AGREEMENT AND PLAN OF MERGER BY AND AMONG WEBEX COMMUNICATIONS, INC., INTRANETS.COM, INC. AND THE OTHER PAR TIES SIGNATORY HERETO Dated as of August 1, 2005
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
WEBEX
COMMUNICATIONS, INC.,
XXXXXXXXX.XXX,
INC.
AND
THE
OTHER PAR
TIES
SIGNATORY HERETO
Dated
as of August 1, 2005
TABLE
OF CONTENTS
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Page
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ARTICLE
1
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THE
MERGER
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1
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1.1
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The
Merger
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1
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1.2
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Effective
Time
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2
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1.3
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Effect
of Merger on Constituent Corporations
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2
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1.4
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Certificate
of Incorporation and Bylaws of Surviving Corporation
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2
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1.5
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Directors
and Officers of Surviving Corporation
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2
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1.6
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Merger
Consideration
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2
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1.7
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Dissenting
Shares
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4
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1.8
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Exchange
Procedures
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5
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1.9
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No
Further Ownership Rights in Company Capital Stock
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6
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1.10
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Company
Employee and Senior Management Bonus Amount
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6
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1.11
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Taking
of Necessary Action; Further Action
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6
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1.12
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Escrow
Fund
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7
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ARTICLE
2
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REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
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7
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2.1
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Organization
and Qualification
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7
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2.2
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Authority
Relative to this Agreement
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7
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2.3
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Capital
Stock
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8
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2.4
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No
Subsidiaries
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10
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2.5
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Directors
and Officers
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10
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2.6
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No
Conflicts
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10
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2.7
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Books
and Records; Organizational Documents
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11
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2.8
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Company
Financial Statements
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11
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2.9
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Absence
of Changes
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13
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2.10
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No
Undisclosed Liabilities
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15
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2.11
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Taxes
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15
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2.12
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Legal
Proceedings
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18
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2.13
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Compliance
with Laws and Orders
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18
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2.14
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Employee
Benefit Plans and Employee Matters
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18
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2.15
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Real
Property
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19
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2.16
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Tangible
Personal Property
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20
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2.17
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Intellectual
Property
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20
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2.18
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Contracts
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24
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2.19
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Insurance
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27
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2.20
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Affiliate
Transactions
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27
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2.21
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Employees;
Labor Relations
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28
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2.22
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Environmental
Matters
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29
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2.23
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Substantial
Customers and Suppliers
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30
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2.24
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Accounts
Receivable
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30
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2.25
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Inventory
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31
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2.26
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Other
Negotiations; Brokers; Third Party Expenses
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31
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2.27
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Bank
and Brokerage Accounts
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31
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2.28
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Warranty
Obligations
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32
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2.29
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Foreign
Corrupt Practices Act
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32
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2.30
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Approvals
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32
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2.31
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Takeover
Statutes
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33
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2.32
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Disclosure
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33
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ARTICLE
3
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REPRESENTATIONS
AND WARRANTIES OF ACQUIRER
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33
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3.1
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Organization
and Qualification
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34
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3.2
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Authority
Relative to this Agreement
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34
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3.3
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No
Conflicts
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34
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3.4
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Investment
Advisors
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35
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ARTICLE
4
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CONDUCT
PRIOR TO THE EFFECTIVE TIME
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35
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4.1
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Conduct
of Business of the Company
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35
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4.2
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No
Solicitation
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37
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ARTICLE
5
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ADDITIONAL
AGREEMENTS
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37
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5.1
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Stockholder
Approval
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37
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5.2
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Access
to Information
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38
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5.3
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Confidentiality
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38
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5.4
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Expenses
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38
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5.5
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Public
Disclosure
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39
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5.6
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Approvals
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39
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5.7
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FIRPTA
Compliance
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39
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5.8
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Notification
of Certain Matters
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39
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5.9
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Additional
Documents and Further Assurances; Cooperation
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39
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5.10
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Company’s
Auditors
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40
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5.11
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Takeover
Statutes
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40
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5.12
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Company
Repurchases
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40
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5.13
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Employment
Matters
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40
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5.14
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Company
Director and Officer Indemnification
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40
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ARTICLE
6
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CONDITIONS
TO THE MERGER
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41
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6.1
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Conditions
to Obligations of Each Party to Effect the Merger
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41
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6.2
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Additional
Conditions to Obligations of the Company
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41
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6.3
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Additional
Conditions to the Obligations of the Acquirer and Merger
Subsidiary
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42
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ARTICLE
7
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SURVIVAL
OF REPRESENTATIONS, WARRANTIES, COVERNANTS AND AGREEMENTS; ESCROW
PROVISIONS
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44
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7.1
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Survival
of Representations, Warranties, Covenants and Agreements
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44
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7.2
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Escrow
Provisions
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44
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ARTICLE
8
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49
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8.1
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Termination
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49
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8.2
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Effect
of Termination
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50
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8.3
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Amendment
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50
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8.4
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Extension;
Waiver
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ARTICLE
9
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MISCELLANEOUS
PROVISIONS
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51
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9.1
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Notices
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51
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9.2
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Entire
Agreement
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52
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9.3
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Further
Assurances; Post-Closing Cooperation
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52
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9.4
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Remedies
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52
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9.5
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Third
Party Beneficiaries
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52
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9.6
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No
Assignment; Binding Effect
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52
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9.7
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Invalid
Provisions
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53
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9.8
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Governing
Law
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53
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9.9
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Waiver
of Trial by Jury
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53
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9.10
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Headings
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53
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9.11
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Counterparts
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53
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9.12
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Specific
Performance
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53
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ARTICLE
10
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DEFINITIONS
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53
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10.1
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Definitions
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53
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Exhibits
Exhibit
A Form
of
Voting Agreement
Exhibit
B Form
of
Delaware Certificate of Merger
Exhibit
C Form
of
Escrow Agreement
Exhibit
D Form
of
Company Officers’ Certificate
Exhibit
E Form
of
Company Secretary’s Certificate
Exhibit
F-1 Form
of
Company US Counsel Legal Opinion
Exhibit
F-2 Form
of
Company Japan Counsel Legal Opinion
Exhibit
G Form
of
Support Agreement
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is made and entered into as of August 1, 2005,
by
and among WEBEX
COMMUNICATIONS, INC.,
a
Delaware corporation (“ACQUIRER”),
ATLANTIC
ACQUISITION SUBSIDIARY, INC.,
a
Delaware corporation and wholly owned subsidiary of Acquirer (“Merger
Subsidiary”)
and
XXXXXXXXX.XXX, INC., a Delaware corpora-tion (the “Company”),
and
solely with respect to Article 7 and Article 9, W
CAPITAL PARTNERS, L.P.,
as
Stockholder Agent. Capitalized terms used and not otherwise defined herein
have
the meanings set forth in Article 10.
RECITALS:
A. The
Boards of Directors of each of Acquirer, Merger Subsidiary and the Company
have
approved this Agreement, and deem it advisable, fair and in the best interests
of their respective stockholders to effect the merger hereafter provided for,
in
which Merger Subsidiary would merge with and into the Company and the Company
would become a wholly owned subsidiary of Acquirer (the “Merger”)
and,
in furtherance thereof, have approved the Merger, this Agree-ment and the
transactions contemplated hereby.
B. Prior
to
the Effective Time, all issued and outstanding Company Options, Company
Warrants and Company Stock Purchase Rights shall be exercised or
terminated.
C. As
a
condition and an inducement to the willingness of Acquirer and Merger Subsidiary
to enter into this Agreement, certain stockholders of the Company have
concurrently herewith executed Voting Agreements with Acquirer and Merger
Subsidiary in substantially the form attached hereto as Exhibit A
(“Voting
Agreements”)
pursuant to which, among other things, such stockholders have agreed to vote
the
shares of Company Capital Stock owned by them in favor of the
Merger.
D. The
Company and Acquirer desire to make certain representations, warranties,
covenants and agreements in connection with the Merger.
NOW,
THEREFORE, in consideration of the covenants, promises, representations and
warranties set forth herein, and for other good and valuable consideration
(the
receipt and sufficiency of which are hereby acknowledged by the parties),
intending to be legally bound hereby, the parties agree as follows:
ARTICLE
1
THE
MERGER
1.1 The
Merger.
At the
Effective Time and upon the terms and subject to the condi-tions of this
Agreement and the applicable provisions of Delaware Law, Merger Subsidiary
shall
be merged with and into the Company, the separate corporate existence of the
Merger Subsidiary shall cease, and the Company shall continue as the surviving
corporation. The Company is sometimes referred to herein as the “Surviving
Corporation.”
1.2 Effective
Time.
Unless
this Agreement is earlier terminated pursuant to Section 8.1 hereof,
the
closing of the Merger (the “Closing”) is expected to take place on or about
August 29, 2005 and will take place no later than five (5) Business
Days
following satisfaction or waiver of the conditions set forth in Article 6,
at
the offices of Pillsbury Xxxxxxxx Xxxx Xxxxxxx LLP, 0000 Xxxxxxx
Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another place or time is agreed to by
Acquirer and the Company. The date upon which the Closing actually occurs is
herein referred to as the “Closing
Date.”
On the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing a Certificate of Merger (or like instrument), in substantially the form
attached hereto as Exhibit B
(the
“Delaware
Certificate of Merger”),
with
the Secretary of State of the State of Delaware, in accordance with the relevant
provisions of Delaware Law (the time of acceptance by the Secretary of State
of
the State of Delaware of such filing or such later time as may be agreed to
by
the parties and set forth in the Delaware Certificate of Merger being referred
to herein as the “Effective
Time”).
1.3 Effect
of the Merger on Constituent Corporations.
At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the prop-erty, rights,
privileges, powers and franchises of Merger Subsidiary and the Company shall
vest in the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of Merger Subsidiary and the Company
shall
become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
1.4 Certificate
of Incorporation and Bylaws of Surviving Corporation.
(a) At
the
Effective Time, the certificate of incorporation of Surviving Corporation,
as in
effect immediately prior to the Effective Time, shall be amended as of the
Effective Time to conform to the certificate of incorporation of Merger
Subsidiary as in effect immediately prior to the Effective Time until thereafter
amended as provided by law and such certificate of incorporation and bylaws
of
the Surviving Corporation.
(b) At
the
Effective Time, the bylaws of Surviving Corporation, as in effect immediately
prior to the Effective Time, shall be amended as of the Effective Time to
conform to the bylaws of Merger Subsidiary as in effect immediately prior to
the
Effective Time until thereafter amended as provided by such bylaws, the
certificate of incorporation and applicable law.
1.5 Directors
and Officers of Surviving Corporation.
The
directors of Merger Subsidiary immediately prior to the Effective Time shall
be
the directors of the Surviving Corporation, each to hold office in accordance
with the certificate of incorporation and bylaws of the Surviving Corporation.
The officers of Merger Subsidiary immediately prior to the Effective Time shall
be the officers of the Surviving Corporation, each to hold office in accordance
with the bylaws of the Surviving Corporation.
1.6 Merger
Consideration.
At the
Effective Time:
(a) Series
B Preferred Stock.
Each
share of Company Series B Preferred Stock outstanding immediately prior to
the
Effective Time (other than any shares of Series B Preferred
Stock
held in the treasury of the Company immediately prior to the Effective Time,
which shares shall be canceled and extinguished without any payment being made
in respect thereof, or any Dissenting Shares)) shall be converted into the
right
to receive the (i) (x) Series B-1 Preferred Portion and (y) a
proportionate interest in the Escrow Fund, (ii) (x) Series B-2
Preferred Portion and (y) a proportionate interest in the Escrow Fund,
or
(iii) (x) Series B-3 Preferred Portion and (y) a proportionate
interest in the Escrow Fund, as applicable. All shares of Series B Preferred
Stock converted pursuant to this Section1.6(a) shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist after
the Effective Time
(b) Series
C Preferred Stock.
Each
share of Company Series C Preferred Stock outstanding immediately prior to
the
Effective Time (other than any shares of Series C Preferred Stock held in the
treasury of the Company immediately prior to the Effective Time, which shares
shall be canceled and extinguished without any payment being made in respect
thereof, or any Dissenting Shares)) shall be converted into the right to receive
(x) the Series C Preferred Portion and (y) a proportionate interest
in
the Escrow Fund. All shares of Series C Preferred Stock converted pursuant
to
this Section 1.6(b) shall no longer be outstanding and shall automatically
be
canceled and retired and shall cease to exist after the Effective
Time
(c) Series
D Preferred Stock.
Each
share of Company Series D Preferred Stock outstanding immediately prior to
the
Effective Time (other than any shares of Series D Preferred Stock held in the
treasury of the Company immediately prior to the Effective Time, which shares
shall be canceled and extinguished without any payment being made in respect
thereof, or any Dissenting Shares)) shall be converted into the right to receive
(x) the Series D Preferred Portion and (y) a proportionate interest
in
the Escrow Fund. All shares of Series D Preferred Stock converted pursuant
to
this Section 1.6(c) shall no longer be outstanding and shall automatically
be
canceled and retired and shall cease to exist after the Effective
Time
(d) Common
Stock.
Each
share of Company Common Stock outstanding immediately prior to the Effective
Time shall automatically be canceled and retired without any payment being
made
in respect thereof and shall cease to exist after the Effective Time.
(e) Notwithstanding
anything contained herein to the contrary, in no event shall the amounts set
forth in Section 1.6 (a), (b) and (c) when multiplied by all outstanding shares
of Preferred Stock of the Company exceed the Upfront Consideration.
(f) Notwithstanding
the foregoing, no amounts shall be payable at the Effective Time with respect
to
any Dissenting Shares or any shares of Company Capital Stock with respect to
which dissenters’ rights have not terminated. In the case of Dissenting Shares,
payment shall be made in accordance with Section 1.7 and Delaware Law.
In
the case of any shares of Company Capital Stock with respect to which
dissenters’ rights have not terminated as of the Effective Time, if such Shares
become Dissenting Shares, payment shall be made in accordance with
Section 1.7 and Delaware Law, and if, instead, the dissenters’ rights with
respect to such shares of Company Capital Stock irrevocably terminate after
the
Effective Time, such shares shall be entitled to receive the Cash Consideration
Portion applicable to such shares.
(g) Cancellation
of Company-Owned Stock.
Each
share of Company Capital Stock owned by the Company or any Subsidiary of the
Company immediately prior to the Effective
Time
shall be automatically canceled and extinguished without any conversion thereof
and without any further action on the part of Acquirer or the
Company.
(h) Capital
Stock of Merger Subsidiary.
Each
share of Merger Subsidiary common stock which is issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one
fully paid and nonassessable share of common stock of the Surviving Corporation,
and such shares shall constitute the only outstanding shares of capital stock
of
the Surviving Corporation. From and after the Effective Time, each share
certificate of Merger Subsidiary theretofore evidencing ownership of any such
shares shall evidence ownership of such shares of capital stock of the Surviving
Corporation.
Immediately following the Effective Time, Acquirer will be the sole and
exclusive owner of the shares of capital stock of the Surviving
Corporation.
(i) Company
Options, Company Warrants and Company Stock Plan.
As of
the Effective Time, the Company shall cause all unexpired and unexercised
Company Options, Company Warrants and Company Stock Purchase Rights, then
outstanding, whether vested or unvested, together with the Company Stock Plan,
to be cancelled and extinguished, if not exercised, as of the Effective Time.
Acquirer will not assume any Company Options, Company Warrants or Company Stock
Purchase Rights or any Company Stock Plans.
(j) Withholding
Rights.
Each of
the Surviving Corporation and Acquirer shall be entitled to deduct and withhold
from the consideration otherwise payable to any Person pursuant to this Article
1 such amounts as it is required to deduct and withhold with respect to the
making of such payment under any provision of federal, state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving Corporation
or Acquirer, as the case may be, such withheld amounts shall be treated for
all
purposes of this Agreement as having been paid to the holder of the Company
Capital Stock in respect of which such deduction and withholding was made by
the
Surviving Corporation or Acquirer, as the case may be.
(k) Company
Stock Splits, Dividends.
If
between the date of this Agreement and the Effective Time, the number of
outstanding shares of Company Common Stock or Company Preferred Stock is changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split-up,
combination, exchange of shares, or the like, the per Share amounts set out
in
Sections 1.6(a), (b) and (c) will be correspondingly adjusted to reflect such
change.
1.7 Dissenting
Shares.
(a) Notwithstanding
any provision of this Agreement to the contrary, any shares of Company Capital
Stock held by a holder who has demanded and perfected appraisal rights for
such
shares in accordance with Delaware Law, and who, as of the Effective Time,
has
not effectively withdrawn or lost such appraisal or dissenters’ rights
(“Dissenting Shares”) shall not be converted into or represent a right to
receive merger consideration pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by the Delaware
Law.
(b) Notwithstanding
the provisions of Section 1.7(a) above, if any holder of shares of Company
Capital Stock who demands appraisal of such shares under Delaware Law shall
effectively withdraw or lose (through failure to perfect or otherwise) the
right
to appraisal, then, as of the later of (i) the Effective Time or
(ii) the occurrence of such event, such holder’s shares shall automatically
be converted into and represent only the right to receive merger consideration
as provided in Section 1.6, without interest thereon, upon surrender to the
Company of the certificate representing such shares in accordance with Section
1.8.
(c) The
Company shall give Acquirer (i) prompt notice of its receipt of any
written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments relating to the Merger served pursuant
to Delaware Law and received by the Company and (ii) the opportunity
to
participate in all negotiations and proceedings with respect to demands for
appraisal under Delaware Law. The Company shall not, except with the prior
written consent of Acquirer or as may be required under applicable law,
voluntarily make any payment with respect to any demands for appraisal of
Company Capital Stock or offer to settle or settle any such
demands.
1.8 Exchange
Procedures.
(a) At
the
Closing, Acquirer shall deposit with the paying agent appointed by Acquirer
and
reasonably acceptable to the Company (the “Paying
Agent”),
for
the benefit of the holders of Company Preferred Stock, cash in U.S. dollars
in
an amount equal to the Upfront Consideration minus the Stockholder Escrow
Amount, which shall be deposited with the Escrow Agent (as defined below).
Promptly after the Effective Time, Acquirer shall cause to be mailed to each
person who was, at the Effective Time, a holder of record of Company Capital
Stock (other than shares of Company Capital Stock held by those persons
described in Section 1.6(g)) a form of letter of transmittal (which
shall
specify that delivery shall be effected and risk of loss and title to the
certificates shall pass only upon delivery of the certificates to Acquirer
and
shall be in such form and have such other provisions as Acquirer and the Company
may reasonably specify) and instructions for use in effecting the surrender
of
the certificates that, immediately prior to the Effective Time, represented
any
of such shares in exchange for payment therefor. Upon surrender to the Paying
Agent of such certificates (or affidavit of loss or destruction in lieu thereof,
including any suitable bond or indemnity that may be required by Acquirer or
the
Paying Agent in their sole discretion), together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, Acquirer shall promptly cause to be paid to the persons entitled
thereto an amount equal to the price to which such person is entitled pursuant
to Section 1.6 less any required tax withholdings, such payments to
be made
by wire transfer or check in accordance with the instructions, and delivered
in
person or by mail to the address, specified in the applicable letter of
transmittal. No interest will be paid or will accrue on the amount payable
upon
the surrender of any such certificate. If payment is to be made to a person
other than the registered holder of the certificate surrendered, it shall be
a
condition of such payment that the certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the certificate
surrendered or establish to the reasonable satisfaction of Acquirer or the
Paying Agent that such tax has been paid or is not applicable.
(b) After
the
Effective Time, there shall be no transfers on the stock transfer books of
the
Surviving Corporation of shares of Capital Stock of the Company that were
outstanding immediately prior to the Effective Time.
(c) One
hundred and eighty (180) days following the Effective Time, Acquirer shall
be
entitled to cause the Paying Agent to deliver to it any funds (including any
interest received with respect thereto) made available to the Paying Agent
that
have not been disbursed to holders of certificates or agreements formerly
representing shares of Company Capital Stock outstanding on the Effective Time,
and thereafter such holders shall be entitled to look to Acquirer only as
general creditors thereof with respect to the merger consideration payable
upon
due surrender of their certificates or agreements.
(d) Notwithstanding
the foregoing, neither the Paying Agent nor any party hereto shall be liable
to
any holder of certificates formerly representing shares of Company Capital
Stock
for any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. The Surviving Corporation shall pay all
charges and expenses in connection with the exchange of cash for Company Capital
Stock.
1.9 No
Further Ownership Rights in Company Capital Stock.
The
merger consideration issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock, and there shall be no further registration of transfers on the
records of the Company of shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates representing Company Capital Stock are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in
this Article 1.
1.10 Company
Employee
and
Senior Management Bonus Amount.
(a) The
Acquirer believes that the continued service of certain employees of the Company
is a material factor in determining the valuation of the Company by Acquirer.
Certain persons who have provided services to the Company shall be entitled
to a
specified portion of the Employee Bonus Amount pursuant to a schedule to be
determined by the Board of Directors of the Company and approved by Acquirer.
The Employee Bonus Amount payments shall be payable within fifteen (15) days
after the Closing Date. In addition, certain of the Company’s senior managers
(the “Senior Managers”) shall receive a portion of the Senior Manager Bonus
Amount as determined by the Board of Directors of the Company and approved
by
Acquirer.
