any Company
Benefit Plan. To the knowledge of the Company, there are no pending, nor has
the Company or any of its Subsidiaries received notice of any threatened,
claims against or otherwise involving any of the Company Benefit Plans. No
Company Benefit Plan is under audit or investigation by the IRS, the
Department of Labor or the Pension Benefit Guaranty Corporation, and to the
knowledge of the Company, no such audit or investigation is pending or
threatened. All contributions and other payments required to be made as of the
date of this Agreement to, or pursuant to, the Company Benefit Plans have been
made or accrued for in the Company Financial Statements and none of the
Company Benefit Plans or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of each of the Company Benefit Plans ended prior to
the date of this Agreement. No lien has been imposed under Section 412(n) of
the Code or Section 302(f) of ERISA on the assets of the Company, any of its
Subsidiaries or any ERISA Affiliate, and no event or circumstance has occurred
that is reasonably likely to result in the imposition of any such lien on any
such assets on account of any ERISA Plan. Neither the Company nor ERISA
Affiliate has at any time contributed to, or been required to contribute to,
any "pension plan" (as defined in Section 3(2) of ERISA) that is subject to
Title IV of ERISA or Section 412 of the Code, including, without limitation,
any "multiemployer plan" (as defined in Sections 3(37) and 4001(a)(3) of
ERISA), and neither the Company nor any ERISA Affiliate has at any time
incurred or could reasonably expect to incur any liability under Title IV of
ERISA.
(b) The consummation of the Transactions will not, unless
required by applicable laws as a result of any Company Benefit Plan's
termination which may be required pursuant to Section 5.19 of this Agreement
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any Company Benefit Plan, employment or
severance agreement, trust, loan or other compensation or benefits agreement
or arrangement that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any current or former employee, officer, director, agent or consultant of
the Company or any Subsidiary, or (ii) result in the triggering or imposition
of any restrictions or limitations on the right of the Company or Parent to
amend or terminate any Company Benefit Plan and receive the full amount of any
excess assets remaining or resulting from such amendment or termination,
subject to applicable taxes. No payment or benefit which will or may be made
by the Company, any of its Subsidiaries, Parent or any of their respective
affiliates with respect to any employee, officer or director of the Company or
its Subsidiaries will be characterized as an "excess parachute payment,"
within the meaning of Section 280G(b)(1) of the Code, and no amount of any
such payment or benefit will fail to be deductible by the Company by reason of
Section 162(m) of the Code.
(c) Neither the Company nor any of its Subsidiaries (i)
maintains or contributes to any Company Benefit Plan which provides, or has
any liability to provide, life insurance, medical, severance or other employee
welfare benefits to any employee upon or with respect to periods following his
retirement or termination of employment, except as may be required by Section
4980B of the Code; or (ii) has ever represented, promised or contracted
(whether in oral or written form) to any employee (either individually or to
employees as a group) that such employee(s) would be provided with life
insurance, medical, severance or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
Section 4980B of the Code. All amounts of deferred compensation benefits under
any Company Benefit Plan have been properly accrued for in the Financial
Statements.
(d) With respect to each Company Benefit Plan which is an
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA,
all material claims incurred (including claims incurred but not reported) by
employees thereunder for which the Company is, or will become, liable are (i)
insured pursuant to a contract of insurance whereby the insurance company
bears any risk of loss with respect to such claims; (ii) covered under a
contract with a health maintenance organization (an "HMO") pursuant to which
the HMO bears the liability for such claims, or (iii) reflected as a liability
in Section 3.9(d) of the Company Disclosure Schedule. Neither the Company, any
of its Subsidiaries or any ERISA Affiliate has, prior to the Effective Time
and in any material respect, violated any of the health care continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended or the Health Insurance Portability Accountability Act of 1996, as
amended, or any similar provision of state law applicable to their employees.
Section 3.10 Litigation; Compliance with Law.
(a) There is no suit, claim, action, proceeding, arbitration or
investigation pending or, to the knowledge of the Company, threatened against
or affecting, the Company or any of its Subsidiaries which, individually or in
the aggregate, is reasonably likely, individually or in the aggregate, to have
a material adverse effect on the Company and its Subsidiaries, or materially
impair the ability of the Company to consummate the Merger or the other
transactions contemplated hereby or by the Ancillary Agreements. The foregoing
includes, without limitation, actions pending or, to the knowledge of the
Company, threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's or any of its Subsidiaries'
employees, their use in connection with the Company's or any of its
Subsidiaries' business of any information, techniques, patents, patent
applications, copyrights, trade secrets, inventions, technology, know-how,
Software (as defined in Section 3.17(a)) or other intellectual property rights
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers.
(b) The Company and its Subsidiaries have complied in a timely
manner and in all material respects, with all laws, statutes, regulations,
rules, ordinances, and judgments, decrees, orders, writs and injunctions, of
any court or Governmental Entity relating to any of the property owned, leased
or used by them, or applicable to their business, including, but not limited
to, (1) the Foreign Corrupt Practices Act of 1977 and any other laws regarding
use of funds for political activity or commercial bribery and (2) laws
relating to equal employment opportunity, discrimination, occupational safety
and health, environmental, interstate commerce and antitrust.
Section 3.11 No Default. The business of the Company and each of
its Subsidiaries has not been and is not being conducted in default or
violation of any term, condition or provision of (i) its respective
certificate of incorporation or bylaws or similar organizational documents,
(ii) any Company Agreement or (iii) any federal, state, local or foreign law,
statute, regulation, rule, ordinance, judgment, decree, order, writ,
injunction, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Company or any of its
Subsidiaries or relating to any of the property owned, leased or used by them,
or applicable to their business, excluding from the foregoing clauses (ii) and
(iii), defaults or violations that would not, individually or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries
or materially impair the ability of the Company to consummate the Merger or
the other transactions contemplated hereby or by the Ancillary Agreements. No
investigation or review by any Governmental Entity or other entity with
respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, nor has any Governmental Entity or other
entity indicated an intention to conduct the same, other than, in each case,
those the outcome of which, as far as reasonably can be foreseen, in the
future will not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries.
Section 3.12 Taxes.
(a) The Company and each of its Subsidiaries has timely filed
(or has had timely filed on its behalf) with the appropriate Tax Authorities
all Tax Returns required to be filed by the Company and each of its
Subsidiaries, and such Tax Returns are true, correct, and complete in all
material respects.
(b) The Company and each of its Subsidiaries has paid, or where
payment is not yet due, has established an adequate accrual in accordance with
GAAP for the payment of, all Taxes for all periods ending through the date
hereof.
(c) There are no liens for Taxes upon any property or assets of
the Company or any of its Subsidiaries, except for liens for Taxes not yet due
and for which adequate reserves have been established in accordance with GAAP.
(d) No federal, state, local or foreign Audits are presently
pending with regard to any Taxes or Tax Returns of the Company and its
Subsidiaries and to the knowledge of the Company, no such Audit is threatened.
(e) The Tax Returns of the Company and each of its Subsidiaries
have been examined by the applicable Tax Authority (or the applicable
statutory period of limitation for the assessment of Taxes for such periods
have expired), and for any year that a Tax Return was examined, no material
adjustments were asserted as a result of such examination which have not been
resolved and fully paid, and no issue has been raised by any Tax Authority in
any Audit of the Company or any of its Subsidiaries that, if raised with
respect to any other period not so audited, could be expected to result in a
proposed deficiency for any such period not so audited.
(f) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by the Company or any of its
Subsidiaries with respect to any Taxes is currently in force.
(g) Neither the Company nor any of its Subsidiaries is a party
to any agreement providing for the allocation, indemnification, or sharing of
Taxes.
(h) Neither the Company nor any of its Subsidiaries has been a
member of any "affiliated group" (as defined in section 1504(a) of the Code)
filing a consolidated U.S. federal income tax return, other than a group the
common parent of which was the Company's and neither Company nor any of its
Subsidiaries is subject to Treas. Reg. 1.1502-6 for any period other than such
periods during which Company and its Subsidiaries filed a consolidated U.S.
federal tax return.
(i) Neither the Company nor any of its Subsidiaries has been a
distributing corporation or a controlled corporation in a transaction
described in Section 355(a) of the Code.
(j) Neither the Company nor any of its Subsidiaries has issued
an option or warrant that continues to be outstanding as of the date hereof
that when issued had an exercise price of less than 85% of the fair market
value of such option or warrant on the date of issuance.
(k) Since January 1, 2001, the Company has not redeemed any of
its stock or made any distributions with respect to its stock other than
regular, normal dividends and common stock acquired in the ordinary course of
business in connection with employee incentive and benefit programs.
(l) "Audit" means any audit, assessment, or other examination
relating to Taxes by any Tax Authority or any judicial or administrative
proceedings relating to Taxes. "Tax" or "Taxes" means all federal, state,
local, and foreign taxes, and other assessments of a similar nature (whether
imposed directly or through withholding), including, without limitation,
corporate, business profits, franchise, income, consumption, sales, use, ad
valorem and value-added tax, and any interest, fine, additions to tax, or
penalties applicable thereto, imposed by any Tax Authority. "Tax Authority"
means the IRS and any other domestic, foreign, territorial governmental
authority or agency responsible for the administration of, or having the power
to impose, any Taxes. "Tax Returns" mean all federal, state, local, and
foreign tax returns, declarations, statements, reports, schedules, forms, and
information returns and any amendments thereto.
Section 3.13 Contracts. Each Company Agreement is valid, binding
and enforceable and in full force and effect, except where failure to be
valid, binding and enforceable and in full force and effect would not have a
material adverse effect on the Company and its Subsidiaries, and there are no
defaults thereunder, except those defaults that would not have a material
adverse effect on the Company and its Subsidiaries. Section 3.13 of the
Company Disclosure Schedule sets forth a true and complete list of (i) all
Company Agreements entered into by the Company or any of its Subsidiaries and
included as exhibits to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001 or any other report filed thereafter that
have been altered, amended or otherwise modified in any manner, and (ii) all
non-competition agreements imposing restrictions on the ability of the Company
or any of its Subsidiaries to conduct business in any jurisdiction or
territory.
Section 3.14 Assets; Real Property. The Company and its Subsidiaries
have all assets, properties, rights and contracts necessary to permit the
Company and its Subsidiaries to conduct their business as it is currently
being conducted, except where the failure to have such assets, properties,
rights and contracts would not have a material adverse effect on the Company
and its Subsidiaries. The Company SEC Documents accurately identify all
material real property or material interests in material real property owned
by the Company and its Subsidiaries (the "Real Property"). The Company or its
Subsidiaries has good and marketable title to the real property owned by them,
free and clear of all liens, charges, security interests, options, claims,
mortgages, pledges, easements, rights-of-way or other encumbrances and
restrictions of any nature whatsoever, and those that do not adversely affect
the value of such real property.
