EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AMONG
OPEN TEXT CORPORATION,
1220 ACQUISITION CORPORATION
AND
ELOQUENT, INC.
DATED AS OF JANUARY 8, 2003
TABLE OF CONTENTS
PAGE
I. THE MERGER......................................................................................... 1
Section 1.1 The Merger................................................................... 1
Section 1.2 Effective Time............................................................... 1
Section 1.3 Effects of the Merger........................................................ 1
Section 1.4 Charter and Bylaws; Directors and Officers................................... 2
Section 1.5 Conversion of Securities; Cash Consideration; Escrow Holdback................ 2
Section 1.6 Exchange of Certificates..................................................... 3
Section 1.7 Additional Escrow and Indemnity Provisions................................... 5
Section 1.8 Further Assurances........................................................... 6
Section 1.9 Closing...................................................................... 6
Section 1.10 Determination of Net Cash and Net Cash Shortfall............................. 6
II. REPRESENTATIONS AND WARRANTIES OF ACQUIROR......................................................... 7
Section 2.1 Organization, Standing and Power............................................. 7
Section 2.2 Authority.................................................................... 7
Section 2.3 Consents and Approvals; No Violation......................................... 8
Section 2.4 Proxy Statement.............................................................. 8
Section 2.5 Brokers...................................................................... 9
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................... 9
Section 3.1 Organization, Standing and Power............................................. 9
Section 3.2 Capital Structure............................................................ 9
Section 3.3 Authority.................................................................... 10
Section 3.4 Consents and Approvals; No Violation......................................... 11
Section 3.5 SEC Documents and Other Reports.............................................. 11
Section 3.6 Proxy Statement.............................................................. 12
Section 3.7 Absence of Certain Changes or Events......................................... 12
Section 3.8 Permits and Compliance....................................................... 13
Section 3.9 Tax Matters.................................................................. 13
Section 3.10 Actions and Proceedings...................................................... 14
Section 3.11 IPO Litigation............................................................... 15
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TABLE OF CONTENTS
(continued)
PAGE
Section 3.12 Certain Agreements........................................................... 16
Section 3.13 ERISA........................................................................ 16
Section 3.14 Compliance with Worker Safety Laws........................................... 17
Section 3.15 Liabilities.................................................................. 18
Section 3.16 Products, Services and Claims................................................ 18
Section 3.17 Labor Matters................................................................ 18
Section 3.18 Intellectual Property........................................................ 19
Section 3.19 Opinion of Financial Advisor................................................. 21
Section 3.20 State Takeover Statutes...................................................... 22
Section 3.21 Required Vote of Company Stockholders........................................ 22
Section 3.22 Title to and Sufficiency of Assets........................................... 22
Section 3.23 Accounts Receivable.......................................................... 22
Section 3.24 Environmental Matters........................................................ 23
Section 3.25 Suppliers, Customers, Distributors and Significant Employees................. 23
Section 3.26 Insurance.................................................................... 24
Section 3.27 Transactions with Affiliates................................................. 24
Section 3.28 Brokers...................................................................... 24
Section 3.29 Accuracy of Information...................................................... 25
IV. COVENANTS RELATING TO CONDUCT OF BUSINESS.......................................................... 25
Section 4.1 Conduct of Business by the Company Pending the Merger........................ 25
Section 4.2 No Solicitation.............................................................. 28
Section 4.3 Third Party Standstill Agreements............................................ 29
V. ADDITIONAL AGREEMENTS.............................................................................. 29
Section 5.1 Stockholder Meeting.......................................................... 29
Section 5.2 Preparation of the Proxy Statement........................................... 29
Section 5.3 Access to Information........................................................ 30
Section 5.4 Notification of Certain Matters.............................................. 30
Section 5.5 Fees and Expenses............................................................ 30
Section 5.6 Company Stock Options........................................................ 31
Section 5.7 Commercially Reasonable Best Efforts......................................... 32
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TABLE OF CONTENTS
(continued)
PAGE
Section 5.8 Public Announcements......................................................... 32
Section 5.9 Conduct of IPO Litigation.................................................... 32
Section 5.10 Indemnification.............................................................. 33
VI. CONDITIONS PRECEDENT TO THE MERGER................................................................. 33
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger................... 33
Section 6.2 Condition to Obligation of the Company to Effect the Merger.................. 34
Section 6.3 Conditions to Obligations of Acquiror to Effect the Merger................... 34
VII. TERMINATION, AMENDMENT AND WAIVER.................................................................. 36
Section 7.1 Termination.................................................................. 36
Section 7.2 Effect of Termination........................................................ 37
Section 7.3 Amendment.................................................................... 38
Section 7.4 Waiver....................................................................... 38
VIII. ACTIONS BY THE PARTIES AFTER THE CLOSING........................................................... 38
Section 8.1 Survival of Representations and Warranties................................... 38
Section 8.2 Indemnification.............................................................. 38
Section 8.3 Indemnity Escrow Account..................................................... 40
Section 8.4 Further Assurances........................................................... 40
IX. GENERAL PROVISIONS................................................................................. 41
Section 9.1 Notices...................................................................... 41
Section 9.2 Interpretation............................................................... 42
Section 9.3 Definitions.................................................................. 42
Section 9.4 Counterparts................................................................. 46
Section 9.5 Entire Agreement; No Third-Party Beneficiaries............................... 46
Section 9.6 Governing Law................................................................ 46
Section 9.7 Assignment................................................................... 46
Section 9.8 Severability................................................................. 47
Section 9.9 Enforcement of this Agreement................................................ 47
Section 9.10 Attorneys' Fees.............................................................. 47
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 8, 2003 (this
"Agreement"), among Open Text Corporation, a corporation formed under the laws
of Ontario ("Parent"), 1220 Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Parent ("Acquiror"), and Eloquent, Inc., a Delaware
corporation (the "Company") (Acquiror and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Acquiror and the
Company have approved and declared advisable this Agreement and the transactions
contemplated hereby, including the merger of Acquiror into the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein; and
the stockholders of Acquiror have approved this Agreement and the Merger and the
Board of Directors of the Company has directed that this Agreement and the
Merger be submitted to the stockholders of the Company for adoption; and
WHEREAS, in order to induce Parent and Acquiror to enter into this
Agreement and contingent upon the prior approval of the Company's Board of
Directors, Acquiror and the directors and officers of the Company and their
affiliates that are stockholders of the Company are each entering into a
Stockholder Agreement in the form attached as Exhibit A (each, a "Stockholder
Agreement") concurrently with the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
I.
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), Acquiror shall be merged with and into the
Company at the Effective Time. Following the Merger, the separate corporate
existence of Acquiror shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Acquiror in accordance with the DGCL.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (which shall be in form and substance reasonably
satisfactory to the parties hereto) (the "Certificate of Merger"), executed in
accordance with the relevant provisions of the DGCL, is filed with the Secretary
of State of the State of Delaware. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of Merger
is accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of the
Closing.
Section 1.3 Effects of the Merger. The Merger shall have the effects
set forth in this Agreement and in Sections 259 through 261 of the DGCL.
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Section 1.4 Charter and Bylaws; Directors and Officers.
(a) At the Effective Time, the Certificate of Incorporation of the
Company (the "Company Charter") shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law. The Bylaws of Acquiror in effect at the Effective Time will
be adopted by, and will be the Bylaws of, the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(b) The directors of Acquiror at the Effective Time shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be. The officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
Section 1.5 Conversion of Securities; Cash Consideration; Escrow
Holdback. As of the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Acquiror, the Company or the holders of any
securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value
$.0001 per share, of Acquiror shall be converted into one validly issued, fully
paid and nonassessable share of Common Stock, par value $.001 per share, of the
Surviving Corporation.