The
Senior Manager Bonus Amount payments shall be paid to each Senior
Manager
in
accordance with agreements to be entered into between each Senior Manager and
Acquirer which will generally provide that half of such payments will be made
at
the Closing and the remainder will be paid on the first anniversary of the
Closing subject to certain conditions. The Senior Manager Escrow Amount shall
be
placed in the escrow as set forth in Section 1.12.
1.11 Taking
of Necessary Action; Further Action.
If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement or to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company, or to effect the
assignment to
the
Surviving Corporation of any and all Company Intellectual Property created
by a
founder, employee or consultant of the Company, or to complete and prosecute
all
domestic and foreign patent filings related to such Company Intellectual
Property, the officers and directors of the Surviving Corporation are fully
authorized to take, and will take, all such lawful and necessary
action.
1.12 Escrow
Fund.
On the
Closing Date, Acquirer shall deposit the Escrow Amount, which shall consist
of
the Stockholder Escrow Amount, the Senior Manager Escrow Amount, the Dissenters
Amount and the Disbursement Amount, with Heritage Bank of Commerce or another
third person mutually satisfactory to Acquirer and the Stockholder Agent, as
escrow agent (the “Escrow
Agent”).
The
Escrow Amount shall be applied for the payment of any obligations relating
to or
arising out of breaches of representations, warranties or covenants of the
Company contained herein, pursuant to the provisions of Article 7 hereof and
an
Escrow Agreement in the form attached hereto as Exhibit C.
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to both Acquirer and Merger Subsidiary,
subject to such exceptions as are specifically disclosed with respect to
specific numbered and lettered sections and subsections of this Article 2 in
the
disclosure schedule and schedule of exceptions (the “Company
Disclosure Schedule”)
delivered herewith, dated as of the date hereof and signed by the President
and
Chief Executive Officer, and numbered with corresponding numbered and lettered
sections and subsections, as follows:
2.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the state of its incorporation, and has full corporate power
and authority to conduct its business as now conducted and as currently
pro-posed to be conducted and to own, use, license and lease its Assets and
Properties. The Company is duly qualified, licensed or admitted to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the nature of its business, makes such qualification, licensing or admission
necessary, which states or jurisdictions are listed in
Section 2.1
of the Company Disclosure Schedule.
The
Japan
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of Japan, and has full corporate power and authority
to
conduct its business as now conducted and as currently pro-posed to be conducted
and to own, use, license and lease its Assets and Properties. The Japan
Subsidiary is duly qualified, licensed or admitted to do business and is in
good
standing as a foreign corporation in each jurisdiction in which the nature
of
its business, makes such qualification, licensing or admission necessary, which
states or jurisdictions are listed in Section 2.1
of the Company Disclosure Schedule.
2.2 Authority
Relative to this Agreement.
Subject
only to the requisite approval of this Agreement by the stockholders of the
Company, the Company has full corporate power and authority to execute and
deliver this Agreement and the other agreements which are attached (or forms
of
which are attached) as exhibits hereto (the “Ancillary
Agreements”)
to
which the Company is a party, to perform its obligations hereunder and
thereunder and to consummate the
transactions
contemplated hereby and thereby. The execution and delivery by the Company
of
this Agreement and the Ancillary Agreements to which the Company is a party
and
the consummation by the Company of the transactions con-tem-plated hereby and
thereby, and the performance by the Company of its obligations hereunder and
thereunder, have been duly and validly authorized by all necessary action by
the
board of directors of the Company, the board of directors of the Company has
unanimously approved this Agreement and the transactions contemplated hereunder
and no other action on the part of the board of directors of the Company is
required to authorize the execution, delivery and performance of this Agreement
and the Ancillary Agreements to which the Company is a party and the
consumma-tion by the Company of the transactions contemplated hereby and
thereby. This Agreement and the Ancillary Agreements to which the Company is
a
party have been or will be, as applicable, duly and validly executed and
delivered by the Company and, assuming the due authorization, execu-tion and
delivery hereof (and, in the case of the Ancillary Agreements to which Acquirer
is a party, thereof) by Acquirer, each constitutes or will constitute, as
applica-ble, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws relating to the
enforcement of creditors’ rights generally and by general principles of equity;
including, without limitation, principals of fiduciary duty.
2.3 Capital
Stock.
(a) The
authorized capital stock of the Company consists only of 180,000,000 shares
of
Common Stock, $.001 par value per share (the “Company
Common Stock”),
of
which 9,070,018 shares of Common Stock are issued and outstanding as of the
date
hereof, and 113,000,000 shares of Preferred Stock, $.001 par value per share
(the “Company
Preferred Stock”).
The
designation and status of the Company Preferred Stock is as follows: (i) no
shares are designated as Series A Preferred Stock, (ii) 35,000,000
shares are designated as Series B Preferred Stock (the “Company
Series B Preferred Stock”),
28,818,909, of which are issued and outstanding as of the date hereof,
(iii) 42,000,000 shares are designated as Series C Preferred
Stock
(the “Company
Series C Preferred Stock”),
41,099,268 of which are issued and outstanding as of the date hereof and (iv)
36,000,000 shares are designated as Series D Preferred Stock (the “Company
Series D Preferred Stock”),
35,473,572 of which are issued and outstanding as of the date hereof. All of
the
issued and outstanding shares of Company Common Stock and Company Preferred
Stock are validly issued, fully paid and nonassessable, and have been issued
in
compliance with all applicable federal, state and foreign securities Laws.
Except as set forth in Section
2.3(a) of the Company Disclosure Schedule,
no
shares of Company Common Stock or Company Preferred Stock are held in treasury
or are authorized or reserved for issuance.
(b) Section
2.3(b) of the Company Disclosure Schedule lists
the
name, address and state of residence of each holder of Company Capital Stock,
and the number of shares of Company Capital Stock held by such holder. Except
as
disclosed in Section
2.3(b) of the Disclosure Schedule,
there
are no other shares of Company Capital Stock outstanding.
(c) With
respect to each Company Option, Company Warrant, Company Stock Purchase Right,
Restricted Stock Purchase Agreement or share of Company Restricted Stock or
agreements, arrangements or understandings to which the Company is a party
(written or oral) to issue any Options or any other equity securities with
respect to the Company, Section
2.3(c) of the Company Disclosure Schedule
sets
forth the holder thereof, the number and type of securities issuable thereunder,
and, if applicable, the exercise price therefor, the exercise period and vesting
schedule thereof (including a specific description of the circumstances under
which such vesting schedule for each such security can or will be accelerated).
Except as set forth in Section
2.3(c) of the Company Disclosure Schedule,
there
are no outstanding Company Options, Company Warrants, Company Stock Purchase
Rights, Restricted Stock Purchase Agreement or shares of Company Restricted
Stock or agreements, arrangements or understandings to which the Company is
a
party (written or oral) to issue any Options with respect to the
Company.
(d) Other
than as described in Section 2.3(a) and 2.3(c) above, there are (i) no
other outstanding shares of capital stock or other equity securities of the
Company and no other options, warrants, calls, conversion rights, commitments
or
agreements of any character to which the Company is a party or by which the
Company may be bound that do or may obligate the Company to issue, deliver
or
sell, or cause to be issued, delivered or sold, additional shares of the
Company’s capital stock or securities convertible into or exchangeable for the
Company’s capital stock or that do or may obligate the Company to grant, extend
or enter into any such option, warrant, call, conversion right, commitment
or
agreement; or (ii) no preemptive rights or agreements, arrangements
or
understandings to issue preemptive rights with respect to the issuance or sale
of Company Capital Stock created by statute, the certificate of incorporation
or
bylaws of the Company, or any agreement or other arrangement to which the
Company is a party (written or oral) or to which it is bound and there are
no
agreements, arrangements or understandings to which the Company is a party
(written or oral) pursuant to which the Company has the right to elect to
satisfy any Liability by issuing Company Common Stock or Equity
Equivalents.
There is
no right of first refusal, co-sale right, right of participation, right of
first
offer, option or other restriction or transfer applicable to any shares of
Company Capital Stock pursuant to any contract to which the Company is a
party.
(e) All
outstanding shares of Company Capital Stock are, and any shares of Company
Capital Stock issued upon exercise of Company Options and the Company Warrants
(subject to receipt of the exercise prices as provided therein) will be, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute or the Company’s certificate of incorporation or bylaws or
rights similar to preemptive rights created by any agreement to which the
Company is a party or by which the Company may be bound. All outstanding
securities of the Company have been issued in compliance with applicable federal
and state securities laws.
(f) Except
for the Voting Agreements, the Company is not a party or subject to any
agreement or understanding, and, to the Company’s Knowledge, there is no
agreement, arrangement or understanding between or among any Persons which
affects, restricts or relates to voting, giving of written consents, dividend
rights or transferability of shares with respect to the Company Capital Stock,
including any voting trust agreement or proxy.
(g) Except
as
set forth in Section 2.3(g)
of the Company Disclosure Schedule,
no debt securities of the Company are issued and outstanding.
(h) The
authorized capital stock of the Japan Subsidiary consists only of
22,668 shares of Ordinary Voting Stock, 12,000 shares of Senior
Preferred Voting Stock and 5,332 shares of Junior Preferred Non-Voting
Stock (the “Subsidiary Capital Stock”) of which 12,180 shares of Ordinary
Voting Stock, 3,340 shares of Senior Preferred Voting Stock and
1,333 shares of Junior Preferred Non-Voting Stock are issued and
outstanding as of the date hereof. Section
2.3(h) of the Company Disclosure Schedule
lists
the name, address and country of residence of each holder of Subsidiary Capital
Stock and the number of shares of Subsidiary Capital Stock held by such holder.
Except as disclosed in Section
2.3(h) of the Disclosure Schedule,
there
are no other shares of Subsidiary Capital Stock outstanding.
2.4 No
Subsidiaries.
The
Company has no other (and prior to the Closing will have no other) Subsidiaries
and does not (and prior to the Closing will not) otherwise hold any equity,
membership, partnership, joint venture or other ownership interest in any
Person, except for its ownership interest in Intranets KK of Tokyo, Japan
(“Japan Subsidiary”).
2.5 Directors
and Officers.
The
names of each director and officer of the Company on the date hereof, and his
or
her position with the Company, are listed in Section
2.5 of the Company Disclosure Schedule.
The
names of each director and officer of the Japan Subsidiary on the date hereof,
and his or her position with the Japan Subsidiary, are listed in Section
2.5 of the Company Disclosure Schedule.
2.6 No
Conflicts.
The
execution, delivery and performance by the Company of this Agreement and the
Ancillary Agreements to which the Company is a party does not and will
not:
(a) conflict
with or result in a violation or breach of any of the terms, conditions or
provisions of the certificate of incorporation or bylaws of the
Company;
(b) subject
to obtaining the consents, approvals and actions, making the filings and giving
the notices disclosed in Section
2.6(b) of the Company Disclosure Schedule,
if any,
conflict with or result in a violation or breach of any Law or Order applicable
to the Company or any of its Assets and Properties;
(c) except
as
disclosed in Section
2.6(c) of the Company Disclosure Schedule,
(i) conflict with or result in a violation or breach of,
(ii) constitute a default (or an event that, with or without notice
or
lapse of time or both, would constitute a default) under, (iii) require
the
Company to obtain any consent, approval or action of, make any filing with
or
give any notice to any Person as a result or under the terms of (except for
(A) the filing of the Delaware Certificate of Merger, together with
the
required officers’ certifi-xxxxx; (B) such consents approvals, orders,
authorizations, registrations, declarations and filings as may be required
under
applicable state or federal securities laws; and (C) such filings as
may be
required under the HSR Act), (iv) result in or give to any Person any
right
of termination, cancellation, acceleration or modification in or with respect
to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or
the
obligation to create or impose) any Lien upon the Company or
any
of
its Assets and Properties under or (vii) result in the loss of any material
benefit under, any of the terms, conditions or provisions of any Contract or
License to which the Company is a party or by which any of the Company’s Assets
and Properties is bound;
or
(d) conflict
with or result in a violation or breach of any of the terms, conditions or
provisions of the governing documents of the Japan Subsidiary or any agreement
by which the Japan Subsidiary is bound.
2.7 Books
and Records; Organizational Documents.
The
minute books and stock record books and other similar records of the Company
have been provided or made available to Acquirer or its counsel prior to the
execution of this Agreement, are complete and correct in all respects and have
been maintained in accordance with reasonable business practices. Such minute
books contain a true and complete record of all actions taken at all meetings
and by all written consents in lieu of meetings of the directors, stockholders
and committees of the board of directors of the Company from the date of the
Company’s incorporation through the date hereof. The Company has prior to the
execution of this Agreement delivered to Acquirer true and complete copies
of
its certificate of incorporation and bylaws, both as amended through the date
hereof. The Company is not in violation of any provisions of its certificate
of
incorporation or bylaws.
2.8 Company
Financial Statements.
(a) Section
2.8(a) of the Company Disclosure Schedule
sets
forth the Company Financials. The Company Financials delivered to Acquirer
are
correct and complete in all material respects and have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto as delivered to Acquirer prior to the date hereof, and, in the
case of the Interim Financial Statements, subject to normal year-end
adjustments, which adjustments will not be material in amount or significance).
The Company Financials present fairly and accurately the financial condition
and
operating results of the Company as of the dates and during the periods
indicated therein, subject, in the case of the Interim Financial Statements,
to
normal year-end adjustments, which adjustments will not be material in amount
or
significance and except that the Interim Financial Statements may not contain
footnotes.
(b) At
the
Audited Financial Statement Date and as of the Closing Date, except as set
forth
in Section
2.8(b) of the Company Disclosure Schedule,
the
Company had no and will have no liabilities or obligations, secured or unsecured
(whether accrued, absolute, contingent or otherwise and whether or not required
to be reflected on the Company Financials under GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other)
not
reflected in the Company Financials or the accompanying notes thereto, except
for liabilities and obligations that have arisen in the ordinary course of
business prior to the date of the Company Financials and which, under GAAP
applied on a basis consistent throughout the periods indicated and consistent
with each other, would not have been required to be reflected in the Company
Financials, and except for liabilities incurred in the ordinary course of
business since the Audited Financial Statement Date that have not resulted
in
material adverse effect on the Company.
(c) Company
maintains, and will maintain, a standard system of accounting established and
administered in accordance with GAAP. Except as set forth in Section
2.8(c) of the Company Disclosure Schedule,
since
December 31, 2004 there has been no change in any accounting policies,
principles, methods or practices, including any change with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), of the
Company.
Neither
Company nor its Subsidiaries has any “off-balance sheet arrangements” as such
term is defined in Item 303(a) of Regulation S-K of the SEC.
(d) Company
and its Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s authorizations, (ii) transactions are recorded as
necessary to permit preparation of consolidated financial statements of Company
and its Subsidiaries in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s authorization, (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences, (v) accounts, notes and other
receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and
timely basis and (vi) there are adequate procedures regarding prevention or
timely detection of unauthorized acquisition, use or disposition of Company’s or
its Subsidiaries’ assets. There are no significant deficiencies in the design or
operation of Company’s internal controls over financial reporting which could
adversely affect in any material respect Company’s ability to record, process,
summarize and report financial data or material weaknesses in internal controls
over financial reporting. There has been no fraud, whether or not material,
that
involved management or other employees of Company or any of its Subsidiaries
who
have a significant role in Company’s internal controls over financial reporting.
Section
2.8(d) of the Company Disclosure Schedule
lists,
and Company has delivered to Acquirer complete and correct copies of, all
written descriptions of, and all policies, manuals and other documents
promulgating, such internal accounting controls and such disclosure controls
and
procedures.
(e) Since
December 31, 2004, neither the Company nor any Subsidiary nor, to Company’s
Knowledge, any director, officer, employee, auditor, accountant or
representative of Company or its Subsidiaries, has received or otherwise had
or
obtained knowledge of any complaint, allegation, assertion or claim, whether
made in writing or made orally to any director, executive officer, or inside
or
outside legal counsel to Company or any of its Subsidiaries, regarding the
accounting or auditing practices, procedures, methodologies or methods of
Company or its Subsidiaries or their respective internal accounting controls,
including any complaint, allegation, assertion or claim that Company or any
of
its Subsidiaries has engaged in questionable accounting or auditing practices
or
any oral or written notification of a (x) “reportable condition” or
(y) “material weakness” in Company’s internal controls. For purposes of
this Agreement, the terms “reportable condition” and “material weakness” shall
have the meanings assigned to them in the Statements of Auditing
Standards 60, as in effect on the date hereof. No attorney representing
Company or any of its Subsidiaries, whether or not employed by Company or any
of
its Subsidiaries, has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by Company or any of its
officers, directors, employees or agents to Company’s Board of Directors or any
committee thereof or to any director or officer of Company. Since
December 31, 2004, there have been no internal investigations regarding
accounting or revenue recognition discussed with, reviewed by or
initiated
at the direction of the chief executive officer, chief financial officer,
general counsel or similar legal officer, Company’s Board of Directors or any
committee thereof.
2.9 Absence
of Changes.
Except
as expressly contemplated by this Agreement and except as disclosed in
Section
2.9 of the Company Disclosure Schedule,
since
the Audited Financial Statement Date (unless otherwise indicated), the Company
has conducted its business only in the ordinary course and, without limiting
the
generality of the foregoing:
(a) the
Company has not entered into any Contract, commitment or transaction, including
involving a Business Combination, or incurred any Liabilities outside of the
ordinary course of business consistent with past practice;
(b) there
has
not been any material amendment or other material modification (or agreement
to
do so) or violation of the terms of, any of the Contracts set forth or described
in Section
2.18(a) of the Company Disclosure Schedule,
except
as described in Section
2.9(b) of the Company Disclosure Schedule;
(c) the
Company has not entered into any transaction with any officer, director,
stockholder, Affiliate or Associate of the Company, other than (i) pursuant
to any Contract in effect on the Audited Financial Statement Date and identified
in Section
2.9(c) of the Company Disclosure Schedule
or
(ii) pursuant to any contract of employment and listed pursuant to
Section
2.18(a) of the Company Disclosure Schedule;
(d) the
Company
has not entered into or amended any Contract pursuant to which any other Person
is granted manufacturing, marketing, distribution, licensing or similar rights
of any type or scope with respect to any products of the Company or Company
Intellectual Property, other than as contemplated by the Contracts and Licenses
disclosed in the Company Disclosure Schedule;
(e) no
Action
or Proceeding has been commenced or, to the Company’s Knowledge, threatened in
writing by or against the Company;
(f) the
Company has not declared or set aside or paid any dividends on or made any
other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock or Equity Equivalents, or effected or approved any split,
combination or reclassification of any Company Capital Stock or Equity
Equivalents, or repurchased, redeemed or otherwise acquired, directly or
indirectly, any shares of Company Capital Stock or Equity
Equivalents;
(g) except
for the issuance of shares of Company Capital Stock upon exercise or conversion
of then-outstanding Company Options, Company Warrants, Company Stock Pur-chase
Rights or Company Preferred Stock listed in Section
2.3(b) of the Company Disclosure Schedule,
the
Company has not issued, granted, delivered, sold or authorized or proposed
to
issue, grant, deliver or sell, or purchased or proposed to purchase, any shares
of Company Capital Stock or Equity Equivalents;
(h) there
has
not been any amendment to the Company’s certificate of incorporation or
bylaws;
(i) there
has not
been any transfer (by way of a License or otherwise) to any Person of rights
to
any Company Intellectual Property;
(j) the
Company
has not made or agreed to make any disposition or sale of, waiver of rights
to,
license or lease of, or incurrence of any Lien in an amount exceeding fifty
thousand dollars ($50,000) individually or one hundred thousand dollars
($100,000) in the aggregate, on any Assets and Properties of the Company, other
than dispositions of inventory, or nonexclusive licenses of products to Persons
to whom the Company had granted licenses of its products at the Audited
Financial Statement Date, in the ordinary course of business of the Company
consistent with past practice;
(k) the
Company has not made or agreed to make any purchase of any Assets and Properties
of any Person other than (i) acquisitions of inventory, or licenses
of
products, in the ordinary course of business of the Company consistent with
past
practice and (ii) other acquisitions in an amount not exceeding twenty
thousand dollars ($20,000) in the case of any individual item or fifty thousand
dollars ($50,000) in the aggregate;
(l) since
June 30, 2005, the Company has not made or agreed to make any capital
expenditures or commitments for additions to property, plant or equipment of
the
Company constituting capital assets individually or in the aggregate in an
amount exceeding fifty thousand dollars ($50,000);
(m) the
Company has not made or agreed to make payment, discharge or satisfaction,
in an
amount in excess of twenty-five thousand dollars ($25,000), in any one case,
or
fifty thousand dollars ($50,000) in the aggregate, of any claim, Liability
or
obligation, other than the payment, discharge or satisfaction in the Company’s
ordinary course of business of Liabilities reflected or reserved against in
the
Company Financials;
(n) the
Company has not failed to pay or otherwise satisfy any Liabilities presently
due
and payable of the Company, except such Liabilities which are being contested
in
good faith by appropriate means or procedures and which, individually or in
the
aggregate, are immaterial in amount;
(o) the
Company has not incurred any Indebtedness or guaranteed any Indebtedness in
an
aggregate amount exceeding twenty-five thousand dollars ($25,000) or issued
or
sold any debt securities of the Company or guaranteed any debt securities of
others;
(p) the
Company has not granted any severance or termination pay to any director,
officer, employee or consultant, except payments made pursuant to written
Contracts outstanding on the date hereof, true, accurate and complete copies
of
which have been delivered to Acquirer and the terms of which are disclosed
in
Section
2.9(p) of the Company Disclosure Schedule;
(q) except
pursuant to a Contract disclosed to Acquirer pursuant to Section
2.9(c)
or
Section
2.18 of the Company Disclosure Schedule,
the
Company has not granted or approved any increase of greater than five percent
(5%) in salary, rate of commissions, rate of consulting fees or any other
compensation of any current or former officer, director, stockholder, employee
or independent contractor of, or advisor or consultant to, the Company which
is
not set forth on the list dated July 20, 2005 delivered to Acquirer
in
connection herewith;
(r) the
Company
has not paid or approved the payment of any consideration of any nature
whatsoever (other than salary, commissions or consulting fees and customary
benefits paid to any current or former officer, director, stockholder, employee
or independent contractor of, or consultant or advisor to, the
Company);
(s) the
Company has not established or modified any (i) targets, goals, pools
or
similar provisions under any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement or (ii) salary ranges, increased guidelines
or
similar provisions in respect of any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement; and
(t) the
Company has not entered into or approved any contract, arrangement or
understanding or acquiesced in respect of any arrangement or understanding,
to
do, engage in or cause or having the effect of any of the foregoing, including
with respect to any Business Combination not otherwise restricted by the
foregoing paragraphs.