Section 3.15 Environmental Matters. Except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement, (a) the
Company and its Subsidiaries are in compliance in all material respects with
federal, state, local and foreign laws and regulations relating to pollution,
protection or preservation of human health or the environment, including,
without limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of toxic or hazardous substances, materials or
wastes, petroleum and petroleum products, asbestos or asbestos-containing
materials, polychlorinated biphenyls, radon, or lead or lead-based paints or
materials ("Materials of Environmental Concern"), or otherwise relating to the
generation, storage, containment (whether above ground or underground),
disposal, transport or handling of Materials of Environmental Concern, or the
preservation of the environment or mitigation of adverse effects thereon
(collectively, "Environmental Laws"), and including, but not limited to,
compliance with any permits or other governmental authorizations or the terms
and conditions thereof; (b) neither the Company nor any of its Subsidiaries
has received any communication or notice, whether from a governmental
authority or otherwise, alleging any violation of or noncompliance with any
Environmental Laws by any of the Company or its Subsidiaries or for which the
any of them is responsible, and there is no pending or threatened claim,
action, investigation or notice by any person or entity alleging potential
liability for investigatory, cleanup or governmental response costs, or
natural resources or property damages, or personal injuries, attorney's fees
or penalties relating to (i) the presence, or release into the environment, of
any Materials of Environmental Concern at any location owned or operated by
the Company or its Subsidiaries, now or in the past, or (ii) any violation, or
alleged violation, of any Environmental Law (collectively, "Environmental
Claims"), except where such Environmental Claims would not have a material
adverse effect or otherwise require disclosure in the Company SEC Documents;
and (c) there are no past or present facts or circumstances that could form
the basis of any Environmental Claim against the Company or its Subsidiaries
or against any person or entity whose liability for any Environmental Claim
the Company or its Subsidiaries have retained or assumed either contractually
or by operation of law, except where such Environmental Claim, if made, would
not have a material adverse effect or otherwise require disclosure in the
Company SEC Documents. All permits and other governmental authorizations
currently held or required to be held by the Company and its Subsidiaries
pursuant to any Environmental Laws are identified in Section 3.15 of the
Company Disclosure Schedule. The Company has provided to Parent all
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of or reasonably available to the
Company regarding environmental matters pertaining to the environmental
condition of the business of the Company and its Subsidiaries, or the
compliance (or noncompliance) by the Company or its Subsidiaries with any
Environmental Laws.
Section 3.16 Product Liability. There are not presently pending or,
to the knowledge of the Company, threatened any civil, criminal or
administrative actions, suits, demands, claims, hearings, notices of
violation, investigations, proceedings or demand letters relating to any
alleged hazard or alleged defect in design, manufacture, materials or
workmanship, including any failure to warn or alleged breach of express or
implied warranty or representation, relating to any product manufactured,
distributed or sold by or on behalf of the Company and its Subsidiaries, which
if adversely determined, would reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries. Neither the Company nor
any of its Subsidiaries has extended to its customers any written non-uniform
product warranties, indemnifications or guarantees.
Section 3.17 Intellectual Property.
(a) The Company or its Subsidiaries have a valid right to use
all trademarks, service marks, trade names, Internet domain names, designs,
slogans, and general intangibles of like nature (collectively, "Trademarks");
Software (as defined below); technology; trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models,
and methodologies (collectively, "Trade Secrets") used in Company's and each
Subsidiaries' business as currently conducted. To the knowledge of the
Company, the Company or its Subsidiaries own all patents and copyrights
necessary for the conduct of the Company's and each of its Subsidiaries'
businesses as currently conducted, or are validly licensed under third party
patents and copyrights necessary for the same. As used in this Agreement, the
term "Intellectual Property" means patents, copyrights, Trademarks,
applications for any of the foregoing, and Trade Secrets; the term "Company
License Agreements" means any license agreements granting any right to use or
practice any rights under any Intellectual Property (except for such
agreements for shrink-wrap or click wrap software or other off-the-shelf
products that are generally available for less than $25,000), and any written
settlements relating to any Intellectual Property, to which the Company or any
of its Subsidiaries is a party or otherwise bound; and the term "Software"
means any and all computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source
code or object code.
(b) Section 3.17(b)(1) of the Company Disclosure Schedule sets
forth, for the Intellectual Property owned by the Company or its Subsidiaries,
a complete and accurate list of all U.S. and foreign (1) patents and patent
applications; (2) Trademark registrations (including Internet domain
registrations) and applications and material unregistered Trademarks; (3)
copyright registrations and applications, indicating for each, the applicable
jurisdiction, registration number (or application number), and date issued (or
date filed). Section 3.17(b)(2) of the Company Disclosure Schedule sets forth
a complete and accurate list of all third party Software that is incorporated
in any Software sold, licensed, leased or otherwise distributed by the Company
or any of its Subsidiaries, indicating for each the title, owner/licensor of
the Software. Third party Software tools that are used to create the Software
sold, licensed, leased or otherwise distributed by the Company or any of its
Subsidiaries but are not incorporated therein are specifically excluded from
this list.
(c) The Intellectual Property owned by the Company or any of its
Subsidiaries is free and clear of all Liens, and the Company or a Subsidiary
of the Company, as noted in Section 3.17(b)(1) of the Company Disclosure
Schedule is listed in the records of the appropriate United States, state or
foreign agency as the sole owner of record for each application and
registration listed in Section 3.17(b)(1) of the Company Disclosure Schedule.
(d) To the knowledge of the Company, the patents owned by the
Company or any of its Subsidiaries are valid and enforceable, in full force
and effect, and have not been canceled, expired, or abandoned. The
Intellectual Property (other than patents) owned by the Company or any of its
Subsidiaries is valid and enforceable, in full force and effect, and to the
extent such Intellectual Property is the subject of a registration or
application (as described in Section 3.17(b)), such Intellectual Property has
not been canceled, expired, or abandoned. There is no pending or, to the
knowledge of the Company, threatened opposition, interference or cancellation
proceeding before any court or registration authority in any jurisdiction
against the registrations listed in Section 3.17(b)(1) of the Company
Disclosure Schedule, or, to the knowledge of the Company, against any
Intellectual Property licensed to the Company or its Subsidiaries.
(e) To the knowledge of the Company, the conduct of the
Company's and its Subsidiaries' business as currently conducted does not
infringe upon any Intellectual Property rights owned or controlled by any
third party (either directly or indirectly such as through contributory
infringement or inducement to infringe). Section 3.17(e) of the Company
Disclosure Schedule lists all U.S. and foreign patents for which: (i) the
Company has obtained written opinion of counsel; or (ii) the Company has
received written notice of infringement or license offer outside the ordinary
course of business. There are no claims or suits pending or, to the knowledge
of the Company, threatened against the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries has received any notice of a
third party claim or suit against the Company or any of its Subsidiaries (1)
alleging that its activities or the conduct of its businesses infringes upon,
violates, or constitutes the unauthorized use of the Intellectual Property
rights of any third party or (2) challenging the ownership, use, validity or
enforceability of any Intellectual Property.
(f) There are no settlements, forbearances to xxx, consents,
judgments, or orders or similar obligations to which the Company or any of its
Subsidiaries are bound which (1) restrict the Company's or its Subsidiaries'
rights to use any Intellectual Property, (2) restrict the Company's or its
Subsidiaries' business in order to accommodate a third party's Intellectual
Property or (3) permit third parties to use any Intellectual Property owned by
the Company or any of its Subsidiaries. The Company or its Subsidiaries have
not licensed or sublicensed its rights in any material Intellectual Property
other than pursuant to the Company License Agreements, and no royalties,
honoraria or other fees are payable by the Company or its Subsidiaries for the
use of or right to use any Intellectual Property licensed to the Company or
its Subsidiaries, except pursuant to the Company License Agreements. The
Company License Agreements are valid and binding obligations of all parties
thereto, enforceable in accordance with their terms. To the knowledge of the
Company, there exists no event or condition which will result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default by the Company or any other party under any such Company
License Agreement.
(g) The Company and each of its Subsidiaries take reasonable
measures to protect the confidentiality of Trade Secrets, including requiring
its employees and independent contractors having access thereto to execute
written non-disclosure agreements. To the knowledge of the Company, no Trade
Secret of the Company or its Subsidiaries have been disclosed or authorized to
be disclosed to any third party other than pursuant to a non-disclosure
agreement that protects the Company and the applicable Subsidiary's
proprietary interests in and to such Trade Secrets. Neither the Company nor,
to the knowledge of the Company, any other party to any non-disclosure
agreement relating to the Company's Trade Secrets is in breach or default
thereof.
(h) To the knowledge of the Company, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
owned by the Company or any of its Subsidiaries and no such claims have been
brought or threatened against any third party by the Company or any of its
Subsidiaries.
(i) The consummation of the transactions contemplated hereby
will not result in the loss or impairment of the Company or any of its
Subsidiaries' right to own or use any of the Intellectual Property, nor will
require the consent of any governmental authority or third party in respect of
any such Intellectual Property.
(j) Section 3.17(j) of the Company Disclosure Schedule lists all
Software sold, licensed, leased or otherwise distributed by the Company or any
of its Subsidiaries to any third party, and identifies which Software is sold,
licensed, leased, or otherwise distributed as the case may be. With respect to
the Software set forth in Section 3.17(j) of the Company Disclosure Schedule
which the Company or any of its Subsidiaries purports to own, such Software
was either developed (1) by employees of the Company or any of its
Subsidiaries within the scope of their employment; or (2) by independent
contractors who have assigned all of their rights in such Software to the
Company or any of its Subsidiaries pursuant to written agreements.
Section 3.18 Proprietary Rights and Confidentiality Agreements;
Consulting Agreements. Each current and former employee and officer of the
Company and its Subsidiaries has executed a confidential information and
invention assignment agreement or similar such agreement, in substantially the
form previously provided to Parent (a "Proprietary Rights and Confidentiality
Agreement"). All independent contractors that the Company or any of its
Subsidiaries has used, including those in India, have executed a consulting
agreement or similar such agreement, in substantially the form previously
provided to Parent (a "Consulting Agreement"). The Company is not aware that
any of the current or former employees, officers, and independent contractors
of the Company or any of its Subsidiaries is in violation of their respective
Proprietary Rights and Confidentiality Agreements or Consulting Agreements (as
applicable).
Section 3.19 Insurance. The Company and each of its Subsidiaries has
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of the
Company and its Subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and
its Subsidiaries are otherwise in compliance in all material respects with the
terms of such policies and bonds. The Company has not been notified of any
threatened termination of, or material premium increase with respect to, any
of such policies.
Section 3.20 Suppliers and Customers. Since September 30, 2002, no
material licensor, vendor, supplier, licensee or customer of the Company or
any of its Subsidiaries has canceled or otherwise modified its relationship
with the Company or its Subsidiaries and, to the Company's knowledge, (a) no
such person has any intention to do so, and (b) the consummation of the
transactions contemplated hereby will not adversely affect any of such
relationships, and no agreements with such parties have expired or terminated.
Section 3.21 Labor Matters.