(b) All shares of Common Stock of the Company, par value $.001 per
share, ("Company Common Stock," such shares being hereinafter referred to as the
"Shares") that are held in the treasury of the Company or by any wholly-owned
Subsidiary of the Company and any Shares owned by Acquiror or by any
wholly-owned Subsidiary of Acquiror shall be cancelled and no consideration
shall be delivered in exchange therefor.
(c) Subject to Sections 1.5(b), (d) and (e), each Share issued and
outstanding immediately prior to the Effective Time (other than any described in
paragraphs (a) and (b) above) shall be automatically converted into the right to
receive a ratable portion of (1) Six Million Seven Hundred Twenty Thousand
Dollars ($6,720,000), minus (2) the Net Cash Shortfall, which shall be
determined in accordance with Section 1.10 (collectively, the "Cash
Consideration"). At the Effective Time all such Shares shall no longer be
outstanding, shall automatically be canceled and retired and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Cash Consideration.
(d) Notwithstanding anything in this Agreement to the contrary, if
required by the DGCL or the General Corporation Law of the State of California
(the "CGCL") (but in each case only to the extent required thereby) Shares that
are issued and outstanding immediately prior to the Effective Time and that are
held of record by a holder who properly exercises appraisal or dissenter's
rights thereto in accordance with Section 262 of the DGCL or Chapter 13 of the
CGCL (a "Dissenting Stockholder") shall not be converted as described in Section
1.5(c), but shall be converted into the right to receive payment of the
appraised value of such Shares in
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accordance with the provisions of such Section 262 or such Chapter 13, as
applicable, until such holder fails to perfect or effectively withdraws or loses
such holder's right to appraisal or dissent and payment under the DGCL or the
CGCL. Shares held of record by a Dissenting Stockholder are referred to in this
Agreement as "Dissenting Shares." If, after the Effective Time, any Dissenting
Stockholder fails to perfect or effectively withdraws or loses such right, the
Dissenting Stockholder's Dissenting Shares shall thereupon be treated as if they
had been converted as of the Effective Time into the right to receive the Cash
Consideration, without any interest thereon. The Company shall give Acquiror (i)
prompt notice of any demands received by the Company for appraisal of Shares and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not, without the
prior written consent of Acquiror, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
(e) At the Closing, pursuant to Section 8.3, Acquiror shall
withhold One Million Dollars ($1,000,000.00) (together with all interest accrued
thereon, the "Indemnity Escrow Amount") from the Cash Consideration payable by
Acquiror to the Company Stockholders. The Indemnity Escrow Amount shall be
deposited in escrow and held in accordance with the Escrow Agreement among
Acquiror, the Stockholder Agent and an escrow agent to be mutually agreed upon
by the Company and Acquiror (the "Escrow Agent") in the form attached hereto as
Exhibit B (the "Escrow Agreement") until the later of the first anniversary of
the Effective Time or six months after such time as a final judgment is entered
in the IPO Litigation and such judgment becomes final and nonappealable, such
time to be determined in accordance with the procedures set forth in the Escrow
Agreement (the "Escrow Period").
Section 1.6 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Acquiror shall
designate a bank or trust company (or such other person or persons as shall be
reasonably acceptable to Acquiror and the Company) to act as paying agent in the
Merger (the "Paying Agent"), and at the Effective Time, Parent or Acquiror shall
make available, or cause the Surviving Corporation to make available, to the
Paying Agent cash in the amount necessary for the payment of the Cash
Consideration (less the Indemnity Escrow Amount) upon surrender of certificates
representing Shares as part of the Merger pursuant to Section 1.5. Any and all
interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be paid over to Acquiror.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Acquiror may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Cash Consideration (less the Indemnity
Escrow Amount). Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Acquiror, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate shall
be entitled to receive in exchange therefor the Cash Consideration (less the
Indemnity Escrow Amount), and the Certificate so surrendered
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shall forthwith be canceled. In the event of a transfer of ownership of Shares
that is not registered in the transfer records of the Company, payment may be
made to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and 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 such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 1.6, each
Certificate (other than Certificates representing Dissenting Shares) shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Cash Consideration (less the Indemnity Escrow
Amount). No interest will be paid or will accrue on any amount payable upon the
surrender of any Certificate. Acquiror or the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement such amounts as Acquiror or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code") or under any provisions of state, local or
foreign tax law. To the extent that amounts are properly withheld by Acquiror or
the Paying Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the person in respect of which such
deduction or withholding was made by Acquiror or the Paying Agent.
(c) No Further Ownership Rights in Shares. All consideration paid
upon the surrender of Certificates in accordance with the terms of this Article
I shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates. At the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged as provided in this Article I, except as
provided in Section 1.6(e).
(d) Termination of Payment Fund. Any portion of the funds made
available to the Paying Agent to pay the Cash Consideration (other than the
Indemnity Escrow Amount) that remains undistributed to the holders of Shares six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holders of Shares who have not theretofore complied with
this Article I and the instructions set forth in the letter of transmittal
mailed to such holders after the Effective Time shall thereafter look only to
the Surviving Corporation for payment of the Cash Consideration (less the
Indemnity Escrow Amount) to which they are entitled and to the Escrow Agent for
payment of any portion of the Indemnity Escrow Amount and associated interest to
which they are entitled.
(e) No Liability. Neither Acquiror, the Company nor the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article I would otherwise escheat to or become the
property of any Governmental Entity (as hereinafter defined)), the cash payment
in respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interests of any person previously entitled thereto.
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(f) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Acquiror or the Paying Agent, the posting by such person of a bond, in such
reasonable amount as Acquiror or the Paying Agent may direct as indemnity
against any claim that may be made against them with respect to such
Certificate, the Paying Agent will pay in exchange for such lost, stolen or
destroyed Certificate the amount of cash to which the holders thereof are
entitled pursuant to Section 1.5.
Section 1.7 Additional Escrow and Indemnity Provisions.
(a) Stockholder Agent Appointment and Approval. By their approval
of the Merger, each of the Company Stockholders will be conclusively deemed to
have consented to and approved, as applicable: (i) the Escrow Agreement as to
any funds to which such Company Stockholder may be entitled thereunder; and (ii)
the irrevocable appointment of White & Xxx LLP, as the representative of the
Company Stockholders (the "Stockholder Agent"), and as the attorney-in-fact and
agent for and on behalf of each Company Stockholder with full power of
substitution, to act in the name, place and stead of the Company Stockholders
with respect to any and all actions or decisions necessary, desirable or
appropriate to be taken in connection with or as provided in this Agreement and
the Escrow Agreement, with respect to the disposition, settlement or other
handling of (a) indemnity claims under Article VIII and (b) all claims, rights
or obligations governed or arising under the Escrow Agreement so long as all
Company Stockholders are treated in a consistent manner in accordance with their
interests and/or consent in writing to different treatment. Each Company
Stockholder will be bound by all actions taken by the Stockholder Agent as to
any funds to which such Company Stockholder may be entitled from the Indemnity
Escrow Amount in connection with indemnity claims under Article VIII and the
Escrow Agreement. If the Stockholder Agent shall resign or become unable to
fulfill its responsibility as Stockholder Agent, then it or its successor in
interest (as applicable) shall promptly appoint a successor, who shall, upon
such appointment, become the Stockholder Agent.
(b) Reliance and Indemnification. Acquiror will be entitled to deal
exclusively with the Stockholder Agent on all matters with respect to the
disposition, settlement or other handling of (i) indemnity claims under Article
VIII and (ii) the distribution of funds under the Escrow Agreement and will be
entitled to rely on any action or decision of Stockholder Agent in connection
therewith. The Indemnity Escrow Amount shall be available to indemnify and hold
harmless the Acquiror, Surviving Corporation and any of their respective
Affiliates from and against any and all Damages (as defined in Section 8.2)
incurred in connection with, arising out of, resulting from or incident to any
action or inaction of the Stockholder Agent, subject to first fulfilling any
claims for Damages pursuant to Article VIII. Furthermore, if said action or
inaction constituted gross negligence, recklessness, intentional misconduct,
fraud or knowing violation of law, as determined by a nonappealable court order,
judgment, decree or decision, the Stockholder Agent will indemnify and hold
harmless the Acquiror, Surviving Corporation and any of their respective
Affiliates from such Damages, provided that the Indemnity Escrow Amount is first
exhausted and provided further that such indemnity will only be to the extent
not otherwise paid or payable from the Indemnity Escrow Amount.