2.10 No
Undisclosed Liabilities.
Except
as reflected or reserved against in the Company Financials (including the notes
thereto) or as disclosed in Section
2.10 of the Company Disclosure Schedule,
there
are no Liabilities of, relating to or affecting the Company or any of its Assets
and Properties, other than Liabilities incurred in the ordinary course of
business consistent with past practice since the Audited Financial Statement
Date and in accordance with the provi-sions of this Agreement which,
individually and in the aggregate, are not material to the Business or Condition
of the Company.
2.11 Taxes.
Except
as set forth in Section 2.11
of the Company Disclosure Schedule:
(a) All
Tax
Returns required to have been filed by or with respect to the Company, any
Subsidiary or any affiliated, consolidated, combined, unitary or similar group
of which the Company is or was a member (a “Relevant
Group”)
have
been duly and timely filed (including any extensions), and each such Tax Return
correctly and completely reflects Tax liability and all other information
required to be reported thereon. All such Tax Returns are true, complete and
correct in all material respects. All Taxes due and payable by the Company,
any
Subsidiary or any member of a Relevant Group, whether or not shown on any Tax
Return, or claimed to be due by any Tax Authority, for periods (or portions
of
periods) covered by the Company Financials, have been paid or accrued on the
balance sheet included in the Company Financials.
(b) The
unpaid Taxes of the Company and each Subsidiary (i) did not, as of the
most
recent fiscal month end, exceed by any material amount the reserve for Liability
for Income Tax (other than the reserve for deferred taxes established to reflect
timing differences between book and tax income) or Other Tax set forth on the
face of the most recent balance sheet included in the Company Financials and
(ii) will not exceed by any material amount such reserve as adjusted
for
opera-tions and transactions in the ordinary course of business at the Effective
Time.
(c) Neither
the
Company nor any Subsidiary is a party to any agreement extending the time within
which to file any Tax Return. No claim has ever been made by a Taxing Authority
of any jurisdiction in which the Company, any Subsidiary or any member of any
Relevant
Group files Tax Returns that the Company, such Subsidiary or such member is
or
may be subject to taxation by that jurisdiction.
(d) The
Company,
each Subsidiary and each member of any Relevant Group has withheld and paid
all
Taxes required to have been withheld and paid in connection with amounts paid
or
owing to any employee, creditor or independent contractor.
(e) Neither
the Company nor any Subsidiary has knowledge of any actions by any Taxing
Authority in connection with assessing additional Taxes against or in respect
of
it or any Relevant Group for any past period. There is no dispute or claim
concerning any Tax Liability of the Company, any Subsidiary or any Relevant
Group either (i) threatened, claimed or raised by any Taxing Authority
or
(ii) of which the Company is otherwise aware. There are no Liens for
Taxes
upon the Assets and Properties of the Company, any Subsidiary or any Relevant
Group other than Liens for Taxes not yet due. Section
2.11(e) of the Company Disclosure Schedule indicates
those Tax Returns, if any, of the Company, each Subsidiary and each member
of
any Relevant Group that have been audited or examined by Taxing Authorities,
and
indicates those Tax Returns of the Company, each Subsidiary and each member
of
any Relevant Group that currently are the subject of audit or examination.
The
Company has delivered to Acquirer complete and correct copies of all federal,
state, local and foreign income Tax Returns filed by, and all Tax examination
reports and statements of deficiencies assessed against or agreed to by, the
Company, each Subsidiary and each member of any Relevant Group since the fiscal
year ended December 31, 2001.
(f) There
are
no outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax Returns required to be filed by, or which
include or are treated as including, the Company or with respect to any Tax
assessment or deficiency affecting the Company, any Subsidiary or any Relevant
Group.
(g) Neither
the
Company nor any Subsidiary has received any written ruling related to Taxes
or
entered into any agreement with a Taxing Authority relating to
Taxes.
(h) Neither
the
Company nor any Subsidiary has any liability for the Taxes of any Person other
than the Company or any Subsidiary (i) under section 1.1502-6 of the
Income
Tax Regulations (or any similar provision of state, local or foreign Law),
(ii) as a transferee or successor, (iii) by Contract or
(iv) otherwise.
(i) The
Company
(i) has neither agreed to make nor is required to make any adjustment
under
section 481 of the Code by reason of a change in accounting method and
(ii) is not a “consenting corporation” within the meaning of section
341(f)(1) of the Code.
(j) Neither
the Company nor any Subsidiary is a party to or bound by any obligations under
any tax sharing, tax allocation, tax indemnity or similar agreement or
arrangement.
(k) Neither
the
Company nor any Subsidiary is involved in, subject to, or a party to any joint
venture, partnership, Contract or other arrangement that is treated as a
partnership for federal, state, local or foreign Income Tax
purposes.
(l) The
Company
was not included and is not includible in the Tax Return of any Relevant Group
with any corporation other than such a return of which the Company is the common
parent corporation.
(m) The
Company
has not made any payments, is not obligated to make any payments, nor is a
party
to any contract, agreement or arrangement covering any current or former
employee or consultant of the Company that under certain circumstances could
require it to make or give rise to any payments that are not deductible as
a
result of the provisions set forth in section 280G of the Code or the Income
Tax
Regulations thereunder or would result in an excise tax to the recipient of
any
such payment under section 4999 of the Code.
(n) Notwithstanding
anything else set forth herein, the Company makes no representation regarding
the size or utilization by the Acquirer, the Company or any of their respective
Affiliates after the Effective Time of the net operating losses, built-in
losses, capital losses, Tax credits or other similar items of the Company under
(i) section 382 of the Code, (ii) section 383 of the Code,
(iii) section 384 of the Code, or (iv) section 1502 of the Code
or the
Income Tax Regulations promulgated thereunder.
(p) Each
material election with respect to income Taxes affecting the Company are set
forth in Section
2.11(o) of the Company Disclosure Schedule.
(q) The
Company is not nor has it ever been a United States real property holding
corporation within the meaning of section 897(c)(1)(A)(ii) of the
Code.
None
of
the assets of the Company constitutes tax-exempt bond financed property or
tax-exempt use property, within the meaning of section 168 of the Code.
The
Company is not a party to any “safe harbor lease” that is subject to the
provisions of section 168(f)(8) of the Internal Revenue Code as in effect prior
to the Tax Reform Act of 1986, or to any “long-term contract” within the meaning
of section 460 of the Code.
(r) The
Company
(i) has
substantial authority for the tax treatment of, or
(ii) has
a
reasonable basis for the tax treatment of and has disclosed (in accordance
with
section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax
Returns,
all
positions taken on its relevant federal income Tax Returns that could give
rise
to a substantial understatement of federal income Tax within the meaning of
section 6662(d) of the Code.
(s) The
Company has not participated and is not participating in any “reportable
transaction” within the meaning of section 1.6011-4(b) of the Income Tax
Regulations.
(t) The
Company
has been neither a “distributing corporation” nor a “controlled corporation”
(both within the meaning of section 355(e) of the Code) in a distribution
purported to be governed by section 355 of the Code.
2.12 Legal
Proceedings.
(a) Except
as
set forth in Section
2.12(a) of the Company Disclosure Schedule:
(i) there
are
no Actions or Proceedings pending or, to the Company’s Knowledge, threatened
against, relating to or affecting the Company or any of its Assets and
Properties or the Japan Subsidiary or any of its Assets or
Properties;
(ii) to
the
Company’s Knowledge, there are no facts or circumstances that could reasonably
be expected to give rise to any Action or Proceeding against, relating to or
affecting the Company or any of its Assets and Properties; and
(iii) the
Company has not received written notice, and does not otherwise have Knowledge
of any Orders outstanding against the Company.
(b) Prior
to
the execution of this Agreement, the Company has delivered to Acquirer all
responses of counsel for the Company to auditor’s requests for information for
the preceding three (3) years (together with any updates provided by such
counsel) regarding Actions or Proceedings pending or threatened against,
relating to or affecting the Company. Section
2.12(b) of the Company Disclosure Schedule
sets
forth all Actions or Proceedings relating to or affecting, or, to the Company’s
Knowledge, threatened against, the Company or any of its Assets and Properties
during the three (3) year period prior to the date hereof.
2.13 Compliance
with Laws and Orders.
Neither
the Company nor to the Company’s Knowledge any of its directors, officers,
Affiliates, agents or employees has violated in any material respect since
the
incorporation of the Company, or is currently in default or violation in any
material respect under, any Law or Order applicable to the Company or any of
its
Assets and Properties, and the Company has no Knowledge of any claim of
violation, or of any actual violation, of any such Laws and Orders by the
Company since the incorporation of the Company.
2.14 Employee
Benefit Plans and Employee Matters.
(a) The
Company
has provided Acquirer with a complete and accurate list setting forth all
employees, advisors and consultants of the Company and any Subsidiary as of
the
date hereof together with their titles or positions, dates of hire, regular
work
location and current compensation. Neither the Company nor any Subsidiary has
any employment contract with any officer or employee or any other consultant
or
Person which is not terminable by the Company or such Subsidiary at will without
liability, except as the right of the Company or such Subsidiary to terminate
its employees at will may be limited by applicable federal, state or foreign
law. Except as set forth in Section
2.14(a) of the Company Disclosure Schedule,
neither
the Company nor any Subsidiary has any Plans.
(b) The
Company and each Subsidiary has made available to Acquirer true, complete and
correct copies of (i) each Plan (or, in the case of any unwritten Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500
filed with the IRS with respect to each Plan (if any such report was required),
(iii) the most recent summary plan description for each Plan for which
such
summary plan description is required, (iv) each trust agreement and group
annuity
contract
relating to any Plan and (v) all correspondence with the IRS or the
United
States Department of Labor relating to any outstanding controversy or audit.
Each Plan complies in all material respects with applicable laws, including,
without limitation, ERISA and the Code.
(c) Each
Plan
has been maintained, funded, operated and administered in compliance in all
material respects with all applicable laws and regulations, including but not
limited to, ERISA, the Code, and the Health Insurance Portability and
Accountability Act of 1996. Each Plan that is intended to be qualified under
Section 401(a) of the Code and each trust forming a part thereof that is
intended to be exempt from taxation under Section 501(a) of the Code has
received a favorable determination letter from the IRS as to its qualification
and tax-exempt status and nothing has occurred since the date of such
determination letter that could adversely affect the qualification of such
Plan
or the tax-exempt status of such related trust. No event has occurred and,
to
the Company’s Knowledge, there currently exists no condition or set of
circumstances in connection with which the Company could reasonably be expected
to be subject to any liability under the terms of any Plans, ERISA, the Code
or
any other applicable law, including any liability under Title IV of ERISA.
Each
Plan can be amended or terminated in accordance with its terms and any
applicable law without any material liability to the Company other than for
benefits accrued or incurred before such amendment or termination. No Plan
is a
plan subject to Title IV of ERISA. No Plan is a “multiemployer plan” as defined
in Section 3(37) of the ERISA and 414(f) of the Code, nor a “multiple employer
plan” as described in Section 4063(a) of ERISA and 413 of the Code, and neither
the Company nor any Person which, together with the Company, would be treated
as
a single employer under Section 4001 of ERISA or Section 414 of the Code has
ever contributed or had an obligation to contribute to any such
plans.
(d) Except
as
set forth in Section
2.14(d) of the Company Disclosure Schedule,
no
director, officer, consultant or other employee of the Company or any Subsidiary
will become entitled to any retirement, severance or similar benefit or enhanced
or accelerated benefit (including any acceleration of vesting or lapse of
repurchase rights or obligations with respect to any employee stock option
or
other benefit under any stock option plan or compensation plan or arrangement
of
the Company or any Subsidiary) solely as a result of the transactions
contemplated hereby.
(e) No
Plan
provides post-retirement health and medical, life or other insurance benefits
for retired employees of the Company or any Subsidiary (other than benefit
coverage mandated by applicable statute, including benefits provided pursuant
to
COBRA).
(f) There
has
been no amendment to, written interpretation or announcement (whether or not
written) by the Company or any Subsidiary or any of its affiliates relating
to,
or change in employee participation or coverage under, any Plan that would
increase materially the expense of maintaining such Plan above the level of
the
expense incurred in respect thereof for the 12 months ended on the Audited
Financial Statement Date.
2.15 Real
Property.
(a) The
Company does not own any real property. All of the fixed assets and properties
reflected in the Company Financials or acquired after the Financial Statement
Date are in good operating condition and repair (subject to normal wear and
tear
and scheduled
maintenance,
having regard to their use and age). The Company has good and valid title to,
or
valid leasehold interests in, all tangible properties and assets, real, personal
and mixed, used or held for use in its business, free and clear of any liens
or
encumbrances.
(b) Section
2.15(b) of the Company Disclosure Schedule
contains
a complete and accurate list of all real property leased or subleased to or
by
the Company in the last five (5) years (the “Properties”),
the
name of the lessor and the date of the lease. The Company does not have any
options to purchase any such Properties or any other real property. The
Properties are held under valid, existing and enforceable leases, true and
correct copies of which have been delivered to the Acquirer. The Properties
and
the operations of the Company thereon do not to the Company’s Knowledge, violate
any applicable material building code, zoning requirement or classification,
or
pollution control ordinance or statute relating to the Properties or to such
operations.
2.16 Tangible
Personal Property.
The
Company is in possession of and has good and marketable title to, or has valid
leasehold interests in or valid rights under contract to use, all tangible
personal property used in the conduct of its business, including all tangible
personal property reflected on the Company Financials and tangible personal
property acquired since the Audited Financial Statement Date, other than
property disposed of since such date in the ordinary course of business
consistent with past practice. Except as disclosed in Section
2.16 of the Company Disclosure Schedule,
all
such tangible personal property (including plant, property and equipment) is
free and clear of all Liens, and is in good working order and condition in
all
material respects, ordinary wear and tear excepted, and to the Company’s
Knowledge its use complies in all material respects with all applicable
Laws.
2.17 Intellectual
Property.
(a) Section
2.17(a) of the Company Disclosure Schedule
lists
all Company Registered Intellectual Property (including all trademarks and
service marks that the Company has used with the intent of creating or
benefiting from any common law rights relating to such marks) and lists any
proceedings or actions pending as of the date hereof before any court or
tribunal (including the PTO or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property.
(b) The
Company has all requisite right, title and interest in or valid and enforceable
rights under Contracts or Licenses to use all Company Intellectual Property
necessary to the conduct of its business as currently conducted.
(i) Except
as
set forth in Section
2.17(b)(i) of the Company Disclosure Schedule,
each
item of Company Intellectual Property, including all Company Registered
Intellectual Property listed in Section
2.17(a) of the Company Disclosure Schedule,
is
owned exclusively by the Company (excluding Intellectual Property licensed
to
the Company under any License disclosed under Section
2.17(f) of the Company Disclosure Schedule)
and is
free and clear of any Liens. Without limiting the generality of the foregoing,
the Company owns exclusively all trademarks, service marks and trade names
used
by the Company in connection with the operation or conduct of the business
of
the Company as currently conducted or as currently contemplated to be conducted,
including
the
sale
of any products or technology or the provision of any services by the Company;
provided, however, that the Company may use trademarks, service marks and trade
names of third parties which are licensed to the Company, as disclosed under
Section
2.17(f) of the Company Disclosure Schedule,
or are
in the public domain.
(ii) Without
limiting the generality of the foregoing, the Company owns exclusively, and
has
good title to, each copyrighted work that is a Company product and each other
work of authorship that the Company otherwise purports to own or is used by
the
Company in connection with the operation or conduct of the business of the
Company as currently conducted or provision of services by the Company, other
than works disclosed under Section
2.17(f) of the Company Disclosure Schedule.
(c) To
the extent
that any Company Intellectual Property has been developed or created by any
Person other than the Company, the Company has a written agreement with such
Person as listed on Section
2.17(f) of the Company Disclosure Schedule.
(d) Except
pursuant to agreements described in Section
2.17(e)of the Company Disclosure Schedule,
the
Company has not transferred ownership of any Intellectual Property that is
or
was Company Intellectual Property, to any other Person.
(e) Except
as
set forth in Section
2.17(d) of the Company Disclosure Schedule,
the
Company Intellectual Property constitutes all the Intellectual Property used
in
and/or necessary to the conduct of the Company’s business as it currently is
conducted and as is currently contemplated to be conducted, including the
design, development, distribution, marketing, manufacture, use, import, license,
and sale of the products, technology and services of the Company (including
products, technology, or services currently under development).
(f) Section
2.17(f)(i) of the Company Disclosure Schedule
lists
all Contracts (including all inbound Licenses) to which the Company is a party
that grant licenses to Intellectual Property, other than standard Licenses
for
off-the-shelf, shrink-wrap software or “open source” code that is commercially
available on reasonable terms to any Person for a license fee of no more than
five thousand dollars ($5,000). Except as set forth in Section
2.17(f)(ii) of the Company Disclosure Schedule,
the
Company is not in breach of, nor has it failed to perform under any of the
foregoing Contracts and Licenses and, to the Company’s Knowledge, no other party
to such Contracts and Licenses is in material breach of or has materially failed
to perform thereunder.
(g) Section
2.17(g)(i) of the Company Disclosure Schedule
lists
all Contracts, Licenses and agreements between the Company and any other Person,
other than standard Licenses for off-the-shelf, shrink-wrap software or “open
source” code that is commercially available on reasonable terms to any Person
for a license fee of no more than five thousand dollars ($5,000), wherein or
whereby the Company has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume
or
incur any obligation or Liability or provide a right of rescission with respect
to the infringement or
misappropriation
by the Company or such other Person of the Intellectual Property of any Person
other than the Company. Except as set forth in Section
2.17(g)(ii) of the Company Disclosure Schedule,
the
Company is not in breach of, nor has it failed to perform under any of the
fore-going Contracts, Licenses and agreements and, to the Company’s Knowledge,
no other party to such Contracts, Licenses and agreements is in breach of or
has
failed to perform thereunder.
(h) Except
as
set forth in Section
2.17(h) of the Company Disclosure Schedule,
the
operation of the business of the Company (i) as currently conducted
or
(ii) as currently contemplated to be conducted, including the Company’s
design, development, use, import, manufacture and sale of the products,
technology or services (including products, technology or services currently
under development) of the Company, does not (A) infringe or misappropriate
the Intellectual Property of any Person, (B) violate any term or provision
of any License or Contract concerning such Intellectual Property,
(C) violate the rights of any Person (including rights to privacy or
publicity), or (D) constitute unfair competition or an unfair trade
practice under any Law, and the Company has not received written notice from
any
Person claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of
the
Company infringes or misappropriates the Intellectual Property of any Person
or
constitutes unfair competition or trade practices under any Law, including
notice of third party patent or other Intellectual Property rights from a
potential licensor of such rights, nor is the Company aware of any basis for
any
such claim.
(i) Each
item
of Company Registered Intellectual Property is valid and subsisting, and all
necessary registration, maintenance, renewal fees, annuity fees and taxes in
connection with such Registered Intellectual Property have been paid and all
necessary documents and certificates in connection with such Company Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions
where the Company has filed documents for such purpose, as the case may be,
for
the purposes of maintaining such Registered Intellectual Property. Section
2.17(i)(i) of the Company Disclosure Schedule
lists
all actions that must be taken by the Company within one hundred eighty (180)
days from the date hereof, including the payment of any registration,
maintenance, renewal fees, annuity fees and taxes or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered Intellectual
Property. In each case in which the Company has acquired ownership of any
Intellectual Property rights from any Person, the Company has obtained a valid
and enforceable assignment sufficient to irrevocably transfer all rights in
such
Intellectual Property (including the right to seek past and future damages
with
respect to such Intellectual Property) to the Company and, to the maximum extent
provided for by and required to protect the Company’s ownership rights in and to
such Intellectual Property in accordance with applicable Laws, the Company
has
recorded each such assignment of Registered Intellectual Property with the
relevant Governmental or Regulatory Authority, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any foreign jurisdiction
where the Company has filed documents for such purpose, as the case may be.