(a) (i) The Company and its Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, health and safety, and wages and hours; (ii) Neither
the Company nor any of its Subsidiaries has received written notice of any
charge or complaint against the Company or any of its Subsidiaries pending
before the Equal Employment Opportunity Commission, the National Labor
Relations Board, or any other government agency or court or other tribunal
regarding an unlawful employment practice; (iii) Neither the Company nor any
of its Subsidiaries is a party to any collective bargaining agreement and
there is no labor strike, slowdown or stoppage actually pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries; (iv) Neither the Company nor any of its Subsidiaries has
received notice that any representation petition respecting the employees of
the Company or any of its Subsidiaries has been filed with the National Labor
Relations Board, and, to the knowledge of the Company, there has been no labor
union prior to the date hereof organizing any employees of the Company or any
of its Subsidiaries into one or more collective bargaining units; (v) There
are no complaints, lawsuits, arbitrations or other proceedings pending, or to
the knowledge of the Company, threatened by or on behalf of any present or
former employee of the Company or any of its Subsidiaries alleging breach of
any express or implied contract of employment; (vi) To the knowledge of the
Company, no federal, state, or local agency responsible for the enforcement of
labor or employment laws intends to conduct an investigation with respect to
or relating to the Company or any of its Subsidiaries and no such
investigation is in progress; (vii) There are no personnel arrangements,
understandings, policies, rules or procedures (whether written or oral)
applicable to employees of the Company or any of its Subsidiaries other than
those set forth in Section 3.21(a) of the Company Disclosure Schedule, true,
correct and complete copies of which have heretofore been delivered to Parent;
and (viii) There are no employment contracts, severance agreements,
confidentiality agreements (other than standard employee non-disclosure
agreements as contemplated by Section 3.21(vii)) or any other agreements
(whether written or oral) with any employees of the Company or any Subsidiary
thereto.
(b) The Company and its Subsidiaries are and have been in
substantial compliance with all notice and other requirements under the Worker
Adjustment and Retaining Notification Act ("WARN") or similar state statute.
None of the employees of the Company or any of its Subsidiaries have suffered
an "employment loss" (as defined in WARN) during the ninety (90)-day period
prior to the execution of this Agreement.
(c) Neither the Company nor any of its Subsidiaries is bound by
any contract, arrangement, understanding, policy, rule or procedure (whether
written or oral) that restricts its ability to terminate the employment of any
of its employees at any time without payment or other liability.
Section 3.22 Accounts Receivable; Inventory. Subject to any reserves
set forth in the balance sheet of the Company included in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, as
filed with the SEC prior to the date of this Agreement (the "Company Balance
Sheet"), the accounts receivable shown in the Company Balance Sheet arose in
the ordinary course of business; were not, as of the date of the Company
Balance Sheet, subject to any material discount, contingency, claim of offset
or recoupment or counterclaim; and represented, as of the date of the Company
Balance Sheet, bona fide claims against debtors for sales, leases, licenses
and other charges. All accounts receivable of the Company and its Subsidiaries
arising after the date of the Company Balance Sheet through the date of this
Agreement arose in the ordinary course of business and, as of the date of this
Agreement, are not subject to any material discount, contingency, claim of
offset or recoupment or counterclaim, except for normal reserves consistent
with past practice. The amount carried for doubtful accounts and allowances
disclosed in the Company Balance Sheet is believed by the Company as of the
date of this Agreement to be sufficient to provide for any losses which may be
sustained or realization of the accounts receivable shown in the Company
Balance Sheet. As of the date of the Company Balance Sheet, the inventories
shown on the Company Balance Sheet consisted in all material respects of items
of a quantity and quality usable or saleable in the ordinary course of
business. All of such inventories were acquired in the ordinary course of
business and, as of the date of this Agreement, have been replenished in all
material respects in the ordinary course of business consistent with past
practices. All such inventories are valued on the Company Balance Sheet in
accordance with GAAP applied on a basis consistent with the Company's past
practices, and provision has been made or reserves have been established on
the Company Balance Sheet, in each case in an amount believed by the Company
as of the date of this Agreement to be adequate, for all slow-moving, obsolete
or unusable inventories.
Section 3.23 Transactions with Affiliates. Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, since September 30, 2002, there have been no transactions,
agreements, arrangements or understandings between the Company and its
affiliates that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.
Section 3.24 Opinion of Financial Advisor. The Company has received
the written opinion of SoundView Technology Corporation ("SoundView"), dated
the date hereof, to the effect that, as of such date, the consideration to be
received by the stockholders of the Company in the Merger is fair to such
stockholders from a financial point of view, a signed copy of which opinion
has been delivered to Parent.
Section 3.25 Brokers or Finders. The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person, other than SoundView, is or
will be entitled to any brokers' or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, and the Company agrees to indemnify and hold Parent and Sub
harmless from and against any and all claims, liabilities or obligations with
respect to any other commissions or similar fees in connection with any of the
transactions contemplated by this Agreement which are asserted by any person
on the basis of any act or statement alleged to have been made by or on behalf
of the Company. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and SoundView, pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereby. The aggregate payments payable to SoundView as a result
of the consummation of the Merger, the purchase of any Securities, the
issuance of any securities, and otherwise in connection with the transactions
contemplated hereby and by the Ancillary Agreements, is set forth in Section
3.25 of the Company Disclosure Schedule.
Section 3.26 Tax Matters. None of the Company, any of its
Subsidiaries or, to the knowledge of the Company, any of their respective
directors, officers or stockholders, has taken any action which would prevent
the Merger from constituting a reorganization qualifying under the provisions
of Section 368(a) of the Code.
Section 3.27 State Takeover Statutes. To the knowledge of the
Company, no state takeover statute (other than Chapter 203 of the DGCL, which
is inapplicable) is applicable to the Merger or the transactions contemplated
by this Agreement and the Ancillary Agreements.
Section 3.28 Key Employee Compensation. Section 3.28 of the Company
Disclosure Schedule lists the total compensation or benefit due or
subsequently due pursuant to any agreement or understanding (written or
otherwise), including without limitation as of the date hereof for the Company
officers and the key employees of the Company listed on Schedule B, including
without limitation the following: (1) salary (on a bi-weekly basis) , (2)
bonus or any other incentive compensation arrangement (including performance
objectives and payout schedule), (3) options (including type (i.e. NSO or
ISO), quantity, exercise price, vesting schedule and acceleration), (4)
advances or loans; and (5) any other form of compensation or payment paid or
payable to such officer or key employee. Except as so designated on the
Company Disclosure Schedule, all such officers or key employees have agreed in
writing that there is no other compensation or benefits in any form to which
they are entitled or due presently or thereafter.
Section 3.29 Option Liability. With respect to options issued in
violation of applicable law, the aggregate liability to the Company for such
violation, assuming a rescission offer is effected by either party under
applicable law, could not exceed the amount set forth in Section 3.29 of the
Company Disclosure Schedule.
Section 3.30 Full Disclosure. The Company has not failed to disclose
to Parent any facts material to the Company's business, results of operations,
assets, liabilities, financial condition or prospects. No representation or
warranty by the Company in this Agreement and no statement by the Company
contained in any schedule or certificate furnished or to be furnished by the
Company to Parent pursuant to the terms hereof, or in connection with the
transactions contemplated hereby or thereby, contains as of the date hereof or
will contain as of the Effective Time, any untrue statements of a material
fact or omit or will omit to state any material fact necessary, in order to
make the statements made herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except as set forth in the disclosure schedule prepared and signed by
Parent and delivered to the Company simultaneously with the execution hereof
(the "Parent Disclosure Schedule"), the Parent and Sub represent and warrant
to the Company all of the statements contained in this Article IV. The Parent
Disclosure Schedule shall be arranged in sections corresponding to the
numbered and lettered sections contained in Article IV and shall qualify only
the corresponding sections in this Article and any other section hereof where
it is reasonably clear upon a reading of such disclosure without any
independent knowledge on the part of the reader regarding the matter
disclosed, that the disclosure is intended to apply to such other section.
Section 4.1 Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power, authority, and governmental approvals would not have a
material adverse effect on Parent and its Subsidiaries. Parent and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a material
adverse effect on Parent and its Subsidiaries.
Section 4.2 Capitalization.
(a) The authorized capital stock of Parent consists of
100,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $.001 per share (the "Parent Preferred Stock"). As of the
date two (2) days prior to the date hereof, (i) 30,484,301 shares of the
Parent Common Stock were issued and outstanding, (ii) no shares of Parent
Preferred Stock were issued and outstanding, (iii) 9,865,344 shares of the
Parent Common Stock were reserved for issuance upon the exercise of
outstanding options to purchase shares of the Parent Common Stock pursuant to
employee stock option plans of Parent, and (iv) 526,613 shares of Parent
Common Stock were reserved for issuance upon the exercise warrants to purchase
shares of Parent Common Stock. All of the issued and outstanding shares of
Parent Common Stock are validly issued, fully paid and nonassessable, were
issued in compliance with applicable law, and are not subject to any
preemptive or similar rights.
(b) There are not now, and at the Effective Time there will not
be any (i) Right to purchase or otherwise to receive from Parent or any of its
Subsidiaries any of the outstanding authorized but unissued or treasury shares
of the capital stock or any other security of Parent or any of its
Subsidiaries, (ii) security of any kind convertible into or exchangeable for
such capital stock and (iii) voting trust or other agreement or understanding
to which Parent or any of its Subsidiaries is a party or is bound with respect
to the voting of the capital stock of Parent or any of its Subsidiaries, and,
in the case of each of clause (i), (ii) and (iii), there is not now any
agreement, contract, commitment or arrangement to which the Parent or any of
its Subsidiaries is a party or is bound to issue or entire into, as
applicable, any of the foregoing.
Section 4.3 Authorization; Validity of Agreement; Company Action.
(a) Each of Parent and Sub has full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements
to which it is a party and, subject to obtaining approval and adoption of this
Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of Parent Common Stock of the issuance of Parent Common
Stock in connection with the Merger (the "Parent Stockholder Approval"), to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Ancillary Agreements to
which each of Parent and Sub, respectively, is a party and the consummation by
Parent and Sub of the Merger and of the other transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of Parent and Sub, respectively, and, subject to obtaining
the Parent Stockholder Approval, no other corporate actions on the part of
Parent and Sub are necessary to authorize the execution and delivery of this
Agreement or such Ancillary Agreements and the consummation by each of them of
the transactions contemplated hereby and thereby. Each of this Agreement and
the Ancillary Agreements to which each of Parent and Sub, respectively, is a
party has been duly executed and delivered by Parent or Sub, as the case may
be, and if applicable, the Parent's stockholders and affiliates, assuming each
of this Agreement and such Ancillary Agreements constitutes a valid and
binding obligation of the other parties hereto and thereto, constitutes a
valid and binding obligation of Parent or Sub, as the case may be, and Parents
stockholders and affiliates enforceable against Parent, Sub or Parent's
stockholders and affiliates, as the case may be, in accordance with their
respective terms, in accordance with its respective terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought. The shares of Parent Common Stock to be issued pursuant to the
Merger, upon receipt of the Parent Stockholder Approval, when issued in
accordance with the terms hereof, will be duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights.
(b) The Boards of Directors of Parent and Sub each have duly and
validly approved and taken all corporate action required to be taken by such
Board of Directors for the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements to which Parent or Sub, as the
case may be, is a party, and resolved to recommend that the stockholders of
the Parent approve and adopt this Agreement. The Parent Stockholder Approval
is the only vote of the holders of any class or series of Parent capital stock
necessary to approve this Agreement and to consummate the Merger.