(c) Limitations on Authority. The Stockholder Agent does not have
and will not have any authority to enter into any agreement or agreements
relating to claims under Article
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VIII or the Escrow Agreement that would obligate the Company Stockholders to pay
any amount other than from the Indemnity Escrow Amount, or an aggregate amount,
together with amounts paid in settlement of all other such claims, in excess of
the Indemnity Escrow Amount. Any ultra xxxxx act of the Stockholder Agent shall
be null and void.
(d) Limitation on Liability. Unless gross negligence, recklessness,
intentional misconduct, fraud or a knowing violation of law shall be determined
by a nonappealable court order, judgment, decree or decision, the Stockholder
Agent shall not be liable or obligated to the Company Stockholders or any of the
parties to this Agreement for any mistake of fact or judgment or for the doing
of any act or the failure to do any act in discharge of its duties hereunder.
Subject to first fulfilling any claims for Damages pursuant to Article VIII or
Section 1.7(b), the Indemnity Escrow Amount shall be available to indemnify and
hold harmless the Stockholder Agent for any Damages (as defined in Section 8.2)
incurred in connection with, arising out of, resulting from or incident to the
discharge of its duties hereunder unless such Damages arise out of, result from
or are incident to actions involving its gross negligence, recklessness,
intentional misconduct, fraud or knowing violation of law, as determined by a
nonappealable court order, judgment, decree or decision.
Section 1.8 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.9 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Xxxxxxx Xxxxx + Xxxxxx,
000 Xxxxxxxxxx Xx., Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, at 10:00 a.m., local time,
no later than the fifth business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived (if
permissible) or at such other time and place as Acquiror and the Company shall
agree.
Section 1.10 Determination of Net Cash and Net Cash Shortfall.
(a) Not later than 5:00 p.m. (California time) on the fifth (5th)
business day prior to the Closing, the Company shall furnish to Acquiror an
itemized calculation of Net Cash, Net Cash at Closing and the Net Cash
Shortfall, if any. Such calculation shall be prepared on a reasonable basis in
accordance with information then available to the Company, in accordance with
the Company's standard accounting and bookkeeping practices and in accordance
with this Agreement. To assist Acquiror in its evaluation of the Company's
calculation, the Company
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shall make available to Acquiror all books and records utilized by the Company
in preparing said calculation. In the event Acquiror disputes said calculation,
not later than four (4) business days after delivery of said calculation,
Acquiror shall deliver a written notice to the Company notifying the Company of
such objection, setting forth the basis for the objection in reasonable detail
and the amount being disputed. If no such notice is delivered, Acquiror shall be
deemed to have accepted the Company's calculation of Net Cash, Net Cash at
Closing and Net Cash Shortfall, if any. In the event of a dispute, the parties
will use reasonable best efforts to resolve such dispute and to effect the
Closing as soon as practicable thereafter, but if any such dispute cannot be
resolved by the parties within one (1) week following the Company's receipt of
Acquiror's notice of dispute, the dispute will be resolved in accordance with
Section 1.10(b).
(b) If the parties have not been able to reach agreement on the
calculation of Net Cash, Net Cash at Closing and the Net Cash Shortfall, if any,
within one (1) week following the Company's receipt of Acquiror's notice of
dispute, the dispute shall be resolved by arbitration. No later than 5:00 p.m.
(California time) on the last day of such one (1) week period, the parties shall
agree on a single arbitrator to resolve the dispute. If the parties cannot agree
on a single arbitrator to resolve the dispute, then the parties will immediately
request JAMS to provide a list of three (3) potential arbitrators (who shall be
retired judges from the Northern California panel of JAMS). Within one (1)
business day after being provided with the JAMS list of arbitrators, the Company
will strike one arbitrator from such list and Acquiror shall strike one of the
other arbitrators from such list, and the arbitrator remaining shall serve in
connection with the dispute. Within one (1) business day after being selected,
the Company and Acquiror shall provide the arbitrator with all written
information they determine is needed to support their claims regarding the
calculation of Net Cash, Net Cash at Closing and Net Cash Shortfall. Within five
(5) business days after being selected, the arbitrator shall render a written
decision as to the calculation of Net Cash, Net Cash at Closing and Net Cash
Shortfall, which decision shall be final and binding on the parties hereto,
without right of appeal, and may be enforced in any court with jurisdiction. The
parties shall each pay their own costs relating to preparing and presenting
their respective positions to the arbitrator. The Company and Acquiror shall
each pay fifty percent (50%) of the entire cost of the arbitration, including
the fee of the arbitrator.
II.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Parent and Acquiror jointly and severally represent and warrant to the
Company as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and
Acquiror is a corporation duly organized, validly existing and in good standing
under the laws of its place of incorporation and has the requisite corporate
power and authority to carry on its business as now being conducted.
Section 2.2 Authority. On or prior to the date of this Agreement (i)
the Board of Directors of Acquiror has declared the Merger advisable and has
approved this Agreement, the Stockholder Agreements, the Escrow Agreement, the
IPO Litigation Undertaking and the Employment, Non-Compete and Non-Solicitation
Agreements (each as defined herein) (collectively the "Transaction Agreements")
and the transactions contemplated thereby in
7
accordance with applicable law and (ii) the Board of Directors of Parent has
declared the Merger advisable and has approved the Transaction Agreements and
the transactions contemplated thereby in accordance with applicable law. Each of
Parent and Acquiror has all requisite corporate power and authority to enter
into the Transaction Agreements to which it is a party and to consummate the
transactions contemplated thereby. The execution and delivery of the Transaction
Agreements by Parent and Acquiror (to the extent they are parties thereto), and
the consummation by Parent and Acquiror of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of
Parent and Acquiror. The Transaction Agreements have been duly executed and
delivered by Parent and Acquiror (to the extent they are parties thereto), and
such agreements constitute the valid and binding obligations of Parent and
Acquiror enforceable against them in accordance with their respective terms.
Section 2.3 Consents and Approvals; No Violation. The execution and
delivery of the Transaction Agreements do not, and the consummation of the
transactions contemplated thereby and compliance with the provisions thereof
will not, result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or result in the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Acquiror
or Parent under, any provision of (i) the Certificate of Incorporation or the
Bylaws of Acquiror or the comparable charter documents of Parent, each as
amended to date, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Acquiror or Parent or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Acquiror or
Parent or any of their properties or assets, other than, in the case of clauses
(ii) and (iii), any such violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect (as hereinafter defined) on Acquiror or
Parent, materially impair the ability of Acquiror or Parent to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated by the Transaction Agreements. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state) or
foreign court, commission, governmental body, regulatory agency, authority or
tribunal (a "Governmental Entity") is required by or with respect to Acquiror or
Parent in connection with the execution and delivery of the Transaction
Agreements by Acquiror or Parent or is necessary for the consummation of the
Merger and the other transactions contemplated by the Transaction Agreements,
except for (i) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business and (ii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on Acquiror.
Section 2.4 Proxy Statement. None of the information to be supplied by
Acquiror for inclusion or incorporation by reference in the proxy statement
(together with any amendments or supplements thereto, the "Proxy Statement")
relating to the Stockholder Meeting (as defined in Section 5.1) will, at the
time the Proxy Statement is first mailed to the Company's stockholders or at the
time of the Stockholder Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the
8
statements in such information, in light of the circumstances under which they
are made, not misleading.
Section 2.5 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Acquiror.