To
the Company’s Knowledge, there are no facts or circumstances that would render
any Company Registered Intellectual Property invalid or unenforceable other
than
as set forth on Section
2.17(i)(ii) of the Company Disclosure Schedule.
Without
limiting the foregoing, to the Company’s Knowledge, no information, materials,
facts, or circumstances exists, including any information or fact that would
constitute prior art, that would render any of the Company Registered
Intellectual Property invalid or
unenforceable,
or would adversely effect any pending application for any Company Registered
Intellectual Property. The Company has not misrepresented, or failed to
disclose, and is not aware of any misrepresentation or failure to disclose,
any
fact or circumstances in any application for any Company Registered Intellectual
Property that would constitute fraud or a material misrepresentation with
respect to such application or that would otherwise effect the validity or
enforceability of any Company Registered Intellectual Property.
(j) Except
as
set forth in Section
2.17(j) of the Company Disclosure Schedule,
there
are no Contracts or Licenses between the Company and any other Person with
respect to Company Intellectual Property under which there is any dispute (or,
to the Company’s Knowledge, facts that may reasonably lead to a dispute) known
to the Company, including any dispute or facts that may reasonably lead to
a
dispute regarding the scope of the Intellectual Property Rights granted in
such
Contract or License, or performance under such Contract or License, including
with respect to any payments to be made or received by the Company
thereunder.
(k) To
the
Company’s Knowledge, no Person is infringing or misappropriating any Company
Intellectual Property owned by the Company.
(l) The
Company has taken all commercially reasonable steps to protect the Company’s
rights in confidential information and trade secrets of the Company or provided
by any other Person to the Company subject to a duty of confidentiality. Without
limiting the generality of the foregoing, the Company has, and enforces, a
policy requiring each employee, consultant and independent contractor to execute
proprietary information, confidentiality and invention and copyright assignment
agreements substantially in the form set forth as Attachment
2.17(l) to the Company Disclosure Schedule,
and all
current and former employees, consultants and independent contractors of the
Company, except as set forth in Section
2.17(l) of the Company Disclosure Schedule,
have
executed such an agreement and copies of all such agreements have been provided
to Acquirer or made available to Acquirer for review.
(m) No
Company Intellectual Property owned by the Company, or any product, technology
or service of the Company, or to the Company’s Knowledge, any other Company
Intellectual Property, is subject to any Order, Action or Proceeding that
restricts, or that is reasonably expected to restrict in any manner, the use,
transfer or licensing of any Company Intellectual Property by the Company or
that may affect the validity, use or enforceability of such Company Intellectual
Property.
(n) Neither
this Agreement nor any transactions contemplated by this Agreement will result
in Acquirer’s or the Surviving Corporation granting any rights or licenses with
respect to the Intellectual Property of Acquirer or the Surviving Corporation
to
any Person pursuant to any Contract to which the Company is a party or by which
any of its Assets and Properties are bound. Neither this Agreement nor any
transaction contemplated by this Agreement will result in the loss of any
ownership or License rights of the Company, prior to the Closing Date, or the
Surviving Corporation, from and after the Closing Date, in any of the Company
Intellectual Property or require or obligate Acquirer or the Surviving
Corporation (i) to grant to any third party any rights or licenses with
respect to any Company Intellectual Property; or (ii) to pay any royalties
or other amounts. Neither this Agreement nor any transaction contemplated by
this
Agreement
will give to any third party the right to terminate, in whole or in part, any
Contracts or Licenses to which the Company is a party with respect to any
Intellectual Property, except for the Contracts or Licenses set forth in
Section
2.17(n) of the Company Disclosure Schedule.
(o) Section
2.17(o)(i) of the Company Disclosure Schedule
sets
forth a list of (i) all software which the Company has licensed from
any
third party which is used by the Company in its products, in providing services
or otherwise in its business (other than standard off-the-shelf, shrink-wrap
software that is commercially available on reasonable terms to any Person for
a
license fee of no more than five thousand dollars ($5,000)) and (ii) a
list
of all “freeware,”“shareware” and “open source” code incorporated into any
product now or heretofore shipped by the Company.
Except
as set forth on Section
2.17(o)(ii) of the Company Disclosure Schedule,
each of
Company’s existing and currently manufactured and marketed software products,
and each of Company’s databases and systems owned, used, developed or licensed
by Company: (i) does not contain, or is not derived in any manner (in whole
or
in part) from, any software that is distributed as free software, open source
software (e.g., Linux), or similar licensing or distribution models; and (ii)
does not require as a condition of use, modification and/or distribution of
such
software that such software or other software incorporated into, derived from
or
distributed with such software be (A) disclosed or distributed in source code
form, (B) licensed for the purpose of making derivative works, or (C)
redistributable at no charge (“Publicly
Available Software”).
Except as set forth in Section
2.17(o)(iii) of the Company Disclosure Schedule,
no
Publicly Available Software is used in whole or in part by Company in the
development of any of Company’s software in a manner that may subject Company’s
software to the license obligations of any Publicly Available
Software.
(p) The
Company has taken all commercially reasonable steps to protect and preserve
its
exclusive ownership of Company Intellectual Property. The Company has secured
valid written assignments from all consultants and employees who contributed
to
the creation or development of the Company Intellectual Property. In the event
that a consultant is (or was) concurrently employed by the Company and a third
party, the Company has taken additional steps to ensure that any Company
Intellectual Property developed by such a consultant does not belong to the
third party or conflict with the third party’s employment agreement. To the
Company’s Knowledge, no employee or officer of or consultant to the Company is
in violation of any term of any employment Contract, proprietary information
and
inventions agreement, non-competition agreement, or any other contract relating
to the relationship of any such employee or consultant with the Company or
any
previous employer.
(q) For
purposes
of this Section 2.17 the word “Company” shall be deemed to mean the Company and
its Subsidiaries.
2.18 Contracts.
(a) Section 2.18(a)
of the Disclosure Schedule
(with
paragraph references corre-spond-ing to those set forth below) contains a true
and complete list of each of the following Contracts or other arrangements
(true
and complete copies of which or, if none, reasonably complete and accurate
written descriptions thereof, together with all amendments and supple-ments
thereto and all waivers of any terms thereof, have been provided to or made
available to
Acquirer
prior to the execution of this Agreement), to which the Company is a party
or by
which any of its Assets and Properties is bound:
(i) (A) all
Contracts to which the Company is a party (excluding Plans) providing for a
commitment of employment or consultant services for a specified or unspecified
term, the name, position and rate of compensation of each Person party to such
a
Contract and the expiration date of each such Contract; and (B) any
written
or unwritten representations, commitments, promises, communi-ca-tions or courses
of conduct involving an obligation of the Company to make payments (with or
without notice, passage of time or both) to any Person in con-nec-tion with,
or
as a consequence of, the transactions contemplated hereby or to any employee
who
is disclosed in Section 2.21(b)(i)
of the Disclosure Schedule,
other
than with respect to salary or incentive compensation payments in the ordinary
course of business consistent with past practice;
(ii) all
Contracts to which the Company is a party with any Person containing any
provision or covenant prohibiting or limiting the ability of the Company to
engage in any business activity or compete with any Person or prohibiting or
limiting the ability of any Person to compete with the Company or prohibiting
or
limiting disclosure of confidential or proprietary information;
(iii) all
partnership, joint venture, stockholders’ or other similar Contracts to which
the Company is a party with any Person;
(iv) all
Contracts to which the Company is a party relating to Indebtedness in an amount
of fifty thousand dollars ($50,000) or more of the Company;
(v) any
trust
indenture, mortgage, promissory note, loan agreement or other Contract for
the
borrowing of money, any currency exchange, commodities or other hedging
arrangement or any leasing transaction of the type required to be capitalized
in
accordance with GAAP;
(vi) all
Contracts to which the Company is a party entered into outside the ordinary
course of business (A) with independent contractors, distributors, dealers,
manufacturers’ representatives, sales agencies or franchisees, (B) with
aggregators, manufacturers and equipment vendors, and (C) with respect
to
the sale of services, products or both, to customers;
(vii) all
guarantees of any Indebtedness made by the Company or other obligations of
the
Company to any Person, including, but not limited to, any agreement of
guarantee, support, indemnification, assumption or endorsement of, or any
similar commitment with respect to, the obligations, Liabilities or Indebtedness
of any other Person;
(viii) all
Contracts to which the Company is a party relating to (A) the future
disposition or acquisition of any Assets and Properties with an aggregate value
of
fifty
thousand dollars ($50,000) or more, and (B) any Business
Combination;
(ix) all
Contracts
between or among the Company, on the one hand, and any current or former
officer, director, stockholder, Affiliate or Associate of the Company or any
Associate of any such officer, director, stockholder or Affiliate, on the other
hand;
(x) all
collective bargaining or similar labor contracts to which the Company is a
party;
(xi) all
Contracts to which the Company is a party that (A) limit or contain
restrictions on the ability of the Company to declare or pay dividends on,
to
make any other distribution in respect of or to issue or purchase, redeem or
otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer
to exist any Lien, to purchase or sell any Assets and Properties, to change
the
lines of business in which it participates or engages, (B) require the
Company to maintain specified financial ratios or levels of net worth or other
indicia of financial condition or (C) require the Company to maintain
insurance in certain amounts or with certain coverage;
(xii) all
Contracts
to which the Company is a party that are necessary for the conduct of the
business of the Company as currently conducted;
(xiii)
any
Contract to which
the Company is a party that expires or may be renewed at the option of any
Person other than the Company, so as to expire more than one (1) year
after
the date of this Agreement;
(xiv)
any
Contract to which
the Company is a party that is not terminable by the Company upon thirty (30)
days (or less) notice by the Company without penalty or obligation to make
payments based on such termination and which (i) requires payments by
the
Company in excess of twenty-five thousand dollars ($25,000) (either alone or
pursuant to a series of related contracts) or (ii) requires the Company
(or
the Surviving Corporation) to provide services to any Person after the
Closing;
(xv) all
powers of
attorney and comparable delegations of authority; and
(xvi) all
other
Contracts not otherwise required to be disclosed above in
Section 2.18(a)
of the Disclosure Schedule which
are
material to the Business or Condition of the Company.
(b) Each
Contract
required to be disclosed in Section
2.18(a) of the Company Disclosure Schedule
is in
full force and effect and constitutes a legal, valid and binding agree-ment,
enforceable in accordance with its terms, and to the Company’s Knowledge, each
other party thereto; and except as disclosed in Section
2.18(b) of the Company Disclosure Schedule,
to the
Company’s Knowledge, no other party to such Contract is, nor has received
written notice
that
it
is, in violation or breach of or default under any such Contract (or with notice
or lapse of time or both, would be in violation or breach of or default under
any such Contract).
(c) Except
as
disclosed in Section
2.18(c) of the Company Disclosure Schedule,
the
Company is not a party to or bound by any Contract that has been or could
reasonably be expected to be, individually or in the aggregate with any other
similar Contracts, materially adverse to the Business or Condition of the
Company as currently conducted or as currently proposed to be conducted or
that
has been or could reasonably be expected to result, individually or in the
aggregate with any such other Contracts in Losses to the Company or be
materially adverse to the Business or Condition of the Company as currently
conducted or as currently proposed to be conducted.
(d) Except
as
disclosed in Section
2.18(d) of the Company Disclosure Schedule,
the
Company is not a party to or bound by any Contract that (i) automatically
terminates or allows termination by the other party thereto upon consummation
of
the transactions contemplated by this Agreement or (ii) contains any
covenant or other provision which limits the Company’s ability to compete with
any Person in any line of business or in any area or territory.
(e) Section
2.18(e) of the Company Disclosure Schedule,
lists
all contracts of the Japan Subsidiary.
2.19
Insurance.
The
Company has provided Acquirer with copies of all insurance policies to which
the
Company is a party or is a beneficiary or named insured. All of the insurance
policies and all such insurance policies are in full force and effect. Since
the
Company’s incorporation, there have been no claims in excess of fifty thousand
dollars ($50,000) asserted under any of the insurance policies of the Company
in
respect of all general liability, professional liability, errors and omissions,
property liability and worker’s compensation and medical claims.
2.20 Affiliate
Transactions.
(a) Except
as
disclosed in Section
2.9(c)
or
Section
2.20(a) of the Company Disclosure Schedule,
(i) there are no Contracts or Liabilities between the Company, on the
one
hand, and (A) any current or former officer, director, stockholder,
or to
the Company’s Knowl-edge, any Affiliate or Associate of the Company or
(B) any Person who, to the Company’s Knowledge, is an Associate of any such
officer, director, stockholder or Affiliate, on the other hand, (ii) the
Company does not provide or cause to be provided any assets, services or
facilities to any such current or former officer, director, stockholder,
Affiliate or Associate, (iii) neither the Company nor any such current
or
former officer, director, stockholder, Affiliate or Associate provides or causes
to be provided any assets, services or facilities to the Company and
(iv) the Company does not beneficially own, directly or indirectly,
any
Investment Assets of any such current or former officer, director, stockholder,
Affiliate or Associate.
(b) Except
as
disclosed in Section
2.20(b) of the Company Disclosure Schedule,
each of
the Contracts and Liabilities listed in Section
2.20(a) of the Company Disclosure Schedule
were
entered into or incurred, as the case may be, on terms no less favorable to
the
Company (in the reasonable judgment of the Company) than if such Contract or
Liability was entered into or
incurred
on an arm’s length basis on competitive terms. Any Contract to which the Company
is a party and in which any director of the Company has a financial interest
in
such Contract was approved by a majority of the disinterested members of the
board of directors of the Company and/or stockholders of the Company, as the
case may be, in accordance with section 144 of Delaware Law.
2.21 Employees;
Labor Relations.
(a) There
are
no controversies or labor disputes or union organization activities pending
or
threatened between the Company and any of its employees. None of the employees
of the Company belongs to any union or collective bargaining unit which
represents employees of the Company in negotiations with the Company. The
Company has complied with all applicable foreign, state and federal equal
employment opportunity and other laws and regulations related to employment
or
working conditions. The Company is not the subject of any material proceeding
asserting that the Company has committed an unfair labor practice or is seeking
to compel it to bargain with any labor union or labor organization nor is there
pending or, to the Company’s Knowledge, threatened, any labor strike, dispute,
walkout, work stoppage, slowdown or lockout involving the Company.
(b) Each
Person who is an employee of the Company is employed at will. Each Person who
is
an independent con-tractor of the Company is properly classified as an
independent contractor for purposes of all employment related Laws and all
Laws
concerning the status of independent contractors. Except as described in
Section
2.21(b) of the Company Disclosure Schedule,
the
completion of the trans-actions contemplated by this Agree-ment will not result
in any payment or increased pay-ment becoming due from the Company to any
current or former officer, director, or employee of, or consultant to, the
Company, and to the Company’s Knowledge no employee of the Company has made any
threat, or otherwise revealed an intent, to terminate such employee’s
relationship with the Company, for any reason, including because of the
consummation of the transactions contemplated by this Agreement.
(c) Since
January 1, 2001 there have been no federal or state claims made against
the
Company based on sex, sexual or other harassment, age, disability, race or
other
discrimination or common law claims, including claims of wrongful termination,
by any employees of the Company or by any of the employees performing work
for
the Company but provided by an outside employment agency, and there are no
facts
or circumstances known to the Company that could reasonably be expected to
give
rise to such complaint or claim. The Company has complied in all material
respects with all laws related to the employment of employees and, except as
set
forth in Section
2.21(c) of the Company Disclosure Schedule,
the
Company has not received any written notice of any claim that it has not
complied in any material respect with any Laws relating to the employment of
employees, including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination, the WARN Act, employee safety, or that
it is liable for any arrearages of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(d) The
Company has no written policies and/or employee handbooks or manuals except
as
described in Section
2.21(d) of the Company Disclosure Schedule.
True and
correct
copies
of
all of such written policies and/or employee handbooks or manuals have been
provided to Acquirer.
(e) To
the
Company’s Knowledge, no officer, employee or consultant of the Company is
obligated under any Contract or other agreement or subject to any Order or
Law
that would interfere with the Company’s business as currently conducted or as
reasonably contem-plated to be conducted. Neither the execution nor delivery
of
this Agreement, nor the carrying on of the Company’s business as presently
con-ducted or as reasonably contemplated to be conducted, nor any authorized
activity of such officers, employees or consultants in connection with the
carrying on of the Company’s business as presently conducted or as reasonably
contemplated to be conducted, will conflict with or result in a breach of the
terms, conditions or provisions of, constitute a default under, or trigger
a
condition xxxxx-xxxx to any rights under any Contract or other agreement under
which the Company is bound
(f) Each
current
and former employee, officer, independent contractor and consultant of the
Company has executed a Proprietary Information and Inventions Agreement. No
current or former employee, officer, independent contractor or consultant of
the
Company has excluded works or inventions with the Company from his or her
assignment of inventions pursuant to such employee, officer or consultant’s
Proprietary Information and Inventions Agreement.
2.22 Environmental
Matters.
Except
as set forth in Section 2.22
of the Company Disclosure Schedule:
(a) The
Company possesses any and all Environmental Permits necessary to or required
for
the operation of its business as currently conducted or as reasonably
contemplated to be conducted.
(b) The
Company
is in compliance with (i) all terms, conditions and provisions of its
Environmental Permits; and (ii) all Environmental Laws.
(c) Neither
the
Company nor any predecessor of the Company nor any entity previ-ously owned
by
the Company has received any written notice of alleged, actual or potential
responsibility for, or any inquiry regarding, (i) any Release or threatened
or suspected Release of any Hazardous Material, or (ii) any violation
of
Environmental Law, and there is no outstanding civil, criminal or administrative
investigation, action, suit hearing or proceeding pending or threatened against
the Company pursuant to any Environmental Law.
(d) Neither
the
Company nor any predecessor of the Company nor any entity previously owned
by
the Company has any obligation or liability with respect to any Hazardous
Material, including any Release or threatened or suspected Release of any
Hazardous Material and any violation of Environmental Law, and there have been
no events, facts or circumstances which could form the basis of any such
obligation or liability.
(d) To
the
Company’s Knowledge, no Releases of Hazardous Material(s) have occurred at,
from, in, to, on, or under any Site and no Hazardous Material is present in,
on,
about or migrating to or from any Site.
(f) Neither
the Company, nor any predecessor of the Company, nor any entity previously
owned
by the Company, has transported or arranged for the treatment, storage,
handling, disposal or transportation of any Hazardous Material at, from or
to
any site or other location.
(g) To
the
Company’s Knowledge, no Site is a current or proposed Environmental Clean-up
Site.
(h) To
the
Company’s Knowledge, there are no Liens under or pursuant to any Environmental
Law on any Site.
(i) To
the
Company’s Knowledge, there is no (i) underground storage tank, active or
abandoned, (ii) polychlorinated biphenyl containing equipment,
(iii) asbestos-containing material, (iv) radon, (v) lead-based
paint or (vi) urea formaldehyde at any Site. To the Company’s Knowledge,
any underground storage tank meets all current applicable upgrade
requirements.
(j) To
the
Company’s Knowledge, there have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted with respect to any Site
which have not been delivered to Acquirer prior to execution of this
Agreement.
(k) The
Company
is not a party, whether as a direct signatory or as successor, assign, third
party beneficiary, guarantor or otherwise, to, and is not otherwise bound by,
any lease or other contract under which the Company is obligated or may be
obligated by any representation, warranty, covenant, restriction,
indemnification or other undertaking respecting Hazardous Materials or under
which any other person is or has been released respecting Hazardous
Materials.
(l) The
Company and any predecessors of the Company and any entity previously owned
by
the Company have provided all notifications and warnings, made all reports,
and
kept and maintained all records required pursuant to Environmental
Laws.
2.23
Substantial
Customers and Suppliers.
The
Company has provided Acquirer with the list of sales by customer of the Company
as of June 30, 2005, collectively, on the basis of revenues collected
or
accrued for the most recent complete fiscal year. Section
2.23(a) of the Company Disclosure Schedule
lists
suppliers of the Company with annual purchases of goods or services of at least
$100,000 purchased for the most recent fiscal year. Except as disclosed in
Section
2.23(b) of the Company Disclosure Schedule,
no such
customer or supplier has ceased or materially reduced its purchases from or
sales or provision of services to the Company since December 31, 2004,
or,
to the Company’s Knowledge, has threatened in writing to cease or materially
reduce such purchases or sales or provision of services after the date hereof.
Except as disclosed in Section
2.23(c) of the Company Disclosure Schedule,
to the
Company’s Knowledge, no such customer or supplier is threatened with bankruptcy
or insolvency.
2.24 Accounts
Receivable.
Except
as set forth in Section
2.24 of the Company Disclosure Schedule,
the
accounts and notes receivable of the Company reflected on the Company
Financials, and all accounts and notes receivable arising subsequent to the
Financial Statement Date, (a) arose from bona fide sales transactions
in
the ordinary course of business, consistent with past practice, and are payable
on ordinary trade terms, (b) are legal, valid,
binding
and enforceable obligations of the respective debtors, (c) are not subject
to any presently asserted valid set-off or counterclaim and (d) do not
represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis or subject to any other repurchase or return
arrangement.