Section 4.4 Consents and Approvals; No Violations. Except for
the Parent Stockholder Approval, the Merger Filing and filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the Securities Act and state
blue sky laws, neither the execution, delivery or performance of this
Agreement or any Ancillary Agreements by Parent and Sub nor the consummation
by Parent and Sub of the transactions contemplated hereby or thereby nor
compliance by Parent and Sub with any of the provisions hereof or thereof will
(i) conflict with or result in any breach of any provision of the respective
certificates of incorporation or by-laws of Parent or Sub, (ii) require any
filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, amendment, cancellation or acceleration or result
in the creation of any lien) under, any of the terms, conditions or provisions
of any material note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, license, lease, contract, agreement or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, any of its Subsidiaries or any of their properties or assets, except
in the case of clauses (ii), (iii) or (iv) where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings, or
where such violations, breaches or defaults would not, individually or in the
aggregate, have a material adverse effect on Parent and will not materially
impair the ability of Parent or Sub to consummate the transactions
contemplated hereby or by the Ancillary Agreements.
Section 4.5 Information in Proxy Statement/Prospectus. The
Registration Statement (or any amendment thereof or supplement thereto) will
not, at the date it becomes effective and at the times of the Special
Meetings, 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 are made,
not misleading, except that no representation is made by Parent or Sub with
respect to statements made therein based on information supplied by the
Company for inclusion in the Registration Statement. None of the information
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement/Prospectus, at the date mailed to stockholders and at the
times of the Special Meetings, will 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 are made, not misleading. The Registration
Statement, as to information supplied by Parent or Sub, will comply in all
material respects with the provisions of the Securities Act and the rules and
regulations thereunder.
Section 4.6 SEC Reports and Financial Statements. Parent has filed
with the SEC, and has heretofore made available to the Company true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it and its Subsidiaries since December 31,
2000 under the Exchange Act and the Securities Act (as such documents have
been amended since the time of their filing, collectively, the "Parent SEC
Documents"). As of their respective dates or, if amended, as of the date of
the last such amendment, the Parent SEC Documents, including, without
limitation, any financial statements or schedules included therein (a) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be,
the Xxxxxxxx-Xxxxx Act of 2002 and the applicable rules and regulations of the
SEC thereunder. The Parent SEC Documents include all the documents that Parent
was required to file with the SEC since December 31, 2000. Each of the
consolidated financial statements included in the Parent SEC Documents have
been prepared from, and are in accordance with, the books and records of
Parent and its consolidated Subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and present fairly the
consolidated financial position and the consolidated results of operations and
cash flows of Parent and its consolidated Subsidiaries as at the dates thereof
or for the periods presented therein.
Section 4.7 Absence of Certain Changes. Except as and to the extent
disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, since September 30, 2002, Parent and its Subsidiaries have
conducted their respective businesses and operations in all material respects
consistent with past practice only in the ordinary and usual course. From
September 30, 2002 through the date of this Agreement, there has not occurred
(i) any event, change or effect (including the incurrence of any liabilities
of any nature, whether or not accrued, contingent or otherwise) having or,
which would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on Parent and its Subsidiaries; (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to the equity interests of Parent or of
any of its Subsidiaries other than regular quarterly cash dividends or
dividends paid by wholly owned Subsidiaries; or (iii) any change by Parent or
any of its Subsidiaries in accounting principles or methods, except insofar as
may be required by a change in GAAP. Since September 30, 2002, neither Parent
nor any of its Subsidiaries has taken any of the actions prohibited by Section
5.2 hereof.
Section 4.8 No Undisclosed Liabilities. Since December 31, 2002,
neither Parent nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that (a) have, or would be reasonably likely to have, a material adverse
effect on Parent and its Subsidiaries or (b) would be required to be reflected
or reserved against on a consolidated balance sheet of Parent and its
Subsidiaries (including the notes thereto) prepared in accordance with GAAP as
applied in preparing the consolidated balance sheet of Parent and its
Subsidiaries as of the date hereof.
Section 4.9 Litigation; Compliance with Law.
(a) Except for the suits disclosed in the Parent SEC Documents
filed prior to the date of this Agreement, there is no suit, claim, action,
proceeding, arbitration or investigation pending or, to the knowledge of
Parent, threatened against or affecting, Parent or any of its Subsidiaries
which, individually or in the aggregate, is reasonably likely, individually or
in the aggregate, to have a material adverse effect on Parent and its
Subsidiaries, or materially impair the ability of Parent to consummate the
Merger or the other transactions contemplated hereby or by the Ancillary
Agreements. The foregoing includes, without limitation, actions pending or, to
the knowledge of Parent, threatened (or any basis therefor known to Parent)
involving the prior employment of any of Parent's or any of its Subsidiaries'
employees, their use in connection with Parent's or any of its Subsidiaries'
business of any information, techniques, patents, patent applications,
copyrights, trade secrets, inventions, technology, know-how, Software or other
intellectual property rights allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
Parent and its Subsidiaries have complied in a timely manner and
in all material respects, with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any
court or Governmental Entity relating to any of the property owned, leased or
used by them, or applicable to their business, including, but not limited to,
(1) the Foreign Corrupt Practices Act of 1977 and any other laws regarding use
of funds for political activity or commercial bribery and (2) laws relating to
equal employment opportunity, discrimination, occupational safety and health,
environmental, interstate commerce and antitrust.
Section 4.10 Brokers or Finders. No agent, broker, investment
banker, financial advisor or other firm or person, other than Bear, Xxxxxxx &
Co., Inc. and RBC Capital Markets, is or will be entitled to any brokers' or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, and Parent agrees to
indemnify and hold the Company harmless from and against any and all claims,
liabilities or obligations with respect to any other commissions or similar
fees or expenses in connection with any of the transactions contemplated by
the Agreement which are asserted by any person on the basis of any act or
statement alleged to have been made by or on behalf of such party.
Section 4.11 Taxes. Except where the failure of any of the following
to occur would not, individually or in the aggregate, have a material adverse
effect on Parent and its Subsidiaries:
(a) Parent and each of its Subsidiaries has timely filed (or has
had timely filed on its behalf) with the appropriate Tax Authorities all Tax
Returns required to be filed by Parent and each of its Subsidiaries, and such
Tax Returns are true, correct, and complete in all material respects.
(b) Parent and each of its Subsidiaries has paid, or where
payment is not yet due, has established an adequate accrual in accordance with
GAAP for the payment of, all Taxes for all periods ending through the date
hereof.
(c) There are no liens for Taxes upon any property or assets of
Parent or any of its Subsidiaries, except for liens for Taxes not yet due and
for which adequate reserves have been established in accordance with GAAP.
(d) No federal, state, local or foreign Audits are presently
pending with regard to any Taxes or Tax Returns of Parent and its Subsidiaries
and to the knowledge of Parent, no such Audit is threatened.
(e) The Tax Returns of Parent and each of its Subsidiaries have
been examined by the applicable Tax Authority (or the applicable statutory
period of limitation for the assessment of Taxes for such periods have
expired), and for any year that a Tax Return was examined, no material
adjustments were asserted as a result of such examination which have not been
resolved and fully paid, and no issue has been raised by any Tax Authority in
any Audit of Parent or any of its Subsidiaries that, if raised with respect to
any other period not so audited, could be expected to result in a proposed
deficiency for any such period not so audited.
(f) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against Parent or any of its
Subsidiaries, and no power of attorney granted by Parent or any of its
Subsidiaries with respect to any Taxes is currently in force.
(g) Neither Parent nor any of its Subsidiaries is a party to any
agreement providing for the allocation, indemnification, or sharing of Taxes.
Neither Parent nor any of its Subsidiaries has been a member of any
"affiliated group" (as defined in section 1504(a) of the Code) filing a
consolidated U.S. federal income tax return, other than a group the common
parent of which was the Parent; and neither Parent nor any of its Subsidiaries
is subject to Treas. Reg. 1.1502-6 for any period other than such periods
during which Parent and its Subsidiaries filed a consolidated U.S. federal
income tax return.
Section 4.12 Tax Matters. None of Parent, any of its Subsidiaries or,
to the knowledge of Parent, any of their respective directors, officers or
stockholders, has taken any action which would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section
368(a) of the Code.
Section 4.13 Operations of Sub. Sub 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 only as
contemplated by this Agreement.