III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquiror, subject to
such exceptions as are disclosed in writing in the disclosure letter supplied by
the Company to Parent dated as of the date of this Agreement (the "Company
Letter"), which disclosure shall provide an exception to or otherwise qualify
the representations or warranties of the Company in the section of this
Agreement corresponding by number to such disclosure and such other
representations and warranties herein to the extent such disclosure shall appear
to be reasonably applicable to such other representations and warranties, as
follows:
Section 3.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of the Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted. The Company and each
of its Subsidiaries is duly qualified to do business, and are in good standing
(with respect to jurisdictions that recognize such concept), in each
jurisdiction where the character of their properties owned or held under lease
or the nature of their activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.2 Capital Structure.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 40,000,000 Shares and 10,000,000 shares of preferred stock,
par value $.001 per share ("Company Preferred Stock").
(b) At the close of business on December 31, 2002,
(i) 19,355,563 Shares were issued and outstanding, all of
which were validly issued, fully paid and nonassessable and free of
preemptive rights;
(ii) no Shares were held in the treasury of the Company;
(iii) no Shares were held by Subsidiaries of the Company;
and
(iv) no shares of Company Preferred Stock were issued and
outstanding or held in the treasury of the Company.
9
(c) Section 3.2 of the Company Letter contains a correct and
complete list as of December 31, 2002 of each outstanding option to purchase
Shares (the "Company Stock Options") then outstanding and unexercised under the
Company's 1999 Employee Stock Purchase Plan, the Equity Incentive Plan, the 1997
Equity Incentive Plan, the 1999 Equity Incentive Plan and the 2000 Non-Qualified
Stock Plan (collectively, the "Company Stock Option Plans") and those assumed by
the Company pursuant to the acquisition of Rebop Media, Inc. by the Company,
including the holder, date of grant, exercise price and number of Shares subject
thereto, the Company Stock Option Plan under which such option was granted and
whether the option is vested or exercisable.
(d) Except for the Company Stock Options, there are no options,
warrants, calls, rights or agreements to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of the Company
or obligating the Company to grant, extend or enter into any such option,
warrant, call, right or agreement, and there are no outstanding contractual
rights to which the Company is a party, the value of which is based on the value
of the Company Common Stock. There are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any Shares.
(e) The only Subsidiary of the Company is Rebop Media, Inc., a
California corporation. Each outstanding share of capital stock of such
Subsidiary of the Company is duly authorized, validly issued, fully paid and
nonassessable and each such share is owned by the Company, free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances of any
nature whatsoever.
(f) The Company does not have any outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter.
Section 3.3 Authority. On or prior to the date of this Agreement, the
Board of Directors of the Company has unanimously declared the Merger advisable
and fair to and in the best interest of the Company and its stockholders,
approved the Transaction Agreements in accordance with applicable law, resolved
to recommend the adoption of this Agreement by the Company's stockholders and
directed that this Agreement be submitted to the Company's stockholders for
adoption. The Company has all requisite corporate power and authority to enter
into this Agreement and the Employment, Non-Compete and Non-Solicitation
Agreements and, subject to approval by the stockholders of the Company of this
Agreement, to consummate the transactions contemplated thereby. The execution
and delivery of this Agreement and the Employment, Non-Compete and
Non-Solicitation Agreements by the Company and the consummation by the Company
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action (including Board action) on the part of the Company,
subject to (x) approval and adoption of this Agreement by the stockholders of
the Company and (y) the filing of the Certificate of Merger as required by the
DGCL. This Agreement and the Employment, Non-Compete and Non-Solicitation
Agreements have been duly executed and delivered by the Company and constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms. The filing of the
10
Proxy Statement with the Securities and Exchange Commission (the "SEC") has been
duly authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof, assuming Company Stockholder
approval of the transaction is obtained in compliance with applicable law, will
not result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or result in the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Company Charter or the Amended and
Restated Bylaws of the Company, (ii) any provision of the comparable charter or
organizational documents of any of the Company's Subsidiaries, (iii) any
contract, agreement, loan or credit agreement, note, bond, mortgage, indenture,
lease, instrument, permit, concession, franchise or license applicable to the
Company or (iv) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (iii) or
(iv), any such violations, defaults, rights, losses, liens, security interests,
charges or encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement, except for (i) in connection, or in compliance, with the provisions
of the Securities Act of 1933, as amended, together with the rules and
regulations promulgated thereunder (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended, together with the rules and regulations
promulgated thereunder (the "Exchange Act"), (ii) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company or
any of its Subsidiaries is qualified to do business, (iii) applicable
requirements of the Nasdaq SmallCap Market and (v) such other consents, orders,
authorizations, registrations, declarations, approvals and filings the failure
of which to be obtained or made would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
Section 3.5 SEC Documents and Other Reports. The Company has timely
filed with the SEC all documents (including proxy statements) required to be
filed with the SEC since February 16, 2000 (collectively, the "Company SEC
Documents"). The Company has furnished to Acquiror a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but that are required to be filed, to agreements, documents or other instruments
that previously had been filed by the Company with the SEC pursuant the
Securities Act or the Exchange Act. No Subsidiaries of the Company are required
to file any documents with the SEC. As of their respective dates, the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of the Company
included in the Company SEC Documents complied as
11
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with United States generally accepted accounting principles
(except, in the case of the unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the Company SEC Documents filed with the SEC prior to the
date of this Agreement or as required by U.S. generally accepted accounting
principles, the Company, since February 16, 2000, has not made any change in the
accounting practices or policies applied in the preparation of its financial
statements.
Section 3.6 Proxy Statement. None of the information to be supplied by
the Company or any of its Subsidiaries for inclusion or incorporation by
reference in the Proxy Statement will, at the time of the mailing of the Proxy
Statement or at the time of the Stockholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Since September 30,
2002, (A) the Company and its Subsidiaries have not incurred any material
liability or obligation (indirect, direct or contingent), or entered into any
material oral or written agreement or other transaction, that is not in the
ordinary course of business or that would result in a Material Adverse Effect on
the Company other than this Agreement and the transactions contemplated hereby,
(B) the Company and its Subsidiaries have not sustained any loss or interference
with their business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had a Material Adverse
Effect on the Company, (C) there has been no change in the rights, preferences
and privileges of the capital stock of the Company and no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its stock, (D) there has not been (v) any adoption of a new Company Plan (as
hereinafter defined), (w) any amendment to a Company Plan materially increasing
benefits thereunder, (x) any granting by the Company to any executive officer or
other key employee of the Company or any of its Subsidiaries of any increase in
compensation not approved in writing by Acquiror, except in the ordinary course
of business consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Company SEC Documents, (y) any granting by the
Company or any of its Subsidiaries to any such executive officer or other key
employee of any increase in severance or termination agreements in effect as of
the date of the most recent audited financial statements included in the Company
SEC Documents or except as approved by Acquiror in writing or (z) any entry by
the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such executive officer or other key employee
except as approved by Acquiror in writing, (E) there has not been any material
change in the amount or terms of the indebtedness of the Company and its
Subsidiaries from that described in the Company Quarterly Report for the quarter
ended September 30, 2002 and (F) there has been no event causing a
12
Material Adverse Effect on the Company, nor any development that would,
individually or in the aggregate, result in a Material Adverse Effect on the
Company.
Section 3.8 Permits and Compliance. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, and no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company (as hereinafter defined), threatened. Neither the Company nor any of
its Subsidiaries is in violation of (A) its charter, Bylaws or other
organizational documents, (B) any applicable law, ordinance, administrative, or
governmental rule or regulation of any Governmental Entity, including any
consumer protection, equal opportunity, customs, export control, foreign trade,
foreign corrupt practices (including the Foreign Corrupt Practices Act), health,
or (C) any order, decree or judgment of any Governmental Entity having
jurisdiction over the Company or any of its Subsidiaries, except, in the case of
clauses (B) and (C), for any violations that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. There are no contracts
or agreements of the Company or its Subsidiaries having covenants not to compete
that materially impair the ability of the Company or any of its Subsidiaries to
conduct its businesses as currently conducted or could reasonably be expected to
materially impair Acquiror's ability to conduct the Company's business after the
Closing in the manner in which it had been conducted prior to the Closing.