2.25 Inventory.
All
inventory of the Company reflected on the balance sheet included in the Company
Financials consisted, subject to reasonable reserves, and all such inventory
acquired since the Audited Financial Statement Date consists, of a quality
and
quantity usable and salable in the ordinary course of business as currently
conducted or as reasonably contemplated to be conducted. Except as disclosed
in
the notes to the Company Financials or in Section
2.25 of the Company Disclosure Schedule,
all
items included in the inventory of the Company are the property of the Company
free and clear of any Lien, have not been pledged as collateral, are not held
by
the Company on consignment from others and conform in all material respects
to
all standards applicable to such inventory or its use or sale imposed by
Governmental or Regulatory Authorities.
2.26
Other
Negotiations; Brokers; Third Party Expenses.
(a)
Neither
the Company nor to the Company’s Knowledge, any of its officers, directors,
employees, agents, or, to the Company Knowledge, any of its stockholders or
Affiliates (nor any investment banker, financial advisor, attorney, accountant
or other Person retained by or acting for or on behalf of the Company or any
such Affiliate) (i) has entered into any Contract that conflicts with
any
of the transactions contemplated by this Agreement or (ii) has entered
into
any Contract or had any discussions with any Person regarding any transaction
involving the Company which could result in Acquirer, the Company or any general
partner, limited partner, manager, officer, director, employee, agent or
Affiliate of any of them being subject to any claim for liability to said Person
as a result of entering into this Agreement or consummating the transactions
contemplated hereby.
(b) Except
as
set forth in Section
2.26(b) of the Company Disclosure Schedule,
no
broker, investment banker, financial advisor or other Person is entitled to
any
broker’s, finder’s, financial advisor’s or similar fee or commission in
connection with this Agreement and the transactions contem-plated hereby
based
on
arrangements made by or on behalf of the Company.
(c) Section 2.26
of the Company Disclosure Schedule
sets
forth the principal terms and conditions of any Contract with respect to, and
a
reasonable estimate of, all Third Party Expenses expected to be incurred by
the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby
(“Estimated Third Party Expenses”).
2.27 Banks
and Brokerage Accounts.
Section
2.27 of the Company Disclosure Schedule
sets
forth (a) a true and complete list of the names and locations of all
banks,
trust companies, securities brokers and other financial institutions at which
the Company has an account or safe deposit box or maintains a banking,
custodial, trading or other similar relation-ship, (b) a true and complete
list and description of each such account, box and relationship, indicating
in
each case the account number and the names of the respective officers,
employees, agents or other similar representatives of the Company having
signatory power with respect
thereto
and (c) a list of each Investment Asset, the name of the record and
beneficial owner thereof, the location of the certificates, if any, therefor,
the maturity date, if any, and any stock or bond powers or other authority
for
transfer granted with respect thereto.
2.28 Warranty
Obligations.
(a) Section
2.28(a) of the Company Disclosure Schedule
sets
forth (i) a list of all forms of written warranties, guarantees and
written
warranty policies of the Company in respect of any of the Company’s products and
services, which are currently in effect (the “Warranty Obligations”), and the
duration of each such Warranty Obligation, (ii) each of the Warranty
Obligations which is subject to any dispute or, to the Company’s Knowledge,
threatened dispute and (iii) the experience of the Company with respect
to
warranties, guarantees and warranty policies of or relating to the Company’s
products and services. True and correct copies of the Warranty Obligations
have
been delivered to Acquirer prior to the execution of this
Agreement.
(b) Except
as
disclosed in Section
2.28(b) of the Company Disclosure Schedule,
(i) there have not been any material deviations from the Warranty
Obligations, and no sales-person, employee or agent of the Company is authorized
to undertake obligations to any customer or other Person in excess of such
Warranty Obligations and (ii) the balance sheet included in the Interim
Financial Statements reflects adequate reserves for Warranty Obligations based
on historical practice and in light of known circumstances.
2.29 Foreign
Corrupt Practices Act.
Neither
the Company, nor to the Company’s Knowledge, any agent, employee or other Person
associated with or acting on behalf of the Company has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, made any unlawful
pay-ment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns from corporate funds, violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or made
any
bribe, rebate, payoff, influence payment, kick-back or other similar unlawful
payment.
2.30 Approvals.
(a) Section
2.30(a) of the Company Disclosure Schedule
contains
a list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by the Company which are required to be
given
to or obtained by the Company from any and all Governmental or Regulatory
Authorities in connection with the consummation of the trans-actions
contemplated by this Agreement and the Ancillary Agreements (other than the
filing of the Delaware Certificate of Merger, together with the required
officers’ certificates, and such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under state or
federal securities laws).
(b) Section
2.30(b) of the Company Disclosure Schedule
contains
a list of all material Approvals which are required to be given to or obtained
by the Company from any and all third parties other than Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
(c) All
material Approvals from Governmental or Regulatory Authorities necessary to
conduct the business conducted by the Company as it is currently being conducted
are set forth in Section
2.30(c)(1) of the Company Disclosure Schedule.
Except
as set forth in Section 2.30(c)(2)
of the Company Disclosure Schedule,
the
Company has obtained all material Approvals from Governmental or Regulatory
Authorities necessary to conduct the business conducted by the Company in the
manner as it is currently being conducted and there has been no written notice
received by the Company of any material violation or material non-compliance
with any such Approvals.
(d) The
affirmative vote or consent of the holders of (i) at least sixty
percent (60%) of the shares of Company Common Stock outstanding as of
the
applicable record date, voting separately as a class, (ii) at least
sixty
percent (60%) of the shares of Company Preferred Stock outstanding as
of
the applicable record date, voting together (on an “as converted to Company
Common Stock” basis) as a sepa-rate class, and (iii) at least sixty
percent (60%) of the shares of Company Common Stock and Company Preferred
Stock outstanding as of the applicable record date, voting together (on an
“as
converted to Company Common Stock” basis) as a separate class, are the only
votes of the holders of any of the Company Capital Stock necessary to approve
this Agreement, the Merger and the trans-actions contemplated
hereby.
(e) The
shares owned by the Major Stockholders of the Company who have con-currently
herewith entered into Voting Agreements constitute (i) at least sixty
percent (60%) of the out-stand-ing shares of Company Common Stock, (ii) at
least sixty percent (60%) of the outstanding shares of Company Pre-ferred Stock
(on an “as converted to Company Common Stock” basis), (iii) at least sixty
percent (60%) of the outstanding shares of each series of Company Preferred
Stock, and (iv) at least sixty percent (60%) of the outstanding shares
of
Company Common Stock and Company Preferred Stock (on an “as converted to Company
Common Stock” basis).
2.31 Takeover
Statutes.
The
Board of Directors of the Company has taken the necessary action to make
inapplicable to this Agreement, the Merger and the transactions contemplated
hereby, all Takeover Statutes applicable to the Company.
2.32 Disclosure.
No
representation or warranty made by the Company contained in this Agreement,
and
no statement contained in the Company Disclosure Schedule or in any
cer-tificate, list or other writing furnished to Acquirer pursuant to any
provision of this Agree-ment (including the Company Financials and the notes
thereto) contains any untrue statement of a material fact or omits to state
a
material fact necessary in order to make the statements herein or therein,
in
the light of the circumstances taken as a whole under which they were made,
not
misleading. The Company has provided Acquirer with all of the Contracts and
Licenses heretofore requested on behalf of Acquirer in writing.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF ACQUIRER
Acquirer
hereby represents and warrants to the Company, subject to such exceptions as
are
specifically disclosed with respect to specific numbered and lettered sections
and subsections
of
this
Article 3in the disclosure schedule and schedule of exceptions (the
“Acquirer
Disclosure Schedule”)
delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections, as
follows:
3.1 Organization
and Qualification.
Each of
Acquirer and Merger Subsidiary is a corporation duly organized, validly existing
and in good standing under the Laws of its state of incorporation. Each of
Acquirer and Merger Subsidiary has full corporate power and authority to conduct
its business as now conducted and as currently proposed to be conducted and
to
own, use and lease its Assets and Properties. Each of Acquirer and Merger
Subsidiary is duly qualified, licensed or admitted to do business and is in
good
standing in each jurisdiction in which the ownership, use, licensing or leasing
of its Assets and Properties, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for such failures
to be so duly qualified, licensed or admitted and in good standing that could
not reasonably be expected to have a material adverse effect on the Business
or
Condition of Acquirer and Merger Subsidiary, taken as a whole. All of the issued
and outstanding capital stock of Merger Subsidiary is owned by
Acquirer.
3.2 Authority
Relative to this Agreement.
Each of
Acquirer and Merger Subsidiary has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
each
of Acquirer and Merger Subsidiary of this Agree-ment and the Ancillary
Agreements to which it is a party and the consummation by each of Acquirer
and
Merger Subsidiary of the transactions contemplated hereby and thereby have
been
duly and validly authorized by all necessary action by the board of directors
of
Acquirer and Merger Subsidiary, and no other action on the part of the board
of
directors of Acquirer or Merger Subsidiary is required to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by Acquirer or Merger
Subsidiary of the transactions contemplated hereby and thereby. This Agreement
and the Ancillary Agreements to which Acquirer or Merger Subsidiary is a party
have been or will be, as applicable, duly and validly executed and delivered
by
Acquirer or Merger Subsidiary and, assuming the due authorization, execution
and
delivery hereof by the Company and/or the other parties thereto, constitutes
or
will constitute, as applicable, a legal, valid and binding obligation of
Acquirer or Merger Subsidiary enforceable against Acquirer or Merger Subsidiary
in accordance with its respective terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws relating to the enforcement of creditors’
rights generally and by general principles of equity.
3.3 No
Conflicts.
The
execution and delivery by Acquirer and Merger Subsidiary of this Agreement
and
the Ancillary Agreements to which it is a party does not, and the performance
by
Acquirer and Merger Subsidiary of its obligations under this Agreement and
the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(a) conflict
with or result in a violation or breach of any of the terms, conditions or
provisions of the certificate of incorporation or bylaws of Acquirer or Merger
Subsidiary; or
(b) conflict
with or result in a violation or breach of any Law or Order applicable to
Acquirer or Merger Subsidiary or their Assets or Properties.
3.4 Investment
Advisors.
No
broker, investment banker, financial advisor or other Person is entitled to
any
broker’s, finder’s, financial advisor’s or similar fee or commission in
connection with this Agreement and the transactions contemplated hereby based
on
arrange-ments made by or on behalf of Acquirer or Merger
Subsidiary.
ARTICLE
4
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business of the Company.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement and the Effective Time, the Company agrees
(unless the Company is required to take such action pursuant to this Agreement
or Acquirer shall give its prior consent in writing) to carry on its business
in
the usual, regular and ordinary course consis-tent with past practice, to pay
its Liabilities and Taxes consistent with the Company’s past practices (and in
any event when due), to pay or perform other obligations when due consistent
with the Company’s past practices, and, to the extent consistent with such
business, to use all commercially reasonable efforts and institute all policies
required to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees,
independent contractors and other Persons having business dealings with it,
all
with the express purpose and intent of preserving unimpaired the Company’s
goodwill and ongoing business at the Effective Time. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Acquirer, take or agree in writing or otherwise to take, any action
that would make any of its representations or warranties con-tained in this
Agreement untrue or incorrect in any material respect or prevent the Company
from performing or cause the Company not to perform its agreements and covenants
hereunder or knowingly cause any condition to Acquirer’s closing obligations in
Section 6.1 or Section 6.3 not to be satisfied. Without limiting the generality
of the foregoing, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, except as set forth in the Company Disclosure Schedule or as
required or expressly permitted by this Agreement, the Company shall not do,
cause or permit any of the following, without the prior written consent of
Acquirer:
(a) cause
or
permit any amendments to its certificate of incorporation or
bylaws;
(b) declare
or pay any dividend on or make any other distribution (whether in cash, stock
or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its
capital stock, or repurchase or otherwise acquire, directly or indirectly,
any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it;
(c) enter
into any Contract or commitment, or violate, amend or otherwise modify or waive
any of the terms of any of its Contracts, other than Contracts in the ordinary
course of business consistent with past practice which involve total obligations
of less than fifty thousand dollars ($50,000) and which are not otherwise
material to the business of the Company;
(d) issue,
deliver or sell or authorize or propose the issuance, delivery or sale of,
any
shares of Company Capital Stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements
or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of Company Common
Stock pursuant to the conversion of outstanding shares of Company Preferred
Stock and the exercise of Company Options or Company Warrants outstanding as
of
the date hereof;
(e) dispose
of,
license or transfer to any person or entity any rights to any Company
Intellectual Property other than non-exclusive licenses in connection with
the
sale of Company products or services in the ordinary course of business
consistent with past practice;
(f) enter
into or amend any agreement pursuant to which any other party is granted
exclusive marketing or other exclusive rights of any type or scope with respect
to any of Company’s products or technology;
(g) sell,
lease, license or otherwise dispose of or encumber any of the Company’s
properties or assets, except for sales of products or services (and related
nonexclu-sive licenses) in the ordinary course of business consistent with
past
practice;
(h) incur
any
indebtedness for borrowed money in excess of $25,000;
(i) adopt
or
amend, or make any promise to adopt or amend, employee benefit, stock purchase,
severance, change in control, retention, bonus or other compensation or option
plan, or any other similar plan, or hire, or make any promise to hire, any
new
director level or officer level consultant or employee, pay, or make any promise
to pay, any special bonus or special remuneration to any employee, consultant
or
director or increase, or make any promise to increase, the salaries, wage rates
or compensation of any employee or consultant;
(j) grant
any
severance or termination pay (i) to any director, officer or consultant
or
(ii) to any other employee or consultant except payments made pursuant
to
standard written agreements outstanding on the date hereof;
(k) commence
a lawsuit other than (i) for the routine collection of bills, (ii) in
such cases where it in good faith determines that failure to commence suit
would
result in the material impairment of a valuable aspect of its business,
provided
that it
consults with Acquirer prior to the filing of such a suit, or (iii) for
a
breach of this Agreement;
(l) acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or
any corporation, partnership, association or other business organization or
division thereof; or
(m) take
or
agree in writing or otherwise to take, any of the actions described in Section
4.1(a) through Section 4.1(l) above, or any other action that would prevent
the
Company from performing, or cause the Company not to perform, its covenants
and
agreements hereunder.
4.2 No
Solicitation.
(a) Until
the
earlier of the Effective Time and the date of termina-tion of this Agreement
pursuant to the provisions of Section 8.1, the Company will not take, nor will
the Company permit any of the Company’s officers, directors, employees,
shareholders, attorneys, investment advisors, agents, representatives,
Affiliates or Associates (collectively, “Representatives”)
to
(directly or indirectly) take any of the following actions with any Person
other
than Acquirer and its designees: solicit, encourage, initiate, entertain, review
or encourage (including by way of furnishing or disclosing non-public
information) any proposals or offers from, or participate in or conduct
discussions with or engage in negotiations with, any Person relating to any
offer, indication of interest or proposal, oral, written or otherwise, formal
or
informal (a “Competing
Proposed Transaction”),
with
respect to any possible Business Combi-na-tion with the Company or any of its
Subsidiaries or agree to, or enter into a Contract with any Person,
other
than Acquirer and Merger Subsidiary, providing for, or approving a Business
Combination with the Company or any Subsidiary, or make or authorize
any
statement, recommendation, solicitation or endorsement in support of any
possible Business Combination with the Company or any Subsidiary other than
by
Acquirer and Merger Subsidiary, or authorize or permit any of the Company’s
Representatives to take any such action. The Company shall immediately cease
and
cause to be terminated any such contacts or negotiations with any Person
relating to any such transaction or Business Combination.
(b) If
the
Company receives prior to the Effective Time or the termination of this
Agree-ment any offer, indication of interest or proposal (formal or informal,
oral, written or otherwise) relating to, or any inquiry or contact from any
Person with respect to, a Competing Proposed Transaction, the Company shall
immediately notify Acquirer thereof, such notice to include the identity of
the
Person or Persons making such offer, indication of interest or proposal and
the
terms thereof, and will keep Acquirer apprised on a current basis of the status
of any such offer, indication of interest or proposal and of any modifications
to the terms thereof. Each of the Company and Acquirer acknowledge that this
Section 4.2 was a significant inducement for Acquirer to enter into this
Agreement and the absence of such provision would have resulted in either
(i) a material reduction in the consideration to be paid to the
stockholders of the Company in the Merger or (ii) a failure to induce
Acquirer to enter into this Agreement.
ARTICLE
5
ADDITIONAL
AGREEMENTS
5.1 Stockholder
Approval.
As soon
as reasonably practicable following the execution and delivery of this
Agreement, the Company shall give written notice of this Agreement and the
proposed Merger to all Company stockholders and shall use commercially
reasonable efforts to take all other action necessary in accordance with
Delaware Law and its certificate of incorpora-tion and bylaws to convene a
meeting of the stockholders of the Company or to secure the written consent
of
its stockholders (“Company
Stockholder Action”)
before
August 15, 2005.
The
Company shall submit this Agreement and the Certificate of Merger to its
stockholders for adoption whether or not the Company’s board of directors
determines at any time subsequent to declaring its advisability that this
Agreement is no longer advisable and recommends that its stockholders reject
it.
The Company shall consult with Acquirer regarding the date of the Company
Stockholder Action and shall not postpone or adjourn (other than for the absence
of a quorum) any meeting of the stockholders of the Company without the consent
of Acquirer, which consent shall not be unreasonably withheld. The Company
shall
use all commercially reasonable efforts required to solicit and obtain from
stockholders of the Company proxies or written consents in favor of the Merger
and this Agreement and shall take all other action necessary or advisable to
secure the vote or written consent of stockholders required to effect the
Merger. The materials submitted to the stockholders of the Company in respect
of
the Merger shall have been subject to prior review and comment by
Acquirer.
5.2 Access
to Information.
Between
the date of this Agreement and the earlier of the Effective Time or the
termination of this Agreement, upon reasonable notice the Company shall
(a) give Acquirer and its officers, employees, accountants, counsel,
financing sources and other agents and representatives reasonable access to
all
buildings, offices, and other facilities and to all Books and Records of the
Company, whether located on the premises of the Company or at another location;
(b) permit Acquirer to make such inspections as it may require;
(c) cause its officers to furnish Acquirer such financial, operating,
technical and product data and other information with respect to the business
and Assets and Properties of the Company as Acquirer from time to time may
request, including financial statements and schedules; (d) allow Acquirer
the opportunity to interview such employees and other personnel and Affiliates
of the Company with the Company’s prior written consent, which consent shall not
be unreasonably withheld or delayed; and (e) assist and cooperate with
Acquirer in the devel-op-ment of integration plans for implementation by
Acquirer and the Surviving Corporation following the Effective Time; provided,
however, that no investigation pursuant to this Section 5.2 shall affect or
be
deemed to modify any representation or warranty made by the Company
herein.
5.3 Confidentiality.
The
parties acknowledge that Acquirer and the Company have previously executed
a
non-disclosure agreement dated December 9, 2004 (the “Confidentiality
Agreement”), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms.
5.4 Expenses.
Whether
or not the Merger is consummated, all fees and expenses incurred in connection
with the Merger including all legal, accounting, financial advisory, consulting
and all other fees and expenses of third parties (“Third
Party Expenses”)
incurred by a party in connection with the negotiation and effectuation of
the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall be the obligation of the respective party incurring such fees and
expenses; provided that the Company shall pay the third party fees and expenses
of the Major Stockholders and such expenses shall be deemed to be Third Party
Expenses. At least three (3) Business Days prior to the Closing Date, the
Company shall provide to Acquirer an itemized and complete list (the
“Company
Transaction List”)
of all
Third Party Expenses, and, in the event the Merger is consummated, all Third
Party Expenses listed on the Company Transaction List in excess of the Permitted
Amount shall be deducted from the Total Transaction Amount. Any Third Party
Expenses incurred by the Company not listed on the Company Transaction List,
shall be paid to Acquirer out of the Escrow Fund pursuant to
Article
7
on a dollar-for-dollar basis, which payment shall not be subject to the Basket
set forth in Section 7.2(b).
5.5 Public
Disclosure.
Except
for a press release which will be issued upon the signing of this Agreement
and
any other required notifications in connection with the execution of this
Agreement, unless otherwise required by Law (including federal and state
securities laws) or, as to Acquirer, by the rules and regulations of the NASD,
prior to the Effective Time, no public disclosure (whether or not in response
to
any inquiry) of the existence of any subject matter of, or the terms and
conditions of, this Agreement shall be made by any party hereto unless approved
by Acquirer and the Company prior to release; provided,
however,
that
such approval shall not be unreasonably withheld or delayed.
5.6 Approvals.
The
Parties shall use commercially reasonable efforts to obtain all Approvals from
Governmental or Regulatory Authorities or under any of the Contracts, Licenses
or other agreements as may be required in connection with the Merger (all of
which Approvals are set forth in the Company Disclosure Schedule) so as to
preserve all rights of and benefits to the Company thereunder and Acquirer
shall
provide the Company with such assistance and information as is reasonably
required to obtain such Approvals.
5.7 FIRPTA
Compliance.