Section 4.14 Full Disclosure. Parent has not failed to disclose to
the Company any facts material to Parent's business, results of operations,
assets, liabilities, financial condition or prospects. No representation or
warranty by Parent in this Agreement and no statement by Parent contained in
schedule or certificate furnished or to be furnished by Parent to the Company
pursuant to the terms hereof, or in connection with the transactions
contemplated hereby or thereby, contains as of the date hereof or will contain
as of the Effective Time, any untrue statements of a material fact or omit or
will omit to state any material fact necessary, in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants
and agrees that, except (i) as expressly provided in this Agreement or (ii)
with the prior written consent of Parent, after the date hereof and prior to
the Effective Time:
(a) the business of the Company and its Subsidiaries will be
conducted in the ordinary and customary course consistent with past practice
and each of the Company and its Subsidiaries shall use its best efforts to
preserve its business organization intact and maintain its existing relations
with customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, split,
combine or reclassify the outstanding Company Common Stock, or any
outstanding capital stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall (i)
amend its certificate of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock; (iii)
issue, sell, transfer, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its Subsidiaries, other than issuances
pursuant to the exercise of Company Options outstanding on the date hereof,
in accordance with their present terms; (iv) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any material assets other than in
the ordinary and usual course of business and consistent with past practice;
or (v) redeem, purchase or otherwise acquire directly or indirectly any of
its capital stock;
(d) neither the Company nor any of its Subsidiaries shall (i)
grant any increase in the compensation payable or to become payable
(including without limitation salaries, bonuses, shares of the Company Common
Stock or Rights to acquire the Company Common Stock or any other security of
the Company or any of its Subsidiaries) by the Company or any of its
Subsidiaries to any of its officers, directors, employees, agents or
consultants (other than increases for non-officer employees in the ordinary
course of business consistent with past practice); (ii) adopt or enter into
any new plan, policy, agreement or arrangement that would constitute a
Company Benefit Plan, or amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing Company Benefit Plan; (iii) enter into any, or amend any existing,
employment or severance agreement with or, except in accordance with the
existing written policies of the Company previously delivered to Parent,
grant any severance or termination pay to any officer, director, employee,
agent or consultant of the Company or any of its Subsidiaries; or (iv) make
any loans to any of its officers, directors, employees, agents or consultants
or make any changes in its existing borrowing or lending arrangements for or
on behalf of any of such persons, whether contingent on the Merger or
otherwise;
(e) neither the Company nor any of its Subsidiaries shall
modify, amend or terminate any of the Company Agreements or waive, release or
assign any material rights or claims, except in the ordinary course of
business and consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall
permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to Parent, except
in the ordinary course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall
license or otherwise transfer, dispose of, permit to lapse or otherwise fail
to preserve any of the Company's or any of its Subsidiaries' Intellectual
Property Rights, or dispose of or disclose to any person any trade secret,
formula, process or know-how not theretofore a matter of public knowledge,
except in the ordinary course of business and consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall
cancel any debts or waive, release or relinquish any contract rights or other
rights of substantial value, except settlements of accounts receivable in the
ordinary course of business and consistent with past practice;
(i) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt except for amounts set forth in the
Company's budget previously delivered to Parent and, except in the ordinary
course of business consistent with past practice, incur or assume any
short-term indebtedness in amounts not consistent with past practice; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person,
except in the ordinary course of business and consistent with past practice;
(iii) make any loans, advances or capital contributions to, or investments
in, any other person (other than to wholly owned Subsidiaries of the Company
or customary advances to employees for travel and business expenses in the
ordinary course of business and consistent with past practice; provided,
however, the Company shall not make any advance for travel and business
expenses in an amount over one thousand dollars ($1,000) without the prior
written consent of Parent); (iv) enter into any material commitment or
transaction (including, but not limited to, any borrowing, capital
expenditure or purchase, sale or lease of assets) other than capital
expenditures pursuant to the Company's capital expenditures budget previously
delivered to Parent and other capital expenditures that do not exceed
thirty-five thousand dollars ($35,000) in the aggregate as of the date
hereof; or (v) without the prior written consent of Parent, which shall not
be unreasonably withheld, enter into any new obligation to any third party in
an amount over thirty-five thousand dollars ($35,000) or enter into any new
obligations to any third party or parties in the aggregate amount over two
hundred thousand dollars ($200,000); provided, however, that notwithstanding
the foregoing Company may, in the ordinary course of business and consistent
with past practice, enter into new obligations with third parties for normal
recurring services and fees, such as utilities, regulatory filing fees, taxes
and similar items, without such consent of Parent;
(j) neither the Company nor any of its Subsidiaries shall (i)
change any of the accounting principles used by it unless required by GAAP;
or (ii) take or allow to be taken any action which would jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code;
(k) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligations (i) in the ordinary course of business and consistent with past
practice, or claims, liabilities or obligations reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated Subsidiaries, (ii) incurred in
the ordinary course of business and consistent with past practice or (iii)
which are legally required to be paid, discharged or satisfied (provided that
if such claims, liabilities or obligations referred to in this clause (iii)
are legally required to be paid and are also not otherwise payable in
accordance with clauses (i) or (ii) above, the Company will notify Parent in
writing if such claims, liabilities or obligations exceed, individually or in
the aggregate, $35,000 in value, reasonably in advance of their payment);
(l) neither the Company nor any of its Subsidiaries will adopt
a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries or any agreement relating to an
Alternative Transaction (as defined in Section 5.6(a) hereof);
(m) neither the Company nor any of its Subsidiaries will take,
or agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any respect at, or as
of any time prior to, the Effective Time;
(n) neither the Company nor any of its Subsidiaries will
voluntarily make or agree to make any changes in Tax accounting methods,
waive or consent to the extension of any statute of limitations with respect
to Taxes, or consent to any assessment of Taxes, or settle any judicial or
administrative proceeding affecting Taxes; and
(o) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing.
Section 5.2 Interim Operations of Parent. Parent covenants and
agrees that, except (i) as expressly provided in this Agreement, or (ii) with
the prior written consent of the Company, after the date hereof and prior to
the Effective Time:
(a) the business of Parent and its Subsidiaries will be
conducted in the ordinary and customary course consistent with past practice
and each of Parent and its Subsidiaries shall use its best efforts to
preserve its business organization intact and maintain its existing relations
with customers, suppliers, employees, creditors and business partners;
(b) Parent will not, directly or indirectly, split, combine or
reclassify the outstanding Parent Common Stock;
(c) Parent shall not: (i) amend its certificate of
incorporation or by-laws; or (ii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to its
capital stock other than regular quarterly cash dividends consistent with
past practice;
(d) neither Parent nor any of its Subsidiaries shall (i) change
any of the accounting principles used by it unless required by GAAP; or (ii)
take or allow to be taken any action which would jeopardize qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code;
(e) neither Parent nor any of its Subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of Parent and Sub contained herein inaccurate in any respect at, or
as of any time prior to, the Effective Time; and
(f) neither Parent nor any of its Subsidiaries will enter into
an agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.3 Access to Information. The Company and Parent shall (and
shall cause each of their respective Subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives
of each other, access, during normal business hours, during the period prior
to the Effective Time, to all of the Company's or Parent's, as the case may
be, and its Subsidiaries' properties, books, contracts, commitments and
records and, during such period, the Company and Parent shall (and shall
cause each of their respective Subsidiaries to) furnish promptly to each
other (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as the requesting party may
reasonably request. Unless otherwise required by law, until the Effective
Time, Parent and the Company will hold, and cause their respective officers
(collectively, "Representatives"), employees, accountants, counsel, financing
sources and other representatives to hold, any such information which is
nonpublic in confidence in accordance with the provisions of the Mutual
Non-Disclosure Agreement between the Company and Parent, dated as of March 6,
2002 (the "Confidentiality Agreement"). Notwithstanding the foregoing, Parent
and the Company, its Affiliates and its and their Representatives (the
"Recipient Parties") are each hereby expressly authorized to disclose to any
and all persons, without limitation of any kind, the structure and tax
aspects of the transactions contemplated by this Agreement and all materials
of any kind (including opinions or other tax analyses) that are provided to
the Recipient Parties related to such structure and tax aspects. The
disclosure of the structure or tax aspects of the transactions contemplated
by this Agreement is not limited in any way by an express or implied
understanding or agreement, oral or written (whether or not such
understanding or agreement is legally binding).
Section 5.4 Consents and Approvals. Each of the Company, Parent and
Sub will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on it with respect to this Agreement
and the transactions contemplated hereby (which actions shall include,
without limitation, furnishing all information in connection with approvals
of or filings with any Governmental Entity) and will promptly cooperate with
and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their Subsidiaries in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby. Each of the Company, Parent and Sub will,
and will cause its respective Subsidiaries to, take all reasonable actions
necessary to obtain any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity (collectively, the "Requisite
Regulatory Approvals") or otherwise any public or private third party
required to be obtained or made by Parent, Sub, the Company or any of their
Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement or the Ancillary Agreements.
Section 5.5 Employment Agreements. Prior to the Closing, the Company
shall, upon Parent's request, extend offers of employment, to be effective as
of the Effective Time and to be subject to consummation of the Merger, to
certain key employees of the Company identified by Parent, in each case on
terms to be proposed by Parent, the effectiveness of which offer letters
shall be conditioned upon the consummation of the transactions consummated
hereby. With regard to the key employee compensation set forth in Section
3.28 of the Company Disclosure Schedule, the Company shall not modify the
terms and conditions of any compensation or benefit to such persons
subsequent to the date hereof without the prior written consent of Parent.
Section 5.6 No Solicitation by the Company.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its Subsidiaries
to, directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
the consummation of which would constitute an Alternative Transaction or (ii)
participate in any discussions or negotiations regarding any Alternative
Transaction; provided, however, that if, at any time prior to the adoption of
this Agreement by the holders of the Company Common Stock, the Company Board
determines in good faith, after receipt of advice from outside counsel, that
such action is required for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under applicable law, the Company
may, in response to any such proposal that was not solicited by it or which
did not otherwise result from a breach of this Section 5.6(a), and subject to
compliance with Section 5.6(c) hereof, (A) furnish information with respect
to the Company and its Subsidiaries to any person pursuant to a customary
confidentiality agreement containing terms as to confidentiality no less
restrictive than the Confidentiality Agreement and (B) participate in
discussions or negotiations regarding such proposal. For purposes of this
Agreement, "Alternative Transaction" means any of (i) a transaction or series
of transactions pursuant to which any person (or group of persons) other than
the Company and its Subsidiaries and other than Parent and its Subsidiaries
(a "Third Party") acquires or would acquire, directly or indirectly,
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of
more than thirty percent (30%) of the outstanding shares of the Company,
whether from the Company or pursuant to a tender offer or exchange offer or
otherwise, (ii) any acquisition or proposed acquisition of the Company or any
of its significant Subsidiaries by a merger or other business combination
whether or not the Company or any of its significant Subsidiaries is the
entity surviving any such merger or business combination) or (iii) any other
transaction pursuant to which any Third Party acquires or would acquire,
directly or indirectly, control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of the Company and any entity
surviving any merger or combination including any of them) of the Company or
any of its Subsidiaries for consideration equal to thirty percent (30%) or
more of the fair market value of all of the outstanding shares of the Company
Common Stock on the date prior to the date hereof.
(b) Neither the Company Board nor any committee thereof shall
(i) except as expressly permitted by this Section 5.6, withdraw, qualify or
modify, or propose publicly to withdraw, qualify or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors
or such committee of the Merger or this Agreement, (ii) approve or recommend,
or propose publicly to approve or recommend, any Alternative Transaction, or
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a
"Acquisition Agreement") related to any Alternative Transaction.
Notwithstanding the foregoing, in the event that prior to the adoption of
this Agreement by the holders of the Company Common Stock the Company Board
determines in good faith, after it has received a Superior Proposal (as
defined below) and after receipt of advice from outside counsel, that such
action is required for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under applicable law, the Company
Board may (subject to this and the following sentences) inform the Company
stockholders that it no longer believes that the Merger or this Agreement is
advisable and no longer recommends approval of the Merger or this Agreement
(a "Subsequent Determination"), but only at a time that is after the fifth
(5th) business day following Parent's receipt of written notice advising
Parent that the Company Board has received a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal, identifying the
person making such Superior Proposal and stating that it intends to make a
Subsequent Determination. After providing such notice, the Company shall
provide Parent three (3) business days from the date of such notice to make
such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with its original recommendation to
stockholders without making a Subsequent Determination; provided, however,
that any such adjustments shall be at the discretion of the parties at such
time. For purposes of this Agreement, a "Superior Proposal" means any
proposal (on its most recently amended or modified terms, if amended or
modified) made by a Third Party to enter into an Alternative Transaction on
terms which the Company Board determines in its good faith judgment (after
consultation with SoundView or other financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders
than the Merger taking into account all relevant factors (including whether,
in the good faith judgment of the Company Board, after consultation with
SoundView or other financial advisor of nationally recognized reputation, the
Third Party is reasonably able to finance the transaction, and any proposed
changes to this Agreement that may have been proposed by Parent in response
to such Alternative Transaction). Notwithstanding any other provision of this
Agreement, the Company shall submit this Agreement to its stockholders
whether or not the Company Board makes a Subsequent Determination.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.6, the Company shall promptly advise
Parent orally and in writing of any request for information or of any
proposal in connection with an Alternative Transaction, the material terms
and conditions of such request or proposal and the identity of the person
making such request or proposal. The Company will keep Parent reasonably
informed of the status and details (including amendments or proposed
amendments) of any such request or proposal on a current basis.
(d) Nothing contained in this Section 5.6 shall prohibit the
Company from (i) taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange
Act or (ii) from making any disclosure to its stockholders if, in the good
faith judgment of the Company Board, after receipt of advice from outside
counsel, failure so to disclose would violate its fiduciary duties to the
Company's stockholders under applicable law.
Section 5.7 Stockholders' Meeting.