Except as disclosed in the Company SEC Documents filed prior to the date of this
Agreement, no event of default or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default exists or, upon
the consummation by the Company of the transactions contemplated by this
Agreement, will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee of any agreement
or instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any such Subsidiary is bound or to which any of
the properties, assets or operations of the Company or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company.
Section 3.9 Tax Matters. (i) The Company and each of its Subsidiaries
have filed all federal, and all state, local, foreign and provincial Tax Returns
(as hereinafter defined) required to have been filed, and such Tax Returns are
correct and complete, except to the extent that any failure to so file or any
failure to be correct and complete would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company; (ii)
all Taxes (as hereinafter defined) shown to be due on such Tax Returns have been
timely paid or extensions for payment have been properly obtained, or such Taxes
are being timely and properly contested; (iii) the Company and each of its
Subsidiaries have complied with all rules and regulations relating to the
withholding of Taxes and the remittance of withheld Taxes, except to the extent
that any failure to comply with such rules and regulations would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company; (iv) neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of its Taxes that
remains in effect; (v) no federal, state, local or foreign audits or
administrative
13
proceedings, of which the Company has Knowledge, are pending with regard to any
Taxes or proposed audit or proceeding from the Internal Revenue Service ("IRS")
or any other taxing authority; (vi) no issues that have been raised in writing
by the relevant taxing authority in connection with the examination of Tax
Returns filed by or with respect to the Company and each of its Subsidiaries are
currently pending; (vii) all deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full; (viii) no withholding is required under Section 1445 of the Code
in connection with the Merger; (ix) neither the Company nor any of its
Subsidiaries has engaged in any transaction that would constitute a "tax
shelter" within the meaning of Section 6111 or 6662 of the Code and that has not
been disclosed on an applicable Tax Return; (x) neither the Company nor any of
its Subsidiaries has submitted a request for a ruling to the IRS or a state tax
authority; (xi) neither the Company nor any of its Subsidiaries has at any time
made, changed or rescinded any express or deemed election relating to Taxes that
is not reflected in any Tax Return; (xii) neither the Company nor any of its
Subsidiaries has at any time changed any of its methods of reporting income or
deductions for Tax purposes from those employed in the preparation of its Tax
Returns; (xiii) neither the Company nor any of its Subsidiaries has been a
member of an affiliated group of corporations (within the meaning of Section
1504(a)) filing a consolidated federal income tax return (or a group of
corporations filing a consolidated, combined or unitary income tax return under
comparable provisions of state, local or foreign tax law) for any taxable period
other than a group of which the Company is the parent; (xiv) neither the Company
nor any of its Subsidiaries has any obligation under any agreement or
arrangement with any other person with respect to Taxes of such other person
(including pursuant to Treasury Regulations Section 1.1502-6 or comparable
provision of state, local or foreign tax law), including any liability for Taxes
of any predecessor entity; and (xv) the unpaid Taxes of the Company and its
Subsidiaries do not exceed the reserve for Tax liability (excluding any reserve
for deferred Taxes established to reflect temporary difference between book and
Tax income) set forth or included in the most recent balance sheet included in
the Company SEC Documents except to the extent that the failure to adequately
reflect such revenue, individually or in the aggregate, would not have a
Material Adverse Effect.
Section 3.10 Actions and Proceedings. There are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity, or (except
for the matter pending in the U.S. District Court for the Southern District of
New York captioned In re Eloquent, Inc. Initial Public Offering Securities
Litigation, Case No. 01-CV-6775) any other Actions or Proceedings pending or, to
the Knowledge of the Company, threatened by any person, against or involving (a)
the Company or any of its Subsidiaries, (b) to the Knowledge of the Company, any
of the present or former directors, officers, employees, consultants, agents or
stockholders of the Company or any of its Subsidiaries, as such, (c) any of the
properties, assets or business of the Company or any of its Subsidiaries or (d)
any Company Plan that, individually or in the aggregate, would have a Material
Adverse Effect on the Company. There are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations (including claims
for workers' compensation) pending or, to the Knowledge of the Company,
threatened against or involving (w) the Company or any of its Subsidiaries, (x)
to the Knowledge of the Company, any of the present or former directors,
officers, employees, consultants, agents or stockholders of the Company or any
of its Subsidiaries, as such, (y) or any of the properties, assets or business
of the Company or any of its Subsidiaries or (z) any Company Plan that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company. There are no Actions or
14
Proceedings, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of the
Company, threatened against or affecting (i) the Company or any of its
Subsidiaries, (ii) to the Knowledge of the Company, any of the present or former
officers, directors, employees, consultants, agents or stockholders of the
Company or any of its Subsidiaries, as such, or (iii) the assets or business of
the Company or any of its Subsidiaries relating to the transactions contemplated
by this Agreement.
Section 3.11 IPO Litigation. With respect to the litigation against
the Company and certain of its directors and officers in the matter pending in
the U.S. District Court for the Southern District of New York captioned In re
Eloquent, Inc. Initial Public Offering Securities Litigation, Case No.
01-CV-6775; the claims, cross-claims, counterclaims or defenses that have been
or are in the future asserted therein or that are related thereto or arise
therefrom and the D&O Policies (as defined below) (collectively, the "IPO
Litigation"),
(a) All written documents provided by the Company or its agents to
Acquiror or its Affiliates concerning the IPO Litigation, a list of which is
included in Section 3.11 of the Company Letter, are true, correct, complete and,
to the Knowledge of the Company, fairly present the status of the matters
described in such written documents as of the respective dates of such
documents. To the Knowledge of the Company, as of the date of this Agreement,
there are no other written documents to which the Company has access containing
additional material information regarding the IPO Litigation.
(b) The Company has timely paid any and all payments required under
the insurance policies identified in Section 3.11(b) of the Company Letter (the
"D&O Policies"), each such policy is in full force and effect as of the date of
this Agreement and there are no actual or contemplated events, including this
Agreement and the transactions contemplated hereby, that will alter, limit,
reduce or otherwise affect the coverage provided by those policies. Except for
the IPO Litigation, neither the Company nor any director or officer has made any
claim under the D&O Policies and to the Knowledge of the Company, no other event
has occurred that would reduce the coverage limits available under the D&O
Policies. The Company has taken all actions necessary, appropriate or advisable
to maintain the applicability of the D&O Policies to the IPO Litigation and to
tender under the D&O Policies all potentially insurable claims and costs related
to the IPO Litigation. The Company has taken no action, nor has it refrained
from action, such that any condition or term of the D&O Policies may have been
violated or breached, resulting in any right of denial or reduction in insurance
coverage for the IPO Litigation. The Company has taken all necessary actions to
report the status of the IPO Litigation under the D&O Policies.
(c) To the Knowledge of the Company, there are no facts, events or
circumstances that could give rise to coverage exclusions or other coverage
limitations under any of the D&O Policies, including without limitation
exclusions related to intentional acts or illegal remuneration by the directors,
officers and agents of Company and no coverage limitations or exclusions have
been asserted by any insurer in connection with the IPO Litigation. The insurer
providing primary coverage among the D&O Policies has not denied its duty to
defend the Company in the IPO Litigation and none of the insurers issuing the
D&O Policies has posited any limitation or exclusion in connection with such
duty.