On or
prior to the Closing Date, the Company shall deliver to Acquirer a properly
executed statement in a form reasonably acceptable to Acquirer for purposes
of
satisfying Acquirer’s obligations under section 1.1445-2(c)(3) of the Income Tax
Regulations, and a properly executed notice to the IRS required by section
1.897-2(b)(ii) in a form satisfactory to Acquirer and either evidence
satisfactory that the statement and notice have been properly filed with the
IRS
or authorization for Acquirer to file the statement and notice.
5.8 Notification
of Certain Matters.
The
Company shall give prompt notice to Acquirer, and Acquirer shall give prompt
notice to the Company, of (a) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of the Company or Acquirer, respectively, contained
in this Agreement to be untrue or inaccurate at or prior to the Closing Date
and
(b) any failure of the Company or Acquirer, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.8 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
5.9 Additional
Documents and Further Assurances; Cooperation.
Each
party hereto, at the request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things
(including all action reasonably necessary to seek and obtain any and all
consents, waivers and approvals of any Governmental or Regulatory Authority
or
Person required in connection with the Merger; provided,
however,
that
Acquirer shall not be obligated to consent to any operational limitations or
activities in connection therewith and no party shall be obligated to make
a
payment of money as a condition to obtaining any such consent, waiver or
approval (other than as provided for herein)) as may be necessary or desirable
for effecting completely the consummation of this Agreement and the transactions
contemplated hereby. Each party agrees to use commercially reasonable efforts
to
cause the conditions set
forth
in
Article 6 to be satisfied, where the satisfaction of such conditions depends
on
action or forbearance from action by such party.
5.10 Company’s
Auditors.
The
Company will use commercially reasonable efforts to cause its management and
its
independent auditors to facilitate on a timely basis (a) the preparation
of
financial statements (including pro forma financial statements if required)
as
required by Acquirer to comply with applicable SEC regulations, (b) the
review of any Company audit or review work papers, including the examination
of
selected interim financial statements and data, and (c) the delivery
of
such representations from the Company’s independent accountants as may be
reasonably requested by Acquirer or its accountants.
5.11 Takeover
Statutes.
If any
Takeover Statute applicable to the Company is or may become applicable to the
transactions contemplated hereby, the board of directors of the Company will,
to
the extent it can in good faith determines that it can do so without violating
its fiduciary duty, grant such approvals and take such actions as are necessary
so that the transactions contemplated by this Agreement and the Ancillary
Agreements may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate the effects of any Takeover
Statute on any of the transactions contemplated hereby.
5.12 Company
Repurchases.
The
Company will exercise any rights that mature between the date hereof and the
Effective Time to repurchase any outstanding shares of Company Capital Stock
at
the price at which such shares were issued.
5.13 Employment
Matters.
At the
Effective Time, Acquirer or a subsidiary thereof shall continue to employ the
employees of the Company with comparable responsibilities as such employee
had
at the Company immediately prior to the Closing; provided however, such
responsibilities shall be with respect to the Surviving Corporation or a
division of unit within the Acquirer.
5.14 Company
Director and Officer Indemnification.
If the
Merger is consummated and prior thereto the Company obtains directors and
officers liability insurance with coverage, in an amount and at a cost
reasonably acceptable to Acquirer, then until the sixth anniversary of the
Closing Date, Acquirer will, and will cause the Surviving Corporation to,
indemnify and hold harmless the officers and directors of the Company as of
immediately prior to the Effective Time (each, a “Company Indemnified Person”)
in respect of acts or omissions occurring on or prior to the Effective Time
to
the extent required under the Company’s certificate of incorporation, bylaws,
and Delaware law in each case as in effect as of the Closing; provided,
however,
that
such indemnification shall be subject to any limitation imposed under applicable
law; and provided further,
that
the foregoing shall not apply to any claim based on a claim by the Indemnified
Persons to receive indemnification for payments required to be made pursuant
to
the terms of Article 7. Notwithstanding anything set forth herein, this
Section 5.14 shall be of no force or effect unless the Company acquires tail
insurance coverage for such liabilities prior to the Closing.
ARTICLE
6
CONDITIONS
TO THE MERGER
6.1 Conditions
to Obligations of Each Party to Effect the Merger.
The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Governmental
and Regulatory Approvals.
Approvals from any Governmental or Regulatory Authority (if any) necessary
for
consummation of the transactions contemplated hereby shall have been timely
obtained, except for any such approvals the failure of which to obtain would
not
have a material adverse effect on the Business or Condition of Acquirer or
the
Company; and any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(b) No
Injunctions or Regulatory Restraints; Illegality.
No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing
the
consummation of the Merger shall be in effect.
(c) Stockholder
Approval.
The
Merger shall have been approved by the requisite votes of the Company’s
stockholders in accordance with Delaware Law.
(d) Legal
Proceedings.
No
Governmental or Regulatory Authority shall have notified either party to this
Agreement that such Governmental or Regulatory Authority intends to commence
proceedings to restrain or prohibit the transactions contemplated hereby or
force rescission, unless such Governmental or Regulatory Authority shall have
withdrawn such notice and abandoned any such proceedings prior to the time
which
otherwise would have been the Closing Date.
(e) Charter
Amendment.
The
Certificate of Incorporation of the Company shall have been amended in a form
to
reflect the economic terms of this Agreement.
6.2 Additional
Conditions to Obligations of the Company.
The
obligations of the Company to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations
and Warranties.
The
representations and warranties of Acquirer contained in this Agreement shall
be
accurate in all respects as of the date of this Agreement and shall be accurate
in all respects as of the Effective Time as if made on and as of the Effective
Time (other than representations and warranties which by their express terms
are
made solely as of a specified earlier date, which shall be accurate as of such
specified earlier date).
(b) Performance.
Acquirer and Merger Subsidiary shall have performed and complied with each
agreement, covenant and obligation required by this Agreement to be so performed
or complied with by it at or before the Closing.
(c) Consideration.
Acquirer shall have deposited the Upfront Consideration, the Employee Bonus
Amount and one-half of the Senior Manager Bonus Amount (after deduction of
the
Senior Manager Escrow Amount) with the Paying Agent or the Company’s payroll
agent as the Parties shall agree.
6.3 Additional
Conditions to the Obligations of Acquirer
and
Merger Subsidiary.
The
obligations of Acquirer and Merger Subsidiary to consummate the Merger and
the
other transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any
of which may be waived, in writing, exclusively by Acquirer:
(a) Representations
and Warranties.
The
representations and warranties of the Company contained in this Agreement shall
be accurate in all respects as of the date of this Agreement and shall be
accurate in all respects as of the Effective Time as if made on and as of the
Effective Time (other than representations and warranties which by their express
terms are made solely as of a specified earlier date, which shall be accurate
as
of such specified earlier date).
(b) Performance.
The
Company shall have performed and complied with each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by
the
Company on or before the Closing Date.
(c) Officers’
Certificates.
The
Company shall have delivered to Acquirer a certificate, dated the Closing Date
and executed by the President and Chief Executive Officer of the Company,
substantially in the form set forth in Exhibit E hereto, and a certificate,
dated the Closing Date and executed by the Secretary of the Company,
substantially in the form set forth in Exhibit F hereto.
(d) Third
Party Consents.
Acquirer shall have been furnished with evidence satisfactory to it that the
Company has obtained the consents, approvals and waivers listed (or required
to
be listed) in Section
2.6 of the Company Disclosure Schedule.
(e) Legal
Opinion.
Acquirer shall have received a legal opinion from Xxxxx Xxxxxxx, LLP, and
Kokusho Law Office, legal counsel to the Company, as to the matters set forth
in
Exhibit F-1
and
Exhibit F-2
and
shall have received a legal opinion from Xxxxxxxx, Xxxxxx & Finger P.A., in
the form and substance reasonably acceptable to Acquirer.
(f) Senior
Manager Agreements.
Each of
Xxxx Xxxxx, J. Xxxxxxxx Xxxxxxx, Xxxxxx X. XxXxxxx, Xxxxx Xxxxxxx
and
Xxxxxx X. Xxxxxx, shall have executed and delivered to Acquirer a Senior
Manager Agreement at the date of execution hereof and such Agreements shall
remain in full force and effect.
(g) Employees.
Ninety
percent (90%) of the employees of the Company set forth on the Schedule A
delivered to the Company by Acquirer and eighty percent (80%) of the employees
set forth on the Schedule B delivered to the Company by Acquirer shall continue
to be employed by the Company at the Closing and shall not have given any
written or oral notice or that they are not willing or do not intend to be
employed by Surviving Corporation, Acquirer
or
a
Subsidiary of Acquirer (as Acquirer shall designate), following the Merger
or
that they are not willing or do not intend to execute and deliver to Acquirer
Acquirer’s standard form of
(h) Confidentiality
and Invention Assignment Agreement.
Stockholder Approval; Limitation on Dissent. The requisite number of holders
of
shares of Company Preferred Stock shall have elected to treat the transactions
contemplated by this Agreement as a “Deemed Liquidation” as defined in
Section 2(b) of Article IV of the Company’s Certificate of
Incorporation. Holders of no more than five percent (5%) of the out-standing
shares of Company Capital Stock shall have exercised, nor shall they have any
continued right to exercise, appraisal, dissenters’ or similar rights under
applicable law with respect to their shares by virtue of the
Merger.
(i) No
Material Adverse Change.
There
shall have occurred no material adverse change in the Business or Condition
of
the Company since the date of execution of the Agreement.
(j) Termination
and Cancellation of Company Options, Company Warrants and Company Stock Purchase
Rights.
All
outstanding Company Options, Company Warrants and Company Stock Purchase Rights
shall have been exercised for Company Stock or shall have been terminated and
cancelled (with evidence of such termination and cancellation, acceptable to
Acquirer in its reasonable discretion, provided at least one (1) Business
Day prior to the Closing Date).
(k) Stockholder
Approval of Certain Payments.
Any
agreements or arrangements that may result in the payment of any amount that
would not be deductible by reason of section 280G of the Code shall have been
approved by such number of stockholders of the Company as is required by the
terms of section 280G(b)(5)(B) and shall be obtained in a manner that satisfies
all applicable requirements of such section 280G(b)(5)(B) and the Proposed
Income Tax Regulations thereunder, including Q-7 of section 1.280G-1 of such
Proposed Income Tax Regulations.
(l) Termination
of 401(k) Plan.
If
requested by Acquirer, the Company shall have provided to Acquirer
(i) executed resolutions of the board of directors of the Company
terminating any 401(b) Plan prior to the Effective Time; and (ii) an
executed amendment to any 401(k) Plan prior to termination sufficient to
maintain the qualification of the 401(k) Plan in form with the applicable
requirements of the Code and regulations thereunder.
(m) Support
Agreements.
Stockholders holding at least ninety-five percent (95%) of the Company’s
outstanding Stock shall have executed Support Agreements in the form attached
hereto as Exhibit G.
(n) Tax
Returns.
Acquirer shall prepare or cause to be prepared and file or cause to be filed
all
Tax Returns of the Company and its Subsidiary that are filed after the Closing
Date. Such Tax Returns shall be prepared and filed consistent with past practice
unless otherwise consented to by the Stockholders’ Agent, such consent not to be
unreasonably withheld. Such Tax Returns shall be prepared and filed whenever
legally permitted with a taxable year ending on the Closing Date and utilizing
a
“closing of the books” method of accounting. To the extent permitted by law,
Stockholders’ Agent shall be allowed to participate in any audit or other
proceeding
relating to Taxes that would result in any indemnification obligations of the
Stockholders under the Agreement, Acquirer shall keep Stockholders’ Agent fully
and timely informed regarding any such proceedings and all parties hereto shall
cooperate in all matters relating to such proceedings.
(o) Certain
Taxes and Fees.
All
transfer, documentary, sales, use, stamp, registration and other such Taxes,
and
all conveyance fees, recording charges and other fees and charges (including
any
penalties and interest) incurred in connection with consummation of the
transactions contemplated by this Agreement shall be paid by Acquirer when
due,
and Acquirer will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges, and, if required
by applicable law, Company will, and will cause its affiliates to, join in
the
execution of any such Tax Returns and other documentation.
ARTICLE
7
SURVIVAL
OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; ESCROW
PROVISIONS
7.1 Survival
of Representations, Warranties, Covenants and Agreements.
Each
party shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other party contained in this Agreement or
in
any instrument delivered pursuant to this Agreement. The representations,
warranties, covenants and agreements contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall not be affected by any
investigation conducted for or on behalf of Acquirer with respect thereto or
any
knowledge acquired by Acquirer or its officers, directors, employees or agents
as to the accuracy or inaccuracy of any such representations or warranty. Except
for this Article 7 (which shall survive until termination of the escrow
created thereby and the satisfaction of any other obligations described
therein), all of the representations, warranties, covenants and agreements
of
the Company and Acquirer contained in this Agreement or in any instrument
delivered pursuant to this Agree-ment shall survive the Merger and continue
for
twenty-four (24) months following the Closing Date (the “Expiration
Date”).
Any
claims by Acquirer based upon fraud or willful misconduct or willful
misrepresentation shall survive until the applicable statute of limitations.
Except as set forth in Section 8.1(d), the waiver of any Closing condition
based
on the accuracy of any Company representation or warranty, or the performance
or
compliance of any covenant or obligation, will not affect the right to
indemnification set forth in this Article 7.
7.2 Escrow
Provisions.
(a) Establishment
of the Escrow Fund.
At
Closing, the Escrow Amount will be deposited by the Acquirer with the Escrow
Agent, such deposit to constitute the “Escrow
Fund”
and in
addition Acquirer will deposit the Disbursement Amount with the Escrow Agent,
both to be governed by the terms set forth herein and in the Escrow Agreement.
The portion of the Escrow Amount and Disbursement Amount and the Dissenter’s
Amount attributable to each stockholder of the Company shall be in proportion
to
the aggregate amount of Upfront Consideration which such stockholder is entitled
under Section 1.6(a)-(c) and the portion of the Escrow Amount attributable
to
each Senior Manager of the Company shall be in proportion to the aggregate
amount of the Senior Manager Bonus Amount which such Senior Manager is
entitled
under Section 1.10.
Each
such Company Stockholder and Senior Manager shall be an
“Escrow
Participant”
and
collectively the “Escrow
Participants”.
(b) Recourse
to the Escrow Fund.
Subject
to the limitations set forth herein, Acquirer and its officers, directors,
employees, agents, Affiliates and Associates (including the Surviving
Corporation; collectively, the “Acquirer
Indemnitees”)
shall
be indemnified and held harmless by the Escrow Participants from and against
any
and all Losses on a Gross-Up Basis (whether or not involving a Third Party
Claim) incurred by Acquirer or the Surviving Corporation directly or indirectly
as a result of (i) any inaccuracy or breach of a representation or warranty
of the Company contained herein; provided, however, that in the event a breach
or inaccuracy in a representation or warranty which constitutes a material
adverse change in the business of the Company was disclosed in writing to
Acquirer prior to the Closing and identified as such, Acquirer shall have no
recourse pursuant to this Section 7.2 with respect to such breach; (ii) any
failure by the Company to perform or comply with any covenant contained herein;
or (iii) any cash paid by Acquirer or Surviving Corporation to holders of
Company Capital Stock as to which appraisal rights have been properly exercised
under Delaware Law (or any other applicable law) pursuant to a decision of
the
Court of Chancery in excess of what such stockholder would be entitled to
receive hereunder. The Escrow Fund shall be the sole remedy, except for fraud
or
willful misconduct or willful misrepresentation, available to compensate the
Acquirer Indemnitees for any and all such Losses and the Acquirer Indemnitees
shall not be entitled to make any claims against any of the Escrow Participants
in excess of the Escrow Amount except in the case of fraud, willful misconduct
or willful misrepresentation by the Company or the Subsidiary. Except in the
case of claims for Losses resulting from any cash paid by Acquirer or Surviving
Corporation to holders of Company Capital Stock as to which appraisal rights
have been properly exercised under Delaware Law (or any other applicable law)
pursuant to a decision of the Court of Chancery in excess of what such
stockholder would be entitled to receive hereunder and for unreimbursed Excess
Third Party Expenses, Acquirer may not make any claims against the Escrow Fund
unless the aggregate Losses incurred or sustained exceed two hundred thousand
dollars ($200,000) (the “Basket”)
(at
which such time claims may be made for all Losses incurred or sustained). The
dollar threshold of the Basket set forth in the immediately preceding proviso
shall not apply to Losses resulting (x) from any cash
paid
by Acquirer or Surviving Corporation to holders of Company Capital Stock as
to
which appraisal rights have been properly exercised under Delaware Law (or
any
other applicable law) pursuant to a decision of the Court of Chancery in excess
of what such stockholder would be entitled to receive hereunder, or (y) from
unreimbursed Excess Third Party Expenses. Any limitations set forth in this
Section 7.2 shall not apply to fraud
or
willful misconduct or willful misrepresentation.
With
respect to actions grounded in fraud, willful misconduct or willful
misrepresentation, (i) the right of a party to be indemnified and held
harmless pursuant to the indemnification provisions in this Agreement shall
be
in addition to and cumulative of any other remedy of such party at law or in
equity and (ii) no such party shall, by exercising any remedy available
to
it under this Article 7, be deemed to have elected such remedy exclusively
or to
have waived any other remedy, whether at law or in equity, available to it;
provided, however, in no event shall any Company Stockholder or Senior Manager
have any liability to Acquirer Indemnitees in excess of their pro rata share
of
such Losses with respect to fraud, willful misconduct or willful
misrepresentation and in any event not in excess of the amounts actually
received by such Company Stockholder or Senior Manager under this
Agreement.
(c) Escrow
Period; Distribution of Escrow Fund upon Termination of Escrow
Period.
Subject
to the following requirements, the Escrow Fund shall be in existence immediately
following the Effective Time and shall terminate at 5:00 p.m., Pacific
Time, on the Expiration Date (the period of time from the Effective Time through
and including the Expiration Date is referred to herein as the “Escrow
Period”)
(except for claims for fraud or willful misconduct or willful misrepresentation
which shall survive for the applicable statute of limitations); and all merger
consideration remain-ing in the Escrow Fund shall be distributed as set forth
in
this Section 7.2(c) and in the Escrow Agreement. Subject to the following
requirements, the Escrow Agent shall release from the Escrow Fund to the Escrow
Participants on the date that is twelve (12) months from the Closing
Date
(the “Intermediate
Release Date”)
an
amount equal to one-half the Escrow Amount minus any amounts paid to Acquirer
prior to such date in accordance with this Article 7 and the Escrow Agreement
and any amounts set forth in any pending notices of any unsatisfied claims
which
are specified in any Officer’s Certificate delivered to the Escrow Agent and the
Stockholder Agent prior to the Intermediate Release Date. In addition, on the
Intermediate Release Date the Escrow Agent shall release to Acquirer the balance
remaining of the Dissenters Amount. All amounts remaining after the Immediate
Release Date shall be available for indemnification pursuant to this Article
7
and shall be released, to the extent any amounts then remain and are not subject
to pending notices of unsatisfied claims, together with any remaining
Disbursement Amount on the Expiration Date. Notwithstanding the foregoing,
the
Escrow Fund will not be released with respect to such amount (or some portion
thereof) that is reasonably necessary, as reflected in documentation provided
by
Acquirer to the Stockholder Representative in good faith, to satisfy any
unsatisfied claims (including costs of defense) under this Section 7.2
concerning facts and circumstances existing prior to the Intermediate Release
Date or the termination of such Escrow Period which claims are specified in
any
Officer’s Certificate delivered to the Escrow Agent in good faith prior to the
Intermediate Release Date or termination of such Escrow Period, as applicable.
Deliveries of cash remaining in the Escrow Fund, on the Intermediate Release
Date or termination of the Escrow Period, as applicable, to the Escrow
Participants pursuant to this Section 7.2(c) shall be made ratably in proportion
to their respective contributions to the Escrow Fund and the Disbursement
Amount.
(d) Protection
of Escrow Fund.
The
Escrow Agent shall hold and safeguard the Escrow Fund during the Escrow Period,
shall treat such fund as a trust fund in accordance with the terms of this
Agree-ment and the Escrow Agreement and not as the property of Acquirer and
shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof and of the Escrow Agreement.
(e) Claims
Upon Escrow Fund.
Upon
receipt by the Escrow Agent and the Stockholder Agent at any time on or before
the last day of the Escrow Period of a certificate signed by any officer of
Acquirer in good faith (an “Officer’s
Certificate”):
(A) stating that Acquirer or another Acquirer Indemnitee has paid or
properly accrued or reasonably anticipates that it will have to pay or accrue
Losses and the amount thereof, and (B) specifying in reasonable detail
the
individual items of Losses included in the amount so stated, the date each
such
item was paid or properly accrued, or the basis for such anticipated liability,
and the nature of the misrepresenta-tion, breach of warranty, agreement or
covenant to which such item is related and the relevant section number of this
Agreement, the Escrow Agent shall, subject to the provisions of Section 7.2(f),
deliver to Acquirer out of the Escrow Fund, as promptly as practicable, cash
held in
the
Escrow Fund in an amount equal to such Losses. Where the basis for a claim
upon
the Escrow Fund by Acquirer is that Acquirer reasonably anticipates that it
will
pay a Loss, no payment will be made from the Escrow Fund for such Loss unless
and until such Loss is actually paid and a further Officer’s Certificate with
respect thereto is delivered to the Escrow Agent and the Stockholder Agent
hereunder.