(a) In order to consummate the Merger, the Company, acting
through its Board of Directors, shall, in accordance with applicable law and
the rules of The Nasdaq Stock Market, duly call, give notice of, convene and
hold a special meeting of its stockholders (the "Company Special Meeting"),
as soon as practicable after the Registration Statement is declared
effective, for the purpose of considering and voting upon this Agreement.
Subject to Section 5.6 hereof, the Company shall include in the Proxy
Statement/Prospectus the unanimous recommendation of the Company Board that
stockholders of the Company vote in favor of the adoption of this Agreement.
Nothing contained in the preceding sentence shall prohibit the Company from
(i) taking and disclosing to its stockholders a position contemplated by Rule
14d-9 or 14e-2 promulgated under the Exchange Act or (ii) from making any
disclosure to its stockholders if, in the good faith judgment of the Company
Board, after receipt of advice from outside counsel, failure so to disclose
would violate its fiduciary duties to the Company's stockholders under
applicable law.
(b) In order to consummate the Merger, Parent, acting through
its Board of Directors (the "Parent Board"), shall, in accordance with
applicable law and the rules of The Nasdaq Stock Market, duly call, give
notice of, convene and hold a special meeting of its stockholders (the
"Parent Special Meeting" and, together with the Company Special Meeting, the
"Special Meetings"), as soon as practicable after the Registration Statement
is declared effective, for the purpose of considering and voting upon the
issuance of shares of Parent Common Stock in the Merger. Parent shall include
in the Proxy Statement/Prospectus the unanimous recommendation of the Parent
Board that stockholders of Parent vote in favor of such issuance of shares of
Parent Common Stock in the Merger. Nothing contained in the preceding
sentence shall prohibit Parent from (i) taking and disclosing to its
stockholders a position contemplated by Rule 14d-9 or 14e-2 promulgated under
the Exchange Act or (ii) making any disclosure to its stockholders if, in the
good faith judgment of the Parent Board, after receipt of advice from outside
counsel, failure so to disclose would violate its fiduciary duties to
Parent's stockholders under applicable law.
(c) Parent and the Company shall use all commercially
reasonable efforts to hold the Parent Special Meeting and the Company Special
Meeting on the same date and as soon as reasonably practicable after the date
hereof.
Section 5.8 Proxy Statement/Prospectus; Registration Statement.
(a) Parent and the Company shall use commercially reasonable
efforts to prepare and file with the SEC, as promptly as practicable after
the execution of this Agreement, a joint proxy statement relating to the
Special Meetings to be held in connection with the Transactions (together
with any amendments thereof or supplements thereto, the "Proxy
Statement/Prospectus"). Parent shall use commercially reasonable efforts to
prepare and file with the SEC, as promptly as practicable after the execution
of this Agreement, a registration statement on Form S-4 (together with all
amendments thereto, the "Parent Registration Statement"), in which the Proxy
Statement/Prospectus shall be included as a prospectus, in connection with
the registration under the Securities Act of the issuance of shares of Parent
Common Stock and warrants to purchase shares of Parent Common Stock to be
issued pursuant to the Merger. Each of Parent and the Company (i) shall cause
the Proxy Statement/Prospectus and the Parent Registration Statement to
comply as to form in all material respects with the applicable provision of
the Securities Act, the Exchange Act and the rules and regulations
thereunder, (ii) shall use all reasonable efforts to have or cause the Parent
Registration Statement to become effective as promptly as practicable, and
(iii) shall take any and all 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. Parent and the Company shall furnish to
the other all information concerning Parent and the Company as the other may
reasonably request in connection with the preparation of the documents
referred to herein. As promptly as practicable after the Parent Registration
Statement shall have become effective, each of Parent and the Company shall
deliver the Proxy Statement/Prospectus to its respective stockholders.
(b) The information supplied by each of Parent and the Company
for inclusion in the Parent Registration Statement and the Proxy
Statement/Prospectus shall not (i) at the time the Parent Registration
Statement is declared effective, (ii) at the time the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of Parent or the Company, (iii) at the time
of the Special Meetings, or (iv) at 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, any Subsidiary of the Company, Parent,
any Subsidiary of Parent, or their respective officers or directors, should
arise or be discovered by such party which should be set forth in an
amendment or a supplement to the Parent Registration Statement or the Proxy
Statement/Prospectus, such party shall promptly inform the other thereof and
take appropriate action in respect thereof. Parent may suspend the
effectiveness or distribution of the Proxy Statement/Prospectus, as
reasonably deemed appropriate, pending resolution of such event or
circumstance.
Section 5.9 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto 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, whether under
applicable laws and regulations or otherwise, or to remove any injunctions or
other impediments or delays, legal or otherwise, to consummate and make
effective the Merger and the other transactions contemplated by this
Agreement and the Ancillary Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or the Ancillary Agreements, the proper officers
and directors of the Company and Parent shall use all reasonable efforts to
take, or cause to be taken, all such necessary actions.
Section 5.10 Publicity. So long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall
issue or cause the publication of any press release or other announcement
with respect to the Merger, this Agreement, the Ancillary Agreements, or the
other transactions contemplated hereby or thereby without the prior
consultation of the other party, except as may be required by law or by any
listing agreement with a national securities exchange. Without limiting the
foregoing, so long as this Agreement is in effect, the Company shall not
issue or cause the publication of any press release or other announcement
without the prior consent of Parent, which consent shall not be unreasonably
withheld.
Section 5.11 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material respect at or
prior to the Effective Time and (ii) any material failure of the Company or
Parent, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder or under any
Ancillary Agreement; provided, however, that the delivery of any notice
pursuant to this Section 5.11 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 5.12 Directors' and Officers' Insurance and Indemnification.
(a) Parent agrees that at all times after the Effective Time,
it shall indemnify, or shall cause the Company (or the Surviving Corporation
if after the Effective Time) and its Subsidiaries to indemnify, each person
who is now, or has been at any time prior to the date hereof, a director or
officer of the Company or of any of the Company's Subsidiaries, successors
and assigns (individually an "Indemnified Party" and collectively the
"Indemnified Parties"), to the same extent and in the same manner as is now
provided in the respective certificates of incorporation, by-laws of the
Company and such Subsidiaries or in indemnity agreements between the Company
or its Subsidiaries and such persons or otherwise in effect on the date
hereof, with respect to any claim, liability, loss, damage, cost or expense
(whenever asserted or claimed) ("Indemnified Liability") based in whole or in
part on, or arising in whole or in part out of, any matter existing or
occurring at or prior to the Effective Time. Without limiting the foregoing,
in the event any Indemnified Party becomes involved in any capacity in any
action, proceeding or investigation based in whole or in part on, or arising
in whole or in part out of, any matter, including the transactions
contemplated hereby, existing or occurring at or prior to the Effective Time,
then to the extent permitted by law Parent shall, or shall cause the Company
(or the Surviving Corporation if after the Effective Time) to, periodically
advance to such Indemnified Party its legal and other expenses (including the
cost of any investigation and preparation incurred in connection therewith),
subject to the provision by such Indemnified Party of an undertaking to
reimburse the amounts so advanced in the event of a final determination by a
court of competent jurisdiction that such Indemnified Party is not entitled
thereto. Promptly after receipt by an Indemnified Party of notice of the
assertion (an "Assertion") of any claim or the commencement of any action
against him in respect to which indemnity or reimbursement may be sought
against Parent, the Company, the Surviving Corporation or a Subsidiary of the
Company or the Surviving Corporation ("Indemnitors") hereunder, such
Indemnified Party shall notify any Indemnitor in writing of the Assertion,
but the failure to so notify any Indemnitor shall not relieve any Indemnitor
of any liability it may have to such Indemnified Party hereunder except where
such failure shall have materially prejudiced Indemnitor in defending against
such Assertion. Indemnitors shall be entitled to participate in and, to the
extent Indemnitors elect by written notice to such Indemnified Party within
thirty (30) days after receipt by any Indemnitor of notice of such Assertion,
to assume, the defense of such Assertion, at their own expense, with counsel
chosen by Indemnitors and reasonably satisfactory to such Indemnified Party.
Notwithstanding that Indemnitors shall have elected by such written notice to
assume the defense of any Assertion, such Indemnified Party shall have the
right to participate in the investigation and defense thereof, with separate
counsel chosen by such Indemnified Party, but, until there is a conflict
between the positions of the Indemnified Party and the Indemnitors, the fees
and expenses of such counsel shall be paid by such Indemnified Party. No
Indemnified Party shall settle any Assertion without the prior written
consent of Parent, nor shall Parent settle any Assertion without either (i)
the written consent of all Indemnified Parties against whom such Assertion
was made, or (ii) obtaining a general release from the party making the
Assertion for all Indemnified Parties as a condition of such settlement.
(b) For a period of six (6) years after the Effective Time,
Parent shall cause to be maintained in effect the current directors' and
officers' liability insurance policies maintained by the Company on the date
hereof (provided that Parent may substitute therefor policies of at least the
same coverage containing terms and conditions, taken as a whole, that are no
less advantageous) with respect to claims arising from facts or events that
occurred prior to the Effective Time; provided, however, that in no event
shall Parent be required to maintain coverage in an amount greater than the
amount set forth in Section 5.12(b) of the Company Disclosure Schedule.
(c) This Section 5.12 is intended to be for the benefit of, and
shall be enforceable by, the Indemnified Parties and their heirs and personal
representatives and shall be binding on Parent and Surviving Corporation and
its successors and assigns. In the event the Company or the Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity in such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any
person, then, and in each case, proper provision shall be made so that the
successors and assigns of the Company or the Surviving Corporation, as the case
may be, honor the indemnification obligations set forth in this Section 5.12.
Section 5.13 Affiliate Agreements. The Company has previously
delivered to Parent a list setting forth the names of all persons who are
expected to be, at the time of the Special Meetings, in the Company's
reasonable judgment, "affiliates" of the Company for purposes of Rule 145
under the Securities Act. The Company shall furnish such information and
documents as Parent may reasonably request for the purpose of reviewing such
list. The Company shall use its reasonable best efforts to cause each person
who is identified as an "affiliate" in the list furnished pursuant to this
Section 5.13 to execute a written agreement as soon as practicable after the
date hereof, but in no event later than the day preceding the filing of the
Registration Statement, in substantially the form of Exhibit E hereto.
Section 5.14 Cooperation. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (i) with respect to the timing of the Special
Meetings and shall use commercially reasonable efforts to hold the Special
Meetings on the same day, (ii) in determining whether any action by or in
respect of, or filing with, any Governmental Entity is required, or any
actions, consents approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements, and
(iii) in seeking any such actions, consents, approvals or waivers or making
any such filings, furnishing information required in connection therewith and
timely seeking to obtain any such actions, consents approvals or waivers.
Subject to the terms and conditions of this Agreement, Parent and the Company
will each use its reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
the Registration Statement is filed, and Parent and the Company shall,
subject to applicable law, confer on a regular and frequent basis with one or
more representatives of one another to report operational matters of
significance to the Merger and the general status of ongoing operations
insofar as relevant to the Merger, provided that the parties will not confer
on any matter to the extent inconsistent with law.
Section 5.15 Plan of Reorganization.