15
(d) The retention on the D&O Policies equals Two Hundred
Fifty-Thousand Dollars ($250,000), applicable to defense costs, of which
approximately Seventy-Four Thousand Seven Hundred Thirty-Nine Dollars and
Fifty-Four Cents ($74,739.54) had been invoiced as of November 30, 2002. The
Company will inform Acquiror promptly after receipt of any other invoices of
amounts applicable to the retention. A summary supporting the costs associated
with the payment of the retention by the Company through July 25, 2002 has been
forwarded to the D&O Policy carriers and such costs have not been rejected by
the D&O Policy carriers. The Company will submit an updated summary of such
costs within 30 days after the execution of this Agreement. The primary D&O
Policy carrier has agreed to defense counsel selected by the Company.
Section 3.12 Certain Agreements. Neither the Company nor any of its
Subsidiaries is a party to any oral or written agreement or plan, including any
employment agreement, severance agreement, stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan (collectively, the
"Compensation Agreements"), pension plan (as defined in Section 3(2) of ERISA)
or welfare plan (as defined in Section 3(1) of ERISA) any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. Section 3.12 of
the Company Letter sets forth (i) for each officer, director or employee who is
a party to, or will receive benefits under, any Compensation Agreement as a
result of the transactions contemplated herein, the total amount that each such
person may receive, or is eligible to receive, assuming that the transactions
contemplated by this Agreement are consummated on the date hereof, and (ii) the
total amount of indebtedness owed to the Company or its Subsidiaries from each
officer, director or employee of the Company and its Subsidiaries.
Section 3.13 ERISA.
(a) Each Company Plan (as hereinafter defined) is listed in Section
3.13(a) of the Company Letter. With respect to each Company Plan, the Company
has made available to Acquiror a true and correct copy of (i) the two most
recent annual reports (Form 5500) filed with the IRS, (ii) each such Company
Plan that has been reduced to writing and all amendments thereto, (iii) each
trust agreement, insurance contract or administration agreement relating to each
such Company Plan, (iv) a written summary of each unwritten Company Plan, (v)
the most recent summary plan description or other written explanation of each
Company Plan provided to participants, (vi) the three most recent actuarial
reports or valuations relating to a Company Plan subject to Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (vii) the
most recent determination letter or opinion and request therefor, if any, issued
by the IRS with respect to any Company Plan intended to be qualified under
section 401(a) of the Code, (viii) any request for a determination currently
pending before the IRS and (ix) all correspondence with the IRS, the Department
of Labor, the SEC or Pension Benefit Guaranty Corporation relating to any
outstanding controversy. Each Company Plan materially complies in all respects
with ERISA, the Code and all other applicable statutes and governmental rules
and regulations. No "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Company Plan for which the 30-day notice
requirement has not been waived. Neither the Company nor any ERISA Affiliate (as
hereinafter defined) currently
16
maintains, contributes to or has any liability or, at any time during the past
six years has maintained or contributed to any pension plan that is subject to
section 412 of the Code or section 302 of ERISA or Title IV of ERISA. Neither
the Company nor any ERISA Affiliate currently maintains, contributes to or has
any liability or, at any time during the past six years has maintained or
contributed to any Company Multiemployer Plan (as hereinafter defined). No
action has been taken, or is currently being considered, to terminate any
Company Plan subject to Title IV of ERISA. No Company Plan, nor any trust
created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived.
(b) With respect to the Company Plans, no event has occurred and,
to the Knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any of its Subsidiaries or
any ERISA Affiliate or Company Plan fiduciary could be subject to any liability
under the terms of such Company Plans, ERISA, the Code or any other applicable
law that would have a Material Adverse Effect on the Company. All Company Plans
that are intended to be qualified under Section 401(a) of the Code have been
determined by the IRS to be so qualified, or a timely application for such
determination is now pending, or the remedial amendment period with respect to
the initial adoption of the Company Plan has not expired, or the Company Plan is
a standardized prototype document and the Company is not aware of any reason why
any such Company Plan is not so qualified in operation. Neither the Company nor
any of its Subsidiaries or ERISA Affiliates has any liability or obligation
under any welfare plan to provide benefits after termination of employment to
any employee or dependent other than as required by Section 4980B of the Code.
(c) Section 3.13(c) of the Company Letter contains a list of all
(i) severance and employment agreements with employees of the Company and each
Subsidiary and ERISA Affiliate, (ii) severance programs and policies of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees and (iii) plans, programs, agreements and other arrangements of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees containing change of control or similar provisions.
(d) Except as set forth in Section 3.13(d) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any agreement,
contract or arrangement that could result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(e) Neither the Company nor any Subsidiary employs people resident
outside of the United States.
Section 3.14 Compliance with Worker Safety Laws. The properties,
assets and operations of the Company and its Subsidiaries are in material
compliance with all applicable federal, state, local and foreign laws, rules and
regulations, orders, decrees, judgments, permits and licenses relating to public
and worker health and safety (collectively, "Worker Safety Laws"). With respect
to such properties, assets and operations, including any previously owned,
leased or operated properties, assets or operations, there are no past, present
or reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of the Company or any of its Subsidiaries
that may interfere with or prevent compliance or continued compliance with
applicable Worker Safety Laws.
17
Section 3.15 Liabilities. Except as fully reflected or reserved
against in the financial statements included in the Company Annual Report or
fairly disclosed in the footnotes thereto, the Company and its Subsidiaries had
no material liabilities (including Tax liabilities) at the date of such
financial statements, absolute or contingent and had no liabilities (including
Tax liabilities) that were not incurred in the ordinary course of business. As
of the date hereof, neither the Company nor any of its Subsidiaries has
indebtedness for borrowed money other than equipment leases.
Section 3.16 Products, Services and Claims.
(a) Neither the Company nor any of its Subsidiaries has received a
written or, to the Knowledge of the Company, oral claim for or based upon breach
of warranty (other than warranty service and repair claims in the ordinary
course of business not material in amount or significance), liability in tort,
negligent provision of services or any other allegation of liability, from sale
of its products or from the provision of services; and, to the Knowledge of the
Company, there is no basis for any such claim that, if asserted, would likely
have a Material Adverse Effect on the Company. Except as set forth in written
agreements between the Company and its customers or as provided by applicable
law, no product sold or delivered or service rendered by the Company or any of
its Subsidiaries is subject to any guaranty, warranty or other indemnity.
(b) Neither the Company nor any of its Subsidiaries has made any
sales to customers that are contingent upon (x) providing future enhancements of
existing products, (y) adding features not currently available on existing
products or (z) otherwise enhancing the performance of existing products (other
than beta or similar arrangements pursuant to which customers of the Company or
any of its Subsidiaries from time to time test or evaluate products).
Section 3.17 Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement, labor contract or other agreement with a
body representing any of its employees. Neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practice with respect to any
persons employed by or otherwise performing services primarily for the Company
(the "Company Business Personnel"), and there is no unfair labor practice
complaint or grievance against the Company or any of its Subsidiaries by any
person pursuant to the National Labor Relations Act or any comparable state or
foreign law pending or threatened in writing with respect to the Company
Business Personnel. There is no labor strike, dispute, slowdown or stoppage
pending or, to the Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries that may interfere with the business
activities of the Company or any of its Subsidiaries.
(b) The Company has not incurred any liability under, and has
complied in all respects with, the Workers Adjustment Retraining Notification
Act (the "WARN Act") , and, to the Knowledge of the Company, no fact or event
exists that would reasonably be expected to give rise to liability under the
WARN Act; no compensation paid or payable to any employee of the Company or any
of its Subsidiaries has been or will be nondeductible by reason of
18
application of Section 162(m) of the Code; and the Company and its Subsidiaries
have complied in all respects with the Consolidated Omnibus Budget
Reconciliation Act of 1985.
Section 3.18 Intellectual Property.
(a) Generally. Section 3.18(a) of the Company Letter sets forth,
for the Intellectual Property owned, in whole or in part, including jointly with
others (such letter specifies if such Intellectual Property is owned jointly),
by the Company, a complete and accurate list of all United States and foreign
(1) issued Patents and pending Patent applications; (2) Trademark registrations
and pending applications; and (3) Copyright registrations and pending
applications, if any, indicating for each listing required by subsections
(1)-(3), the applicable jurisdiction, registration number (or application
number) and date issued (or date filed).