(f) Objections
to Claims.
At the
time of delivery of any Officer’s Certificate to the Escrow Agent, a duplicate
copy of such certificate shall be delivered to the Stockholder Agent and for
a
period of thirty (30) days after such delivery, the Escrow Agent shall make
no
delivery to Acquirer of any Escrow Amounts pursuant to Section 7.2(e) unless
the
Escrow Agent shall have received written authorization from the Stockholder
Agent to make such delivery. After the expiration of such thirty (30) day
period, the Escrow Agent shall make delivery of cash from the Escrow Fund in
accordance with Section 7.2(e), provided that no such payment or delivery may
be
made if the Stockholder Agent shall object in a written statement to the claim
made in the Officer’s Certificate, and such statement shall have been delivered
to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(g) Stockholder
Agent of the Stockholders; Power of Attorney.
(i) In
the
event that the Merger is approved by the stockholders of the Company, effective
upon such vote, and without further act of any Escrow Participant, W Capital
Partners, L.P. shall be appointed as agent and attorney-in-fact (the
“Stockholder
Agent”)
for
and on behalf of the Escrow Participants, to give and receive notices and
communications, to authorize delivery to Acquirer of cash from the Escrow Fund
in satisfaction of claims by Acquirer, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to
such
claims, and to take all actions necessary or appropriate in the judgment of
the
Stockholder Agent for the accomplishment of the foregoing. Such agency may
be
changed by the Escrow Participants from time to time upon not less than thirty
(30) days prior written notice to Acquirer and the Stockholder Agent; provided,
however, that the Stockholder Agent may not be removed unless holders of a
two-thirds interest in the Escrow Fund agree to such removal and to the identity
of a substituted stockholder agent. Any vacancy in the position of Stockholder
Agent may be filled by approval of the holders of a majority in interest of
the
Escrow Fund. No bond shall be required of the Stockholder Agent, and the
Stockholder Agent shall not receive compensation for its services. Notices
or
communications to or from the Stockholder Agent pursuant to Section 9.1
hereof shall constitute notice to or from each of the stockholders of the
Company.
(ii) The
Stockholder Agent shall not incur any liability with respect to any action
taken
or suffered by it or omitted hereunder as Stockholder Agent while acting in
good
faith and in the exercise of reasonable judgment. The Stockholder Agent may,
in
all questions arising hereunder, rely on the advice of counsel or other
appropriate advisors and for anything done, omitted or suffered in good faith
by
the Stockholder Agent based on such advice, the Stockholder Agent shall not
be
liable to anyone. The Stockholder Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement or the Support
Agreements against the Stockholder Agent.
(h) Actions
of the Stockholder Agent.
A
decision, act, consent or instruction of the Stockholder Agent shall constitute
a decision of all the Escrow Participants for whom a portion of the Escrow
Amount otherwise issuable to them are deposited in the Escrow Fund and shall
be
final, binding and conclusive upon each of such Escrow Participants, and the
Escrow Agent and Acquirer may rely upon any such decision, act, consent or
instruction of the Stockholder Agent as being the decision, act, consent or
instruction of every such Escrow Participant. The Escrow Agent and Acquirer
are
hereby relieved from any liability to any person for any acts done by them
in
accordance with such decision, act, consent or instruction of the Stockholder
Agent.
(i) Third-Party
Claims.
In the
event Acquirer becomes aware of a third-party claim (a “Third
Party Claim”)
which
Acquirer reasonably expects may result in a demand against the Escrow Fund,
Acquirer shall notify the Stockholder Agent of such claim, and the Stockholder
Agent, as representative for the Escrow Participants, shall be entitled, at
their expense, to participate in any defense of such claim. Acquirer shall
have
the right in its sole discretion to settle any Third Party Claim; provided,
however, that if Acquirer settles any Third Party Claim without the Stockholder
Agent’s consent (which consent shall not be unreasonably withheld or delayed),
Acquirer may not make a claim against the Escrow Fund with respect to the amount
of Losses incurred by Acquirer in such settlement. In the event that the
Stockholder Agent has consented to any such settlement, the Stockholder Agent
shall have no power or authority to object under any provision of this Article
7
to the amount of any claim by Acquirer against the Escrow Fund with respect
to
the amount of Losses incurred by Acquirer in such settlement.
(j) Reimbursement
and Indemnification for Stockholder Agent.
The
Stockholder Agent shall be entitled to reimbursement out of the Disbursement
Amount and the Escrow Fund for all reasonable fees, costs and expenses incurred
in the performance of its duties as Stockholder Agent under this Agreement,
including, but not limited to, the right to employ financial and legal advisors
and other agents to undertake or to assist in the assessment, litigation and/or
settlement of any claims against the Escrow Fund. The Stockholder Agent is
expressly authorized to rely upon the advice of such advisors and agents. The
Stockholder Agent shall be indemnified and held harmless by the Escrow
Participants from and against any Losses that may be incurred by the Stockholder
Agent arising out of or in connection with the acceptance or performance of
the
Stockholder Agent’s duties or the transactions contemplated by this Agreement or
the Escrow Agreement, except as caused by the Stockholder Agent’s gross
negligence or willful misconduct, including the legal costs and expenses of
defending such Stockholder Agent against any claim or liability in connection
with the acceptance or performance of the Stockholder Agent’s duties or the
transactions contemplated by this Agreement or the Escrow Agreement. The
Stockholder Agent shall first be reimbursed from the Disbursement Amount. To
the
extent the Disbursement Amount is insufficient, the Stockholder Agent shall
be
entitled to such reimbursement from the Escrow Fund prior to any distribution
thereof to the Escrow Participants, but after any and all distributions
therefrom to all Acquirer Indemnitees. In the event that the Stockholder Agent’s
fees, expenses and Losses are in excess of the Disbursement Amount and any
amounts remaining in the Escrow Fund after payment in full of all claims of
any
Acquirer Indemnitee, the Stockholder Agent shall be entitled to reimbursement
of
such unpaid fees and expenses by the Stockholders on a several, but not joint
and several basis. Acquirer
shall not have any obligation or liability for such expenses, costs or losses
or
for payment of any fees of the Stockholder Agent.
(k) Section
338 Election.
The
Escrow Participants shall have no indemnification obligations under this
Agreement or the Escrow Agreement for any Taxes arising from an election under
section 338 of the Code, or any comparable election under state or local law,
filed by Acquirer or its affiliates with respect to the Company or its
Subsidiary.
(l) Treatment
of Payments.
To the
extent permitted by law, the parties agree to treat payments made under this
Article 7 as adjustments to the consideration paid for the sale and transfer
of
the capital stock of the Company.
ARTICLE
8
TERMINATION,
AMENDMENT AND WAIVER
8.1 Termination.
Except
as provided in Section 8.2, this Agreement may be termi-nated and the Merger
abandoned at any time prior to the Effective Time:
(a) by
mutual
agreement of the Company and Acquirer;
(b) by
Acquirer or the Company if: (i) the Effective Time has not occurred
before
5:00 p.m. (Pacific Time) on September 9, 2005 (provided,
however,
that
the right to terminate this Agreement under this Section 8.1(b)(i) shall not
be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date); (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or (iii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applica-ble to the Merger by any
Governmental or Regulatory Authority that would make consummation of the Merger
illegal;
(c) by
Acquirer if there shall be any action taken, or any Law or Order enacted,
promulgated or issued or deemed applicable to the Merger, by any Governmental
or
Regulatory Authority, which would: (i) prohibit Acquirer’s ownership or
operation of all or any portion of the business of the Company or
(ii) compel Acquirer to dispose of or hold separate all or any portion
of
the Assets and Properties of the Company as a result of the Merger;
(d) by
Acquirer if it is not in material breach of its representations, warranties,
covenants and agreements under this Agreement and there has been a breach of
any
representa-tion, warranty, covenant or agreement contained in this Agreement
on
the part of the Company and (i) the Company is not using its reasonable
efforts to cure such breach, or has not cured such breach within fifteen (15)
days, after notice of such breach to the Company (provided, however, that,
no
cure period shall be required for a breach which by its nature cannot be cured)
and (ii) as a result of such breach any of the conditions set forth
in
Section 6.1 or Section 6.3, would not be satisfied prior to the Closing
Date;
(e) by
the
Company if it is not in material breach of its representations, warranties,
covenants and agreements under this Agreement and there has been a breach of
any
representa-tion, warranty, covenant or agreement contained in this Agreement
on
the part of Acquirer or Merger Subsidiary and (i) Acquirer or Merger
Subsidiary is not using its reasonable efforts to cure such
breach,
or has not cured such breach within fifteen (15) days, after notice of such
breach to Acquirer or Merger Subsidiary (provided, however, that no cure period
shall be required for a breach which by its nature cannot be cured), and
(ii) as a result of such breach any of the conditions set forth in Section
6.1 or Section 6.2, would not be satisfied as of the Closing Date;
(f) by
Acquirer if, if at any time after five (5) days following the meeting at which
the Company’s stockholders take the Company Stockholder Action, holders of more
than five percent (5%) of the outstanding shares of Company Capital Stock shall
have exercised, or have any continued right to exercise, appraisal, dissenters’
or similar rights under applicable law with respect to their shares by virtue
of
the Merger; or
(g) by
Acquirer, if the Merger shall not have been approved by the requisite votes
or
consents, as applicable, of the Company’s stockholders in accordance with
Delaware Law at any meeting (or any adjournment thereof) convened for the
purpose of taking a vote with respect to the Merger or, in any solicitation
of
stockholder written consents with respect to the Merger, within twenty (20)
days
after the record date established for determining the stockholders of the
Company entitled to consent.
8.2 Effect
of Termination.
In the
event of a valid termination of this Agreement as provided in Section 8.1,
this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Acquirer, Merger Subsidiary or the Company, or their
respective officers, directors or stockholders or Affiliates or Associates;
provided,
however,
that
each party shall remain liable for any breaches of Section 4.2, 5.1, 5.3, 5.4
and 5.5, Article 8 or Article 9 of this Agreement prior to its termination;
and
provided further that, the provisions of Sections 5.3, 5.4 and 8.2, Article
9
(exclusive of Section 9.3) and the applicable definitions set forth in Article
10 shall remain in full force and effect and survive any termination of this
Agreement.
8.3 Amendment.
Except
as is otherwise required by applicable law after the stockholders of the Company
approve this Agreement, this Agreement may be amended by the parties hereto
at
any time by execution of an instrument in writing signed on behalf of each
of
the parties hereto; provided, however, that the consent of the Stockholder
Agent
and the Escrow Agent shall not be required in connection with any amendment
to
this Agree-ment that does not affect the rights and obligations of the
Stockholder Agent or the Escrow Agent, as applicable.
8.4 Extension;
Waiver.
At any
time prior to the Effective Time, Acquirer, Merger Subsidiary and the Company
may, to the extent legally allowed, (a) extend the time for the performance
of any of the obligations of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements, covenants or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto
to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE
9
MISCELLANEOUS
PROVISIONS
9.1 Notices.
All
notices, requests and other communications hereunder must be in writing and
will
be deemed to have been duly given only if delivered personally against written
receipt or by facsimile transmission against facsimile confirmation or mailed
by
internationally recognized overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
|
If
to Acquirer or Merger Subsidiary to:
|
WebEx
Communications, Inc.
0000
Xxxxxxx Xxxxxx
Xxxxx
Xxxxx, XX 00000
Facsimile
No.: (000) 000-0000
Attn:
President and General Counsel
|
|
with
a copy (which shall not constitute notice) to:
|
Pillsbury
Xxxxxxxx Xxxx Xxxxxxx LLP
0000
Xxxxxxx Xxxxxx
Xxxx
Xxxx XX 00000
Facsimile
No.: (000) 000-0000
Attn:
Xxxxxxx Xxxxxxx Xxxxxx, Esq.
|
|
If
to the Company to:
|
Xxxxxxxxx.xxx,
Inc.
Xxx
Xxx xx Xxxxx Xxxxx
Xxxxxxxxxx,
XX 00000
Facsimile
No.: (000) 000-0000
Attn:
Chief Financial Officer and Chief Executive Officer
|
|
with
a copy (which shall not constitute notice) to:
|
Xxxxx
Peabody, LLP
000
Xxxxxx Xxxxxx
Xxxxxx,
XX 00000
Facsimile
No.: 000-000-0000
Attn:
Xxxxxx X. Xxxxx, Esq.
|
|
If
to the Stockholder Agent:
|
W
Capital Partners, L.P.
Xxx
Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx, XX 00000
Facsimile
No.: (000) 000-0000
Attn:
Xxxxxx Xxxxxxxxxx
|
|
with
a copy (which shall not constitute notice) to:
|
Xxxxx
Raysman Xxxxxxxxx Xxxxxx & Xxxxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, XX 00000
Facsimile
No.: (000) 000-0000
Attn:
Xxxxxx Xxxxxxxx, Esq.
|
|
If
to the Escrow Agent:
|
Heritage
Bank of Commerce
000
Xxxxxxx Xxxx.
Xxx
Xxxx, XX 00000
Facsimile
No.: (000) 000-0000
Attn:
Chloe Flowers
|
All
such
notices, requests and other communications will (a) if delivered personally
to the address as provided in this Section 9.1, be deemed given upon delivery,
(b) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
and (c) if delivered by overnight courier to the address as provided
in
this Section 9.1, be deemed given on the earlier of the first Business Day
following the date sent by such overnight courier or upon receipt (in each
case
regardless of whether such notice, request or other communication is received
by
any other Person to whom a copy of such notice is to be delivered pursuant
to
this Section 9.1). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
9.2 Entire
Agreement.
This
Agreement and the Exhibits and Schedules hereto, including the Company
Disclosure Schedule and the Acquirer Disclosure Schedule, constitute the entire
Agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof , except for the
Confidentiality Agreement, which shall continue in full force and effect and
shall survive any termination of this Agreement or the Closing in accordance
with its terms.
9.3 Further
Assurances; Post-Closing Cooperation.
At any
time or from time to time after the Closing, the parties shall execute and
deliver to the other party such other documents and instruments, provide such
materials and information and take such other actions as the other party may
reasonably request to consummate the transactions contemplated by this Agreement
and otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations
to
consummate the Merger to be satisfied.
9.4 Remedies.
All
remedies, either under this Agreement or by Law or otherwise afforded, will
be
cumulative and not alternative.
9.5 Third
Party Beneficiaries.
The
terms and provisions of this Agreement are intended solely for the benefit
of
each party hereto and their respective successors or permitted assigns, and
it
is not the intention of the parties to confer third-party beneficiary rights,
and this Agreement does not confer any such rights, upon any other Person other
than any Person entitled to indemnity under Article 7.
9.6 No
Assignment; Binding Effect.
Neither
this Agreement nor any right, interest or obligation hereunder may be assigned
(by operation of law or otherwise) by any party without the prior written
consent of the other party and any attempt to do so will be void. Subject to
the
preceding sentence, this Agreement is binding upon, inures to the benefit of
and
is enforceable by the parties hereto and their respective successors and
assigns.
9.7 Invalid
Provisions.
If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future Law, and if the rights or obligations of any party
hereto under this Agreement will not be materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect
and
will not be affected by the illegal, invalid or unenforceable provision or
by
its severance herefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.8 Governing
Law.
This
Agreement, the Ancillary Agreements and any other closing documents shall be
governed by and construed in accordance with the domestic laws of the State
of
Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than
the
State of Delaware.
9.9 Waiver
of Trial by Jury.
IN ANY
ACTION OR PROCEEDING ARISING HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL
WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY
HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION
OR
PROCEEDING.
9.10 Headings.
The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
9.11 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which will
be
deemed an original, but all of which together will constitute one and the same
instrument.
9.12 Specific
Performance.
The
parties hereto agree that irreparable damage would occur in the event that
any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Except where this Agreement
specifically provides for arbitration, it is agreed that the parties shall
be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
ARTICLE
10
DEFINITIONS
10.1 Definitions.
As used
in this Agreement, the following defined terms shall have the meanings indicated
below:
“Acquirer”
has the meaning
ascribed to it in the forepart of this Agreement.
“Acquirer
Disclosure Schedule” has the meaning ascribed to it in the forepart of Article
3.
“Acquirer
Indemnitees” has the meaning ascribed to it in Section 7.2(b).
“Actions
or Proceedings” means any action, suit, complaint, petition, investigation,
proceeding, arbitration, litigation or Governmental or Regulatory Authority
investigation, audit or other proceeding, whether civil or criminal, in law
or
in equity, or before any arbitrator or Governmental or Regulatory
Authority.
“Affiliate”
means, as applied to any Person, (a) any other Person directly or
indirectly controlling, controlled by or under common control with, that Person,
(b) any other Person that owns or controls (i) ten percent (10%)
or
more of any class of equity securities of that Person or any of its Affiliates
or (ii) ten percent (10%) or more of any class of equity securities
(including any equity securities issuable upon the exercise of any option or
convertible security) of that Person or any of its Affiliates, or (c) as
to
a corporation, each director and officer thereof, and as to a partnership,
each
general partner thereof, and as to a limited liability company, each managing
member or similarly authorized person thereof (including officers), and as
to
any other entity, each Person exercising similar authority to those of a
director or officer of a corporation. For the purposes of this definition,
“control” (including with correlative meanings, the terms “controlling,”“controlled by,” and “under common control with”) as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise.
“Agreement”
means this Agreement and Plan of Merger, including (unless the context otherwise
requires) the Exhibits and the Disclosure Schedules and the certificates and
instru-ments delivered in connection herewith, or incorporated by reference,
as
the same may be amended or supplemented from time to time in accordance with
the
terms hereof.
“Ancillary
Agreements” has the meaning ascribed to it in Section 2.2.
“Approval”
means any approval, authorization, consent, permit, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from or made with, or any notice, statement or other communication required
to
be filed with or delivered to, any Governmental or Regulatory Authority or
any
other Person.
“Assets
and Properties” of any Person means all assets and properties of every kind,
nature, character and description (whether real, personal or mixed, whether
tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
“Associate”
means, with respect to any Person, any corporation or other business
organization of which such Person is an executive officer or partner or is
the
beneficial owner, directly or indirectly, of ten percent (10%) or more of any
class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves
as
a
trustee or in a similar capacity and any relative or spouse of such Person,
or
any relative of such spouse, who has the same home as such Person.
“Audited
Financial Statement Date” means December 31, 2004.
“Audited
Financial Statements” means the audited consolidated balance sheets of the
Company as of each of the fiscal years ended December 31, 2001 through
December 31, 2004, respectively, and the related audited consolidated
income statement and statement of cash flows for each of the fiscal years then
ended, in each case, including the notes thereto together with the notes thereto
and the unqualified report of the Company’s independent accountants with respect
thereto.
“Basket”
has the meaning ascribed thereto in Section 7.2(b).
“Books
and Records” means all files, documents, instruments, papers, books and records
relating to the Business or Condition of a Person, including financial
statements, internal reports, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs (including
data
processing files and records), retrieval programs, operating data and plans
and
environmental studies and plans.
“Business
Combination” means, with respect to any Person, (a) any merger,
consolida-tion, share exchange reorganization or other business combination
transaction to which such Person is a party, (b) any sale, dividend,
split
or other disposition of any capital stock or other equity interests of such
Person (except for issuances of common stock upon conversion of preferred stock
outstanding on the date hereof or upon the exercise of options or warrants
outstanding on the date hereof or issued in accordance with the covenants of
this Agreement), (c) any tender offer (including a self tender), exchange
offer, recapitalization, restructuring, liquidation, dissolution or similar
or
extraordinary transaction, (d) any sale, dividend or other disposition
of
all or a material or significant portion of the Assets and Properties of such
Person (including by way of exclusive license or joint venture formation, but
excluding non-exclusive licenses in connection with the sale of Company products
in the ordinary course of business consistent with past practice) or
(e) the entering into of any agreement or understanding, the granting
of
any rights or options, with respect to any of the foregoing.
“Business
Day” means a day other than Saturday, Sunday or any day on which banks located
in San Francisco, California are authorized or obligated to close.
“Business
or Condition of Acquirer” means the business, condition (financial or
otherwise), results of operations, prospects or Assets and Properties of
Acquirer and its Subsidiaries, considered in the aggregate.
“Business
or Condition of the Company” means the business, condition (financial or
otherwise), results of operations, prospects or Assets and Properties of the
Company.
“Cash
Consideration Portion” shall mean, with respect to each series of Company
Preferred Stock, the amount of cash equal to the result of the following
calculation:
X
= (A
x B)
C
where
“X”
is the Cash Consideration Portion; “A” represents the Upfront Consideration; “B”
represents the Series Allocation Percentage for the particular series of Company
Preferred Stock; and “C” represents the aggregate number of shares outstanding
for such series of Company Preferred Stock on a fully-diluted basis of such
series of Company Preferred Stock as of the Closing Date. The Cash Consideration
Portion for the Series B-1 Preferred Stock shall be the “Series
B-1 Preferred Portion.”
The
Cash Consideration Portion for the Series B-2 Preferred Stock shall be the
“Series
B-2 Preferred Portion.”