(a) This Agreement is intended to constitute a "plan of
reorganization" within the meaning of section 1.368-2(g) of the income tax
regulations promulgated under the Code. From and after the date of this
Agreement and until the Effective Time, each party hereto shall use its
commercially reasonable efforts to cause the Merger to qualify, and will not
knowingly take any action, cause any action to be taken, fail to take any
action or cause any action to fail or to be taken which action or failure to
act could prevent the Merger from qualifying as a reorganization under the
provisions of section 368(a) of the Code. Following the Effective Time,
neither the Surviving Corporation, Parent nor any of their affiliates shall
knowingly take any action, cause any action to be taken, fail to take any
action or cause any action to fail to be taken, which action or failure to
act could cause the Merger to fail to qualify as a reorganization under
section 368(a) of the Code.
(b) As of the date of this Agreement, the Company does not know
of any reason why it would not be able to deliver to Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP ("Xxxxxxx Xxxx") or Xxxx Xxxx Xxxx & Freidenrich LLP
("Xxxx Xxxx"), at the date of the legal opinions referred to below,
certificates substantially in compliance with IRS published advance ruling
guidelines, with customary exceptions and modifications thereto, to enable
such firms to deliver the legal opinions contemplated by Sections 6.2(f) and
6.3(d), and the Company hereby agrees to deliver such certificates effective
as of the date of such opinions.
(c) As of the date of this Agreement, Parent and Sub do not
know of any reason why they would not be able to deliver to Xxxxxxx Xxxx or
Xxxx Xxxx, at the date of the legal opinions referred to below, certificates
substantially in compliance with IRS published advance ruling guidelines,
with customary exceptions and modifications thereto, to enable such firms to
deliver the legal opinions contemplated by Sections 6.2(f) and 6.3(d), and
Parent hereby agrees to deliver such certificates effective as of the date of
such opinions.
Section 5.16 Consents of Accountants. Parent and the Company will
each use reasonable best efforts to cause to be delivered to each other
consents from their respective independent auditors, dated the date on which
the Registration Statement shall become effective, in form reasonably
satisfactory to the recipient and customary in scope and substance for
consents delivered by independent public accountants in connection with
registration statements on Form S-4 under the Securities Act.
Section 5.17 Commercially Reasonable Efforts and Further Assurances.
Subject to the terms and conditions hereof, each of the parties to this
Agreement shall use commercially reasonable efforts to effect the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to the Merger under this Agreement. Subject to the terms and
conditions hereof, each party hereto, at the reasonable request of another
party hereto, shall execute and deliver such other instruments and do and
perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
Section 5.18 Nasdaq Qualification. Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger
to be qualified for inclusion in the Nasdaq Stock Market, subject to official
notice of issuance, as of or prior to the Effective Time.
Section 5.19 Employee Plans and Arrangements
(a) As soon as practicable after the execution of this
Agreement, the Company and Parent shall confer and work together in good
faith to agree upon mutually acceptable employee benefit and compensation
arrangements (and amend or terminate Company employee plans immediately prior
to the Effective Time, if appropriate, provided, however, that if any Company
Benefit Plan is to be terminated, Parent shall provide Company with written
notice, at least three (3) days prior to the Effective Time, of such decision
to terminate any such plan). Parent shall use commercially reasonable efforts
to ensure that continuous employment with the Company or its Subsidiaries
shall be credited to Company employees who become Parent employees or become
Continuing Employees for all purposes of eligibility and vesting of benefits
but not for purposes of accrual of benefits under Parent benefit, incentive
or compensation plans. Parent shall take commercially reasonable steps to (a)
cause to be waived all limitations as to preexisting condition limitations,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the employees of the Company and its Subsidiaries
under any welfare benefit plans that such employees are eligible to
participate in after the Effective Time, other than limitations, exclusions
or waiting periods that are already in effect with respect to such employees
and that have not been satisfied as of the Effective Time under any welfare
benefit plan maintained for such employees immediately prior to the Effective
Time and (b) provide each employee of the Company and its Subsidiaries with
credit for any co-payments and deductibles paid during the plan year
commencing immediately prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans
that such employees are eligible to participate in after the Effective Time
for such plan year.
(b) Prior to the Closing, the Company shall amend the Company
Option Plans and forms of option agreements thereunder, (x) to conform the
terms and conditions applicable to options granted under such Company Option
Plans to the terms and conditions applicable to options granted under
Parent's 1999 Omnibus Incentive Plan and standard form of option agreements
under such plan, and (y) with respect to the 1998 Stock Plan, (A) to provide
that, following the Closing, the calculation of the annual share
replenishment feature set forth in Section 3 of such plan shall be based on
the number of shares of Parent Common Stock issued and outstanding on the
last day of the Parent's preceding fiscal year, and (B) to provide that the
number of shares Company Common Stock available for grant immediately
following the Closing under such plan shall be no less than 1,500,000 shares
of Company Common Stock (without giving effect to the Exchange Ratio).
Section 5.20 Grant of New Options. Subject to availability under the
Assumed Company Option Plans, within five (5) days following the Closing
Date, Parent shall grant new options to employees of the Company who continue
as employees of the Surviving Corporation or Parent after the Effective Time
(the "Continuing Employees") to purchase up to 1,000,000 shares of the Parent
Common Stock at an exercise price equal to the closing price of the Parent
Common Stock on the date of grant pursuant to an Assumed Company Option Plan.
In the event that the Company for any reason does not grant new Company
Options, as recently contemplated, to purchase an aggregate of 689,000 shares
of Company Common Stock to the Continuing Employees prior to the Closing
Date, within five (5) days following the Closing Date, Parent shall, based on
the particular allocation of options to purchase Company Common Stock in such
aforementioned contemplated grant by the Company, grant new options to the
Continuing Employees to purchase a comparable number of shares the Parent
Common Stock, after giving effect to the Exchange Ratio (consistent with the
applicable conversion provision of assumed Company Options of Section 2.6
hereof), from the Assumed Company Option Plans assumed by Parent at an
exercise price equal to the closing price of the Parent Common Stock on the
date of grant. The Company shall grant all or none of such new Company
Options prior to the Closing Date. In no event shall Parent be obligated to
grant any such options to Continuing Employees from any of Parent's stock
option plans in effect on or after the Closing other than the Assumed Company
Option Plans.
Section 5.21 Payroll Tax Matters. Prior to Closing, the Company and
each of its Subsidiaries shall take all appropriate actions, subject to the
review and approval of Parent in its sole determination, to (i) satisfy any
Company liability in respect of the underpayment of employment taxes,
interest, and penalties, arising from, in connection with, or attributable to
cancellation of indebtedness income for Company present or former employees
as well as any other item of unreported compensation (the "Affected Payroll
Items") and (ii) amend any Tax Returns, including without limitation, payroll
tax and information returns, previously filed with the relevant governmental
authorities in order that such filings, as amended, properly take into
account the Affected Payroll Items.
Section 5.22 Netherlands Lease. The Company shall use commercially
reasonable efforts to terminate the Rental Agreement Office Space (for the
premises located at 00xx Xxxxx, Xx Xxxxxxxxxx, Xxxxxxxxxxxx, Xxxxxxxxx,
Xxxxxxxxxxx), by and between Dreef Tower Amsterdam, ValiCert, Inc. and
ValiCert B.V., dated Xxxxx 00, 0000 (xxx "Xxxxxxxxxxx Lease") prior to the
Closing, and settle any and all litigation pending or threatened (including
obtaining an unconditional release to forever discharge the Company and its
Subsidiaries and Parent and its Subsidiaries from any liability related to or
arising from the Netherlands Lease) related to the Netherlands Lease prior to
the Closing, in each case, on terms and conditions reasonably satisfactory to
Parent.
Section 5.23 Reseller Practices. The Company shall use all
reasonable efforts to amend its agreements with each of the Company's
resellers set forth in Schedule 5.23 attached hereto (each, a "Company
Reseller"), so that by no later than the sixtieth (60) day following the
Effective Date, each Company Reseller shall have adopted sales practices
consistent with the revenue recognition practices of Parent, including, but
not limited to, the practice of requiring such Company Reseller to deliver to
the Company a fully executed end user license agreement, in form and
substance reasonably acceptable to Parent, within five (5) days following any
sale or transfer of the Company's software products by such Company Reseller
to any third party.
Section 5.24 Rescission Offer. The Company shall use commercially
reasonable efforts to complete a written offer to repurchase securities in
accordance with the terms and conditions of Section 25507(b) through (d) of
the California Corporations Code (the "Corporations Code") in order that all
optionees of Company be precluded from commencing an action under Section
25503 of the Corporations Code by reason of Section 25507(b) (the "Written
Offer"), prior to the Closing. The Written Offer, to the extent permitted by
the California Department of Corporations, shall be in the form set forth
under Section 260.507 of Title 10 of the California Code of Regulations and
shall conform to the guidelines set forth in Corporate Securities Release No.
36-C or other such appropriate form.
Section 5.25 Board of Directors.
(a) Parent shall take all necessary corporate action such that
upon the Closing, one (1) individual designated by the Company (the "Company
Designee") shall be a director of the Board of Directors, such Company
Designee to be selected and named prior to the filing of the Parent
Registration Statement.
(b) Notwithstanding anything to the contrary in the foregoing,
the selection of the Company Designee shall be subject to the approval of
each of the Company's and Parent's Board of Directors.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to the Obligations of Each Party. The
obligations of the Company, on the one hand, and Parent and Sub, on the other
hand, to consummate the Merger are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of
the following conditions:
(a) the Company shall have received the Company Stockholder
Approval;
(b) Parent shall have received Parent Stockholder Approval;
(c) no court, arbitrator or governmental body, agency or
official shall have issued any order, and there shall not be any statute, rule
or regulation, restraining or prohibiting (collectively, "Restraints") the
consummation of the Merger or the effective operation of the business of the
Company and its respective Subsidiaries after the Effective Time;
(d) all Requisite Regulatory Approvals shall have been obtained
but excluding any Requisite Regulatory Approval the failure to obtain which
would not have a material adverse effect on Parent, Sub, the Company or,
after the Effective Time, the Surviving Corporation;
(e) the shares of Parent Common Stock to be issued in the
Merger shall have been qualified for inclusion in Nasdaq Stock Market; and
(f) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the SEC.
Section 6.2 Conditions to the Obligations of Parent and Sub.