(b) Trademarks.
(i) The Company is currently in compliance with all legal
requirements with respect to its Trademarks (including the timely
post-registration filing of affidavits of use and incontestability and
renewal applications with respect to registered Trademarks and pending
Trademark applications), other than any requirement that, if not
satisfied, would not result in a cancellation of any such registration
or otherwise affect the priority and enforceability of the Trademark in
question.
(ii) None of the Company's registered Trademarks has been
within the last three (3) years or is now involved in any opposition or
cancellation proceeding in the United States Patent and Trademark
Office, and no such action has been threatened in writing within the
one (1)-year period prior to the date of this Agreement.
(iii) To the Knowledge of the Company, there has been no
prior use of any of the Company's Trademarks by any third party that
confers upon said third party superior rights in any such Trademark.
(iv) The Company's registered Trademarks have been
continuously used in the form appearing in, and in connection with the
goods and services listed in, their respective registration
certificates or renewal certificates, as the case may be.
(c) Copyrights.
(i) The Company is currently in compliance with all legal
requirements with respect to its Copyrights, other than any requirement
that, if not satisfied, would not result in a cancellation of any
registration or otherwise affect the enforceability of the Copyright in
question.
(ii) None of the Company's registered Copyrights, if any,
has been within the last three (3) years or is now involved in any
proceeding in any court of law challenging the Company's rights in any
such Copyright, and no such action has been threatened in writing
within the one (1)-year period prior to the date of this Agreement.
19
(iii) To the Knowledge of the Company, there has been no
prior use of any of the Company's Copyrights, if any, by any third
party that confers upon said third party superior rights in any such
Copyright.
(d) Patents.
(i) The Company is currently in compliance with legal
requirements with respect to its Patents (including payment of filing,
examination, and maintenance fees and proofs of working or use with
respect to its issued Patents or pending Patent applications), other
than any requirement that, if not satisfied, would not result in a
revocation or lapse or otherwise affect the enforceability of the
Patent in question.
(ii) None of the Company's Patents has been or is now
involved in any interference, reissue, reexamination or opposing
proceeding in the United States Patent and Trademark Office or any
foreign patent office, and no such action has been threatened in
writing within the one (1)-year period prior to the date of this
Agreement.
(iii) To the Knowledge of the Company, there is no Patent
of any person that claims the same subject matter as any Patent of the
Company or invalidates any claim of any Patent of the Company.
(e) Trade Secrets and Other Proprietary Information. All of the
Company's current and former employees, consultants, contractors and other
entities have executed proprietary information and confidentiality agreements
substantially in the Company's standard forms. Except under confidentiality
obligations, to the Knowledge of the Company, there has been no disclosure by
the Company of its confidential information or Trade Secrets and Other
Proprietary Information. The Company has taken all reasonable steps necessary to
enforce the proprietary information and confidentiality agreements that have
been entered into by its employees, consultants, contractors and other entities.
(f) License Agreements. Section 3.18(f)(1) of the Company Letter
sets forth a complete and accurate list of all license agreements granting to
the Company any right to use or practice any rights under any Intellectual
Property other than over-the-counter "shrink wrap" software but including all
such agreements that are otherwise material to the Company (collectively, the
"Inbound License Agreements") that are currently utilized by the Company,
indicating for each the title and the parties thereto and the Intellectual
Property that is licensed thereunder. Section 3.18(f)(2) of the Company Letter
sets forth a complete and accurate list of all license agreements under which
the Company grants licenses or other rights in or to use or practice any rights
under any Intellectual Property that are attributable to revenues recognized by
the Company between July 1, 2001 and December 31, 2002, indicating for each the
title and the parties thereto and the Intellectual Property that is licensed
thereunder. There is no outstanding or, to the Knowledge of the Company,
threatened dispute or disagreement with respect to any Inbound License Agreement
or any license agreement under which the Company has granted a license or other
right in or to use or practice any rights under any Intellectual Property.
(g) Ownership and Other Rights; Sufficiency of Intellectual
Property Assets. To the Company's Knowledge, it owns or possesses adequate
licenses, re-marketing or sublicensing
20
rights, or other rights to use, all of the Intellectual Property used in its
business. The Intellectual Property identified in Section 3.18(a) of the Company
Letter, together with the Company's Trade Secrets and Other Proprietary
Information and the Company's unregistered Copyrights and rights granted to the
Company under the Inbound License Agreements, constitute all the Intellectual
Property rights and Inbound License Agreements used in the operation of the
Company's business as it is currently conducted and to the Knowledge of the
Company are all such Intellectual Property rights and Inbound License Agreements
necessary to operate such business after the Effective Time in substantially the
same manner as such business has been operated by the Company prior thereto.
(h) No Infringement by the Company. To the Knowledge of the
Company, the products used, manufactured, marketed, sold or licensed by the
Company, and all Intellectual Property used in the conduct of the Company's
business as currently conducted, do not infringe upon, violate or constitute the
unauthorized use of any rights owned or controlled by any third party, including
any Intellectual Property of any third party.
(i) No Pending or Threatened Infringement Claims. No litigation is
now or, within the three (3) years prior to the date of this Agreement, was,
pending, and no notice or other claim in writing has been received by the
Company, (1) alleging that the Company has engaged in any activity or conduct
that infringes upon, violates or constitutes the unauthorized use of the
Intellectual Property rights of any third party or (2) challenging the
ownership, use, validity or enforceability of any Intellectual Property owned or
exclusively licensed by or to the Company. No Intellectual Property that is
owned or licensed by the Company is subject to any outstanding Order,
stipulation or agreement restricting the use thereof by the Company or, in the
case of Intellectual Property licensed by the Company to others, restricting the
sale, transfer, assignment or licensing thereof by the Company to any Person.
(j) No Infringement by Third Parties. To the Knowledge of the
Company, no third party is misappropriating, infringing, diluting or violating
any Intellectual Property owned or licensed by the Company, and no such claims
have been brought against any third party by the Company.
(k) Software. The Software owned or purported to be owned by the
Company, was either (i) developed by employees of the Company within the scope
of their employment; (ii) developed by independent contractors who have validly
assigned all of their rights in such Software to the Company; or (iii) otherwise
acquired by the Company from a third party. To the Company's Knowledge, such
Software does not contain any programming code, documentation or other materials
or development environments that embody Intellectual Property rights of any
person other than the Company, except for such materials or development
environments obtained by the Company from other Persons that make such materials
or development environments generally available to all interested purchasers or
end-users on standard commercial terms.
Section 3.19 Opinion of Financial Advisor. The Company has received
the written opinion of U.S. Bancorp Xxxxx Xxxxxxx Inc. dated as of the date of
the approval of this Agreement by the Board of Directors of the Company to the
effect that, as of the date of such opinion, the Cash Consideration is fair to
the Company's Stockholders from a financial point of view.
21
Section 3.20 State Takeover Statutes. The Board of Directors of the
Company has, to the extent such statutes are applicable, taken all action
(including appropriate approvals of the Board of Directors of the Company)
necessary to render the provisions of Section 203 of the DGCL inapplicable to
the Merger, this Agreement, the Stockholder Agreements and the transactions
contemplated hereby and thereby. To the Knowledge of the Company, no other state
takeover statutes are applicable to the Merger, this Agreement, the Stockholder
Agreements and the transactions contemplated hereby and thereby.
Section 3.21 Required Vote of Company Stockholders. The affirmative
vote of the majority of the outstanding Shares is required to adopt this
Agreement. No other vote of the security holders of the Company is required by
law, the Company Charter or the Amended and Restated Bylaws of the Company or
otherwise in order for the Company to consummate the Merger and the transactions
contemplated hereby.