The
Cash Consideration Portion for the Series B-3 Preferred Stock shall be the
“Series
B-3 Preferred Portion.”
The
Cash Consideration Portion for the Series C Preferred Stock shall be the
“Series
C Preferred Portion.”
The
Cash Consideration Portion for the Series D Preferred Stock shall be the
“Series
D Preferred Portion.”
“Closing”
means the closing of the transactions contemplated by Section 1.2.
“Closing
Bonus Payment” has the meaning ascribed to it in Section 1.10.
“Closing
Date” has the meaning ascribed to it in Section 1.2.
“COBRA”
means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
“Code”
means the United States Internal Revenue Code of 1986, as amended, and the
rules
and regulations promulgated thereunder.
“Company”
shall mean Xxxxxxxxx.xxx, Inc., a Delaware corporation, and all of its
Subsidiaries.
“Company
Capital Stock” means the Company Common Stock and the Company Preferred
Stock.
“Company
Common Stock” has the meaning ascribed to it in Section 2.3(a).
“Company
Disclosure Schedule” means the schedules delivered to Acquirer by or on behalf
of the Company, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein in connection
with the representations and warranties made by the Company in Article 2 or
otherwise.
“Company
Employee” has the meaning ascribed to it in Section 1.10.
“Company
Financials” means the Audited Financial Statements and the Interim Financial
Statements.
“Company
Intellectual Property” shall mean any Intellectual Property that (a) is
owned by; (b) is licensed to; (c) was developed or created by
or for
the Company or (d) is used in or necessary for the conduct of the business
of the Company as presently or heretofore conducted or
as
proposed to be conducted, including any Intellectual Property created by any
of
the Company’s founders, employees, independent contractors or consultants for or
on behalf of the Company.
“Company
Option(s)” means any Option to purchase Company Capital Stock, excluding the
Company Preferred Stock and the Company Warrants.
“Company
Preferred Stock” has the meaning ascribed to it in Section 2.3(a).
“Company
Registered Intellectual Property” means all Registered Intellectual Property
owned by, filed in the name of, assigned to or applied for by, the
Company.
“Company
Restricted Stock” means shares of Company Capital Stock purchased pursuant to an
exercise of a Company Stock Purchase Right which are subject to a repurchase
option by the Company.
“Company
Series B Preferred Stock” shall mean the Series B-1 Preferred Stock, Series
B-2 Preferred Stock and Series B-3 Preferred Stock.
“Company
Series C Preferred Stock” has the meaning ascribed to it in Section
2.3(a).
“Company
Series D Preferred Stock” has the meaning ascribed to it in Section
2.3(a).
“Company
Stock Plan” shall mean all plans that can grant rights to purchase or receive
equity securities of the Company, including the Company’s 1997 Stock Option
Plan.
“Company
Stock Purchase Right” means a right to purchase Company Restricted Stock granted
pursuant to the Company Stock Plan or otherwise.
“Company
Stockholder” means a holder of the Company’s Preferred Stock prior to the
Effective Time.
“Company
Stockholder Action” has the meaning ascribed to it in
Section 5.1.
“Company
Transaction List” has the meaning ascribed to it in
Section 5.4.
“Company
Warrants” means any and all warrants to purchase Company Capital Stock,
including the warrants listed in Section
2.3 of the Company Disclosure Schedule.
“Competing
Proposed Transaction” has the meaning ascribed to it in Section
4.2.
“Confidentiality
Agreement” has the meaning ascribed to it in Section 5.3.
“Contract”
means any legally binding agreement, lease, evidence of Indebtedness, mortgage,
indenture, security agreement or other contract or business arrangement (whether
written or oral).
“Controlled
Group” has the meaning ascribed to it under the term “Plan” in this
Section 10.1
.
“Senior
Manager Bonus Payment” has the meaning ascribed to it in
Section 1.10.
“Delaware
Law” means the Delaware General Corporation Law and all amendments and additions
thereto.
“Delaware
Certificate of Merger” has the meaning set forth in Section 1.2.
“Disbursement
Amount” means the amount of $100,000.
“Disclosure
Schedules” means the Company Disclosure Schedule and the Acquirer Disclosure
Schedule.
“Dissenters
Amount” means the portion of the Upfront Consideration allocable to any
Dissenting Shares.
“Dissenting
Shares” has the meaning ascribed to it in Section 1.7(a).
“Effective
Time” has the meaning ascribed to it in Section 1.2.
“Employee
Bonus Amount” means 4.728% of the Net Transaction Amount.
“Environment”
means air, surface water, ground water, or land, including land surface or
subsurface, and any receptors such as persons, wildlife, fish, biota or other
natural resources.
“Environmental
Clean-up Site” means any location which is listed or proposed for listing on the
National Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System, or on any similar state list of sites relating
to investigation or cleanup, or which is the subject of any pending or
threatened action, suit, proceeding, or investigation, formal or informal,
related to or arising from any location at which there has been a Release or
threatened or suspected Release of a Hazardous Material.
“Environmental
Law” means any federal, state, local or foreign environmental, health and safety
or other Law relating to of Hazardous Materials, including the Comprehensive,
Environmental Response Compensation and Liability Act, the Clean Air Act, the
Federal Water Pollution Control Act, the Solid Waste Disposal Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the California Safe Drinking
Water and Toxic Enforcement Act.
“Environmental
Permit” means any permit, license, approval, consent or authorization required
under or in connection with any Environmental Law and includes any and all
orders, consent orders or binding agreements issued by or entered into with
a
Governmental or Regulatory Authority.
“Equity
Equivalents” means securities (including Options to purchase any shares of
Company Capital Stock) which, by their terms, are or may be exercisable,
convertible or exchangeable for or into common stock, preferred stock or other
securities at the election of the holder thereof.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and
the
rules and regulations promulgated thereunder.
“Escrow
Agent” means Heritage Bank of Commerce or any successor or
assignee.
“Escrow
Amount” means eight and one-quarter percent (8.25%) of the Net Transaction
Amount.
“Escrow
Fund” has the meaning ascribed to it in Section 7.2(a).
“Escrow
Participant” has the meaning ascribed to it in Section 7.2(a).
“Escrow
Period” has the meaning ascribed to it in Section 7.2(c).
“Estimated
Third Party Expenses” has the meaning ascribed to it in Section 2.26.
“Exchange
Agent” means ESCROW AGENT CORPORATION, N.A..
“Excess
Third Party Expenses” means all Third Party Expenses in excess of the Permitted
Amount.
“Expiration
Date” has the meaning ascribed to it in Section 7.1.
“Financial
Statement Date” means June 30, 2005.
“GAAP”
means generally accepted accounting principles in the United States, as in
effect from time to time.
“Governmental
or Regulatory Authority” means any court, tribunal, arbitrator, authority,
agency, bureau, board, commission, department, official or other instrumentality
of the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision, and shall include any stock
exchange, quotation service and the NASD.
“Grossed-Up
Basis” means, when used to describe the basis on which the payment of a
specified sum is to be made, a basis such that the amount of such payment,
after
being reduced by the amount of all Taxes imposed on the recipient of such
payment as a result of the receipt or accrual of such payment, will equal the
specified sum.
“Hazardous
Material” means (a) any chemical, material, substance or waste including,
containing or constituting petroleum or petroleum products, solvents (including
chlorinated solvents), nuclear or radioactive materials, asbestos in any form
that is or could become friable, radon, lead-based paint, urea formaldehyde
foam
insulation or polychlorinated biphenyls, (b) any chemicals, materials,
substances or wastes which are now defined as or included in the definition
of
“hazardous substances,”“hazardous wastes,”“hazardous materials,”“extremely
hazardous wastes,”“restricted hazardous wastes,”“toxic substances,”“toxic
pollutants” or words of similar import under any Environmental Law; or
(c) any other chemical, material, substance, pollutant or waste which
is
regulated by any Governmental or Regulatory Authority or which could constitute
a nuisance.
“HSR
Act”
means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
“Income
Tax” means (a) any income, alternative or add-on minimum tax, gross income,
gross receipts, franchise, profits, including estimated taxes relating to any
of
the foregoing, or other similar tax or other like assessment or charge of
similar kind whatsoever, excluding any Other Tax, together with any interest
and
any penalty, addition to tax or additional amount imposed by any Taxing
Authority responsible for the imposition of any such Tax (domestic or foreign);
or (b) any liability of a Person for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. § 1.1502-6 or comparable provisions of any
Taxing Authority in respect of a Tax Return of a Relevant Group or any
Contract.
“Income
Tax Regulations” means Part 1 of Title 26 of the United States Code of
Federal Regulation, promulgated under the Code.
“Indebtedness”
of any Person means all obligations of such Person (a) for borrowed
money,
(b) evidenced by notes, bonds, debentures or similar instruments,
(c) for the deferred purchase price of goods or services (other than
trade
payables or accruals incurred in the ordinary course of business),
(d) under capital leases or (e) in the nature of guarantees of
the
obligations described in clauses (a) through (d) above of any
other
Person.
“Intellectual
Property” means all trademarks and trademark rights, trade names and trade name
rights, service marks and service xxxx rights, service names and service name
rights, patents and patent rights, utility models and utility model rights,
copyrights, mask work rights, brand names, trade dress, product designs, product
packaging, business and product names, logos, slogans, rights of publicity,
trade secrets, inventions (whether patentable or not), invention disclosures,
improvements, processes, formulae, industrial models, processes, designs,
specifi-ca-tions, technology, methodologies, computer software (including all
source code and object code), firmware, development tools, flow charts,
annotations, all Web addresses, sites and domain names, all data bases and
data
collections and all rights therein, any other confidential and proprietary
right
or information, whether or not subject to statutory registration, and all
related technical information, manufacturing, engineering and technical
drawings, know-how and all pending applications for and registrations of
patents, utility models, trademarks, service marks and copyrights, and the
right
to xxx for past infringement, if any, in connection with any of the foregoing,
and all documents, disks, records, files and other media on which any of the
foregoing is stored.
“Interim
Financial Statements” means the unaudited balance sheet of the Company as of
June 30, 2005, and the related unaudited income statement and statement of
cash
flows for the six (6) month period ended on such date.
“Intermediate
Release Date” shall have the meaning set forth in
Section 7.2(c).
“Investment
Assets” means all debentures, notes and other evidences of Indebtedness, stocks,
securities (including rights to purchase and securities convertible into or
exchangeable for
other
securities), interests in joint ventures and general and limited partnerships,
mortgage loans and other investment or portfolio assets owned of record or
beneficially by the Company.
“IRS”
means the United States Internal Revenue Service or any successor
entity.
“Knowledge”
means, as to the Company, the actual knowledge of the Company’s Chief Executive
Officer, President and Chief Financial Officer and anything such officers could
or should have known upon diligent investigation of the Company’s books and
records and diligent review and inquiries of the Company’s senior management and
responsible employees.
“Law”
or
“Laws” means any law, statute, order, decree, consent decree, judgment, rule,
regulation, ordinance or other pronouncement having the effect of law whether
in
the United States, any foreign country, or any domestic or foreign state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.
“Liabilities”
means all Indebtedness, obligations and other liabilities of a Person, whether
absolute, accrued, asserted or unasserted, contingent (or based upon any
contingency), known or unknown, fixed or otherwise, or whether due or to become
due.
“License”
means any Contract that grants a Person the right to use or otherwise enjoy
the
benefits of any Intellectual Property (including any covenants not to xxx with
respect to any Intellectual Property).
“Liens”
means any mortgage, pledge, assessment, security interest, lease, lien,
easement, license, covenant, condition, restriction, adverse claim, levy,
charge, option, equity, adverse claim or restriction or other encumbrance of
any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities
law.
“Loss(es)”
means any and all damages, fines, fees, Taxes, penalties, deficiencies, losses
(including lost profits or diminution in value) and expenses, including
interest, reasonable expenses of investigation, court costs, reasonable fees
and
expenses of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment (such
fees and expenses to include all fees and expenses, including fees and expenses
of attorneys, incurred in connection with (a) the investigation or defense
of any Third Party Claims or (b) asserting or disputing any rights under
this Agreement against any party hereto or otherwise), net of any insurance
proceeds actually received (without any adverse effect on the premiums paid
for
such insurance) or proceeds received by virtue of third party
indemnification.
“Major
Stockholders” means the following Company stockholders: Xxxxxxx X. Xxxxxxx,
Tritech Partners, L.P., idealab Holdings LLC, Graystone Venture Direct Equity,
L.P., W Capital Partners, L.P., Lazard Freres & Co LLC, FBR
Technology Venture Partners, L.P. and Xxxxxx & Co.
“Merger”
has the meaning ascribed to it in Recital A to this Agreement.
“Merger
Subsidiary” is Atlantic Acquisition, Inc., a Delaware corporation and
wholly-owned subsidiary of Acquirer.
“NASD”
means the National Association of Securities Dealers, Inc.
“Net
Transaction Amount” means the Total Transaction Amount less (i) the Working
Capital Adjustment and (ii) the Excess Third Party Expenses.
“Officer’s
Certificate” has the meaning ascribed to it in Section 7.2(e).
“Option”
with respect to any Person means any security, right, subscription, warrant,
option, “phantom” stock right or other Contract (other than the Company
Preferred Stock) that gives the right to (a) purchase or otherwise receive
or be issued any shares of capital stock or other equity interests of such
Person or any security of any kind convertible into or exchangeable or
exercisable for any shares of capital stock or other equity interests of such
Person or (b) receive any benefits or rights similar to any rights enjoyed
by or accruing to the holder of shares of capital stock or other equity
interests of such Person, including any rights to participate in the equity,
income or election of directors or officers of such Person.
“Order”
means any writ, judgment, decree, injunction or similar order of any
Governmental or Regulatory Authority (in each such case whether preliminary
or
final).
“Other
Tax” means any sales, use, ad valorem, business license, withholding, payroll,
employment, excise, stamp, transfer, recording, occupation, premium, property,
value added, custom duty, severance, windfall profit or license tax,
governmental fee or other similar assessment or charge, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such tax (domestic or
foreign).
“Paying
Agent” shall have the meaning ascribed to it in Section 1.8(a)
“Permit”
means any license, permit, franchise or authorization.
“Permitted
Amount” means the lesser of $466,000 and one-half of all Third Party
Expenses.
“Person”
means any natural person, corporation, general partnership, limited partnership,
limited liability company or partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
“Plan”
means each employee benefit or compensation plan, agreement, policy, program
or
arrangement covering present or former employees, officers and directors of,
and
advisors and consultants to, the Company, including but not limited to “employee
benefit plans” within the meaning of section 3(3) of ERISA, stock purchase,
stock option or any other stock-based award, profit sharing, fringe benefit,
post-retirement health, health, life, vision and/or dental insurance coverage
(including any self-insured arrangement), disability benefit, supplemental
unemploy-ment benefit, vacation benefit, change in control, retention,
severance, termination pay, bonus and deferred compensation plans, agreements
or
funding arrangements (collectively, the “Plans”), whether written or oral and
whether sponsored, maintained or contributed to by (i) the Company or
(ii) any other organization that is a member of a controlled group of
organizations (within the
meaning
of sections 414(b), (c), (m) or (o) of the Code) of which the Company is a
member (the “Controlled
Group”).
“Properties”
has the meaning ascribed to it in Section 2.15(b).
“PTO”
means the United States Patent and Trademark Office.
“Registered
Intellectual Property” shall mean all United States, international and foreign:
(a) patents and patent applications (including provisional applications);
(b) registered trademarks and service marks, applications to register
trademarks and service marks, intent-to-use applications, other registrations
or
applications to trademarks or service marks, or trademarks or service marks
in
which common law rights are owned or otherwise controlled; (c) registered
copyrights and applications for copyright registration; (d) any mask
work
registrations and applications to register mask works; and (e) any other
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of a Hazardous Material
into
the Environment.
“Relevant
Group” has the meaning ascribed to it in Section 2.11(a).
“Representatives”
has the meaning ascribed to it in Section 4.2(a).
“Restricted
Stock Purchase Agreement” means a Restricted Stock Purchase Agreement in the
form attached to the Company Stock Plan pursuant to which the Company has sold
Company Restricted Stock or issued Company Stock Purchase Rights or as may
otherwise been entered into by the Company prior to the date of this
Agreement.
“SEC”
means the Securities and Exchange Commission or any successor
entity.
“Senior
Manager” has the meaning ascribed to it in Section 1.10.
“Senior
Manager Bonus Amount” means 12.772% of the Net Transaction Amount less (i) 17.5%
of the Disbursement Amount and (ii) the Senior Manager Escrow
Amount.
“Senior
Manager Escrow Amount” means 6.7025% of the Escrow Amount.
“Series
Allocation Percentage” shall be the percentage (expressed in decimal form) of
the Upfront Consideration allocated for each series of Company Preferred Stock.
The Series Allocation Percentage for the Series B-1 Preferred Stock shall be
22.6904%. The Series Allocation Percentage for the Series B-2 Preferred Stock
shall be 6.8892%. The Series Allocation Percentage for the Series B-3 Preferred
Stock shall be 4.4580%. The Series Allocation Percentage for the Series C
Preferred Stock shall be 22.6137%. The Series Allocation Percentage for the
Series D Preferred Stock shall be 43.3487%.
“Series
B-1 Preferred Stock” shall mean shares of the Company’s Series B Preferred Stock
purchased on March 3, 1998.
“Series
B-2 Preferred Stock” shall mean shares of the Company’s Series B Preferred Stock
purchased on October 13, 1998.
“Series
B-3 Preferred Stock” shall mean shares of the Company’s Series B Preferred Stock
purchased on May 6, 1999.
“Site”
means any of the real properties currently or previously owned, leased,
occupied, used or operated by the Company, any predecessors of the Company,
or
any entities previously owned by the Company, including all soil, subsoil,
surface waters and groundwater.
“Stockholder
Agent” has the meaning ascribed to it in Section 7.2(g)(i).
“Stockholder
Escrow Amount” means 93.2975% of the Escrow Amount.
“Subsidiary”
means any Person in which the Company or Acquirer, as the context requires,
directly or indirectly through Subsidiaries or otherwise, beneficially owns
at
least twenty percent (20%) of either the equity interest in, or the
voting
control of, such Person, whether or not existing on the date
hereof.
“Support
Agreement” has the meaning ascribed to it in Section 6.3(m) to this
Agreement.
“Surviving
Corporation” has the meaning ascribed to it in Section 1.1.
“Takeover
Statute” means a “fair price,”“moratorium,”“control share acquisition” or
other similar antitakeover statute or regulation enacted under state or federal
laws in the United States, including section 203 of the Delaware
Law.
“Tax”
or
“Taxes” means Income Taxes, Other Taxes or both, as the context
requires.
“Tax
Laws” means the Code, federal, state, county, local or foreign laws relating to
Taxes and any regulations or official administrative pronouncements released
thereunder.
“Tax
Returns” means any return, report, information return, schedule, certificate,
statement or other document (including any related or supporting information)
filed or required to be filed with, or, where none is required to be filed
with
a Taxing Authority, the statement or other document issued by, a Taxing
Authority in connection with any Tax.
“Taxing
Authority” means any governmental agency, board, bureau, body, department or
authority of any United States federal, state or local jurisdiction or any
foreign jurisdiction, having or purporting to exercise jurisdiction with respect
to any Tax.
“Third
Party Claim” has the meaning ascribed to it in Section 7.2(i).
“Third
Party Expenses” has the meaning ascribed to it in Section 5.4.
“Total
Transaction Amount” means forty-five million dollars ($45,000,000).
“Upfront
Consideration” means 82.5% of the Net Transaction Amount; less (i) 82.5%
of the Disbursement Amount and (ii) the Stockholder Escrow
Amount.
“Warranty
Obligations” has the meaning ascribed to it in Section 2.28.
“Working
Capital Adjustment” means the amount by which the short term debt (excluding
Third Party Expenses) of the Company plus $1,800,000 exceeds, as of the Closing
Date, the cash, and cash equivalents, plus credit card receipts processed on
the
first of the month (if not yet deposited in the Company’s accounts at the
Closing) plus short term investments of the Company plus any amounts disbursed
by the Company, prior to the Closing Date for Third Party Expenses. For this
purpose, cash and cash equivalents will include all amounts on deposit in any
Company bank account whether restricted or unrestricted.
IN
WITNESS WHEREOF, Acquirer and the Company, and with respect to Article 7 and
Article 9 only, the Stockholder Agent, have caused this Agreement to be signed
by their duly authorized representatives, all as of the date first written
above.
|
XXXXXXXXX.XXX,
INC.
By /s/
Xxxx X. Xxxxx
Name Xxxx
X.
Xxxxx
Title President
and CEO
|
WEBEX
COMMUNICATIONS, INC.
By
/s/ Subrah S. Iyar
Name Subrah
S. Iyar
Title Chief
Executive Officer
|
|
ATLANTIC
ACQUISITION SUBSIDIARY, INC.
By /s/
Xxxx Xxxx
Name Xxxx
Xxxx
Title President
|
|
|
W
CAPITAL PARTNERS, L.P., as STOCKHOLDER AGENT
By:
WCP 2003 L.L.C., its general partner
By
/s/ Xxxxxx X. Xxxxxxxxxx
Name
Xxxxxx
X. Xxxxxxxxxx
Title
Managing
Director
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