The obligations of Parent and Sub to consummate the Merger are subject to the
satisfaction (or waiver by Parent) of the following further conditions:
(a) the representations and warranties of the Company shall be
true and accurate both when made and (except for those representations and
warranties that address matters only as of a particular date which need only
be true and accurate as of such date) as of the Effective Time as if made at
and as of such time, except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation
as to "materiality" or "material adverse effect" set forth therein), does not
have, and is not reasonably likely to have, individually or in the aggregate,
a material adverse effect on the Company and its Subsidiaries taken as a
whole; provided, that the representations and warranties set forth in
Sections 3.2, 3.3 and 3.28 shall be true and correct in all respects;
provided, however, that the representations and warranties set forth in
Section 3.2 shall be deemed true and correct in all respects if the sum of
the differences between (i) the number of shares identified in each of the
respective clauses set forth in Section 3.2; and (ii) the actual number of
shares required to be identified in each such clause set forth in Section 3.2
is less than, in the aggregate, thirty thousand (30,000) shares;
(b) the Company shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior
to the Effective Time;
(c) the Company shall have obtained, and there shall be in full
force and effect, the consents described in Section 6.2 of the Company
Disclosure Schedule, if any;
(d) each of the Ancillary Agreements shall be valid, in full
force and effect and complied with in all material respects;
(e) since the date of this Agreement, there shall not have
occurred any event, change or effect having, individually or in the
aggregate, a material adverse effect on the Company and its Subsidiaries;
(f) Parent shall have received the opinion of Xxxxxxx Xxxx,
counsel to Parent, based upon representations of Parent, Merger Sub and the
Company and normal assumptions, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization qualifying under the
provisions of section 368(a) of the Code, which opinion shall not have been
withdrawn or modified in any material respect. The issuance of such opinion
shall be conditioned on receipt by Xxxxxxx Xxxx of representation letters
from each of Parent and Company as contemplated in Section 5.15 of this
Agreement. Each such representation letter shall be dated on or before the
date of such opinion and shall not have been withdrawn or modified in any
material respect as of the Effective Time;
(g) Parent shall have received an opinion of Xxxx Xxxx,
substantially in the form attached as Exhibit F-1 hereto and otherwise
reasonably satisfactory in form and substance to Parent, addressed to Parent;
(h) The Company shall have furnished Parent with a certificate
dated the Closing Date signed on behalf of it by the Chairman of the Board of
Directors of the Company or the President and Chief Financial Officer of the
Company to the effect that the conditions set forth in Sections 6.2(a)
through (f) have been satisfied; and
(i) Each employee of the Company as of the Effective Time shall
have executed and delivered a Proprietary Rights and Confidentiality
Agreement (as defined in Section 3.18) and confirmation of "at will"
employment to Parent.
Section 6.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction (or waiver by the Company) of the following further conditions:
(a) the representations and warranties of Parent and Sub shall
be true and accurate (except for those representations and warranties that
address matters only as of a particular date which need only be true and
accurate as of such date) as of the Effective Time as if made at and as of
such time, except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), does not have,
individually or in the aggregate, a material adverse effect on Parent and its
Subsidiaries taken as a whole; provided, that the representations and
warranties set forth in Sections 4.2 and 4.3 shall be true and correct in all
respects;
(b) each of Parent and Sub shall have performed in all material
respects all of the respective obligations hereunder required to be performed
by Parent or Sub, as the case may be, at or prior to the Effective Time;
(c) since the date of this Agreement, there shall not have
occurred any event, change or effect having, or which could be reasonably
likely to have, individually or in the aggregate, a material adverse effect
on Parent and its Subsidiaries, taken as a whole;
(d) the Company shall have received the opinion of Xxxx Xxxx,
counsel to the Company, based upon representations of Parent, Sub and the
Company, and normal assumptions, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization qualifying under
the provisions of section 368(a) of the Code, which opinion shall not have
been withdrawn or modified in any material respect. The issuance of such
opinion shall be conditioned on receipt by Xxxx Xxxx of representation
letters from each of Parent and Company as contemplated in Section 5.15 of
this Agreement. Each such representation letter shall be dated on or before
the date of such opinion and shall not have been withdrawn or modified in any
material respect as of the Effective Time;
(e) the Company shall have received an opinion of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, substantially in the form attached as
Exhibit F-2 hereto and otherwise reasonably satisfactory in form and
substance to the Company, addressed to the Company; and
(f) Parent shall have furnished the Company with a certificate
dated the Closing Date signed on behalf of it by the President of Parent to
the effect that the conditions set forth in Sections 6.3(a) through (d) have
been satisfied.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated at any time prior
to the Effective Time (with respect to Section 7.1(b) through Section 7.1(f),
by written notice by the terminating party to the other party), and (except
in the case of 7.1(e) and (f)) whether before or after the Parent Stockholder
Approval or the Company Stockholder Approval, as the case may be:
(a) by mutual written consent of the Company and Parent, if the
Board of Directors of each so determines by a vote of a majority of its
entire Board;
(b) by either the Company Board or the Parent Board:
(i) if the Merger shall not have been consummated by
September 15, 2003 unless the Company Board or Parent Board, as the case
may be, has expressly restricted in writing its right to terminate this
Agreement pursuant to this Section 7.1(b)(i); provided, however, that
the right to terminate this Agreement pursuant to this Section 7.1(b)(i)
shall not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the Merger to
be consummated by such time;
(ii) if the Parent Stockholder Approval shall not have
been obtained at the Parent Special Meeting duly convened therefor or at
any adjournment or postponement thereof;
(iii) if the Company Stockholder Approval shall not have
been obtained at the Special Meeting duly convened therefor or at any
adjournment or postponement thereof; or
(iv) if any Restraint having any of the effects set
forth in Section 6.1(c) shall be in effect and shall have become final
and nonappealable, or if any Governmental Entity that must grant a
Requisite Regulatory Approval has denied approval of the Merger and such
denial has become final and nonappealable; provided, however, that the
party seeking to terminate this Agreement pursuant to this Section
7.1(b)(iv) shall have used commercially reasonable efforts to prevent
the entry of and to remove such Restraint or to obtain such Requisite
Regulatory Approval, as the case may be;
(c) by the Company Board (provided that the Company is not then
in material breach of any representation, warranty, covenant or other
agreement contained herein), if Parent shall have materially breached or
failed to perform any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(A) would give rise to the failure of a condition set forth in Section 6.3(a)
or (b), and (B) is incapable of being cured by Parent or is not cured within
thirty (30) days of written notice thereof;
(d) by the Parent Board (provided that Parent is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), if the Company shall have materially breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set
forth in Section 6.2(a) or (b), and (B) is incapable of being cured by the
Company or is not cured within thirty (30) days of written notice thereof;
(e) by the Company Board, at any time prior to the Parent
Special Meeting, if the Parent Board shall have (A) failed to include in the
Proxy Statement/Prospectus to the stockholders of Parent its unanimous
recommendation without modification or qualification that such stockholders
approve this Agreement and the transactions contemplated hereby, (B) failed
to reaffirm such recommendation within ten (10) business days of the
Company's request, (C) subsequently withdrawn such recommendation or (D)
modified or qualified such recommendation in a manner adverse to the
interests of the Company; and
(f) by the Parent Board, at any time prior to the Company
Special Meeting, if the Company Board shall have (A) failed to include in the
Proxy Statement/Prospectus to the stockholders of the Company its unanimous
recommendation without modification or qualification that such stockholders
approve this Agreement and the transaction contemplated hereby, (B) failed to
reaffirm such recommendation within ten (10) business days of Parent's
request, (C) subsequently withdrawn such recommendation or (D) modified or
qualified such recommendation in a manner adverse to the interests of Parent.
Section 7.2 Effect of Termination.
(a) Except as set forth in Section 7.2(b) below, in the event
of termination of this Agreement as provided in Section 7.1 hereof, there
shall be no liability or obligation on the part of Parent, the Company, Sub
or their respective officers, directors, stockholders or affiliates;
provided, however, that nothing herein shall relieve any party from liability
from the intentional or willful breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement or fraud; and provided that the provisions of this Section 7.2,
Section 8.1 and Section 5.3 of this Agreement and the confidentiality
provisions set forth herein and in the Confidentiality Agreement shall remain
in full force and effect and survive any termination of this Agreement.
(b) The parties hereby agree that the Company shall be
obligated to pay Parent a fee of $1.0 million upon the termination of this
Agreement by Parent pursuant to Section 7.1(f) hereof.
(c) Payment of the fee pursuant to Section 7.2(b) hereof shall
be made not later than five (5) business days of delivery of notice of
termination and demand for such payment.
(d) Payment of the fee pursuant to Section 7.2(b) shall be the
sole and exclusive remedy of the terminating party upon the termination of
this Agreement pursuant to Section 7.1(f) hereof; provided, however, that
payment of such fee shall not be in lieu of damages incurred in the event of
the intentional or willful breach of the representations, warranties,
covenants or agreements set forth in this Agreement or fraud.
Section 7.3 Amendment. Subject to compliance with applicable
law, this Agreement may be amended by the parties at any time before or after
the Parent Stockholder Approval or the Company Stockholder Approval;
provided, however, that after any such approval, there may not be, without
further approval of such the stockholders of Parent (in the case of the
Parent Stockholder Approval) and the stockholders of the Company (in the case
of the Company Stockholder Approval), any amendment of this Agreement that
changes the amount or the form of the consideration to be delivered to the
holders of Company Common Stock hereunder, or which by law otherwise
expressly requires the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto and duly approved by the parties' respective
Boards of Directors or a duly designated committee thereof.
Section 7.4 Extension; Waiver. At any time prior to the Effective
Time, a party may, subject to the provision of Section 7.3 (and for this
purpose treating any waiver referred to below as an amendment), (a) extend
the time for the performance of any of the obligations or other acts of the
other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) waive compliance by the
other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Any extension or waiver given in compliance with this
Section 7.4 or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. Except as otherwise contemplated by
this Agreement, including Section 7.2 hereof, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this
Agreement, the Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby, and the issuance of any securities,
including all legal, accounting and financial advisory fees and expenses
("Third Party Expenses"), shall be paid by the party incurring such expenses,
except that (i) those costs and expenses incurred in connection with filing
and printing (but not mailing) the Registration Statement and the Proxy
Statement/Prospectus (including filing fees related thereto) shall be shared
equally by Parent and the Company (provided, however, that Parent shall pay
printing costs and expenses for the Registration Statement and the Proxy
Statement/Prospectus as such costs and expenses become due and payable, but
such printing costs and expenses shall be shared equally by Parent and the
Company in the event this Agreement is terminated pursuant to Section 7.1
hereof), and (ii) the Company shall cause that portion of its Third Party
Expenses which constitute legal, accounting and financial advisory fees and
expenses to be invoiced or estimated and capped at or before the Closing and
not to exceed, in the aggregate, $1,100,000.
Section 8.2 Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall
survive the Effective Time.
Section 8.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, faxed
(which is confirmed) or sent by an overnight courier service, such as FedEx,
to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Tumbleweed Communications Corp.
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx - Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
(b) if to the Company, to:
Valicert, Inc.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 8.4 Interpretation. When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article or
Section of this Agreement, as the case may be, unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without
limitation." 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 to February 18, 2002. As
used in this Agreement, the term "affiliate(s)" shall have the meaning set
forth in Rule l2b-2 of the Exchange Act. The headings and table of contents
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation hereof.
Section 8.5 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two 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.
Section 8.6 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement, the Ancillary Agreements and the
Confidentiality Agreement (including the documents and the instruments
referred to herein and therein): (a) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and (b) except
as provided in Section 5.12 (Directors' and Officers' Insurance and
Indemnification) hereof, are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
Section 8.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.8 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 8.9 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, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent.
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 assigns.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
TUMBLEWEED COMMUNICATIONS CORP.
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
VELOCITY ACQUISITION SUB, INC.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
VALICERT, INC.
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President and CEO