Section 3.22 Title to and Sufficiency of Assets.
(a) The Company and its Subsidiaries own good and marketable title
to all of their assets constituting personal property that is material to their
business (excluding, for purposes of this sentence, assets held under leases or
licenses), free and clear of any and all mortgages, liens, encumbrances,
charges, claims, restrictions, pledges, security interests or impositions
(collectively, "Liens"). Such assets, together with all assets held by the
Company and the Subsidiaries under leases and licenses, include all tangible and
intangible personal property, contracts and rights necessary or required for the
operation of the businesses of the Company and its Subsidiaries as currently
conducted.
(b) The Company and its Subsidiaries do not own any real property.
(c) Section 3.22 of the Company Letter sets forth a list of all
real estate leases of the Company or any of its Subsidiaries (the "Real Estate
Leases"). The Real Estate Leases are in full force and effect and no event has
occurred that with the passage of time, the giving of notice, or both, would
constitute a default or event of default by the Company or any of its
Subsidiaries or, to the Knowledge of the Company, any other person who is a
party signatory thereto, other than such defaults or events of default that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 3.23 Accounts Receivable. All of the accounts and notes
receivable of the Company and its Subsidiaries set forth on the books and
records of the Company (net of the applicable reserves reflected on the books
and records of the Company and in the financial statements included in the
Company SEC Documents) (i) represent sales actually made or transactions
actually effected in the ordinary course of business for goods or services
delivered or rendered to unaffiliated customers in bona fide arm's length
transactions, (ii) constitute valid claims, and (iii) are good and collectible
at the aggregate recorded amounts thereof (net of such reserves) without right
of recourse, defense, deduction, return of goods, counterclaim, or offset and
have been or will be collected in the ordinary course of business and consistent
with past experience.
22
Section 3.24 Environmental Matters.
(a) The Company and its Subsidiaries are and have been in
compliance with all applicable Environmental Laws, have obtained all
Environmental Permits and are in compliance with their requirements, and have
resolved all past non-compliance with Environmental Laws and Environmental
Permits without any pending, on-going or future obligation, cost or liability,
except in each case where such non-compliance would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries has (i) placed,
held, located, released, transported or disposed of any Hazardous Substances on,
under, from or at any of the Company's or any of its Subsidiaries' properties or
any other properties, other than in a manner that would not, in all such cases
taken individually or in the aggregate, result in a Material Adverse Effect on
the Company, (ii) to the Knowledge of the Company, the presence of any Hazardous
Substances on, under, emanating from, or at any of the Company's or any of its
Subsidiaries' properties or any other property but arising from the Company's or
any of its Subsidiaries' current or former properties or operations, other than
in a manner that would not result in a Material Adverse Effect on the Company,
or (iii) to the Knowledge of the Company, received any written notice (A) of any
violation of or liability under any Environmental Laws, (B) of the institution
or pendency of any suit, action, claim, proceeding or investigation by any
Governmental Entity or any third party in connection with any such violation or
liability, (C) requiring the investigation of, response to or remediation of
Hazardous Substances at or arising from any of the Company's or any of its
Subsidiaries' current or former properties or operations or any other
properties, (D) alleging noncompliance by the Company or any of its Subsidiaries
with the terms of any Environmental Permit in any manner reasonably likely to
require material expenditures or to result in material liability or (E)
demanding payment for response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of its Subsidiaries' current or former
properties or operations or any other properties.
(c) There are no environmental assessments or audit reports or
other similar studies or analyses in the possession of or available to the
Company or any of its Subsidiaries relating to any real property currently or
formerly owned, leased or occupied by the Company or any of its Subsidiaries.
Section 3.25 Suppliers, Customers, Distributors and Significant
Employees. Neither the Company nor any of its Subsidiaries has received any
written or, to the Knowledge of the Company, oral notice that (i) any
significant vendor or supplier will not sell materials or provide services to
the Company or any of its Subsidiaries at any time after the Effective Time on
terms and conditions substantially similar to those used in its current sales to
the Company or any of its Subsidiaries, subject only to general and customary
price increases, or (ii) any significant customer of the Company or any of its
Subsidiaries intends to terminate or limit or alter its business relationship
with the Company or any such Subsidiary. Neither the Company nor any of its
Subsidiaries has received any written or, to the Knowledge of the Company, oral
notice that any distributors, sales representatives, sales agents or other third
party sellers will not sell or market the products or services of the Company or
any such Subsidiary at any time after the Effective Time on terms and conditions
substantially similar to those used in the current sales and distribution
contracts of the Company and its Subsidiaries.
23
Section 3.26 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of the Company and its Subsidiaries
and their respective properties and assets, and are in character and amount at
least equivalent to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such failures
to maintain insurance policies that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. The Company and each of its
Subsidiaries have made any and all payments required to maintain such policies
in full force and effect. Neither the Company nor any of its Subsidiaries has
received notice of default under any such policy, and has not received written
notice or, to the Knowledge of the Company, oral notice of any pending or
threatened termination or cancellation, coverage limitation or reduction or
material premium increase with respect to such policy.
Section 3.27 Transactions with Affiliates.
(a) Since September 30, 2002, the Company and its Subsidiaries have
not, in the ordinary course of business or otherwise, (i) purchased, leased or
otherwise acquired any material property or assets or obtained any material
services from, (ii) sold, leased or otherwise disposed of any material property
or assets or provided any material services to (except with respect to
remuneration for services rendered in the ordinary course of business as
director, officer or employee of the Company or any of its Subsidiaries), (iii)
entered into or modified in any manner any contract with, or (iv) borrowed any
money from, or made or forgiven any loan or other advance (other than expenses
or similar advances made in the ordinary course of business) to, any Affiliated
Person.
(b) (i) The contracts of the Company and its Subsidiaries do not
include any material obligation or commitment between the Company or any of its
Subsidiaries and any Affiliated Person other than pursuant to written employment
contracts in existence on the date of this Agreement, (ii) the assets of the
Company or any of its Subsidiaries do not include any receivable or other
obligation or commitment from an Affiliated Person to the Company or any of its
Subsidiaries and (iii) the liabilities of the Company and its Subsidiaries do
not include any payable or other obligation or commitment from the Company or
any of its Subsidiaries to any Affiliated Person other than the payment of owed
but unpaid salary and bonus compensation.
(c) To the Knowledge of the Company, no Affiliated Person of any of
the Company or any of its Subsidiaries is a party to any contract with any
customer or supplier of the Company or any of its Subsidiaries that affects in
any material manner the business, operations, assets, liabilities, employee
relationships, earnings or results of operations, financial projections or
forecasts, or the business prospects and condition (financial or otherwise) of
the Company or any of its Subsidiaries.
Section 3.28 Brokers. No broker, investment banker or other person,
other than U.S. Bancorp Xxxxx Xxxxxxx Inc., the fees and expenses of which will
be paid by the Company (as reflected in an agreement between U.S. Bancorp Xxxxx
Xxxxxxx Inc. and the Company, a copy of which has been furnished to Acquiror),
is entitled to any broker's, finder's or other similar fee or
24
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
Section 3.29 Accuracy of Information. None of the representations or
warranties made by the Company herein or in the Company Letter, or any
certificate furnished by the Company to Acquiror pursuant to this Agreement,
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statement contained herein or therein not misleading.
IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the Merger.
Except as expressly permitted by clauses (i) through (xxii) of this Section 4.1,
the Performance Plan (as defined below) or Section 4.2, during the period from
the date of this Agreement through the Effective Time, the Company shall, and
shall cause each of its Subsidiaries to, in all material respects carry on its
business in the ordinary course of its business as currently conducted and, to
the extent consistent therewith, use all commercially reasonable best efforts to
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall be unimpaired at the Effective Time. The
Company shall, and shall cause each of its Subsidiaries to, timely and
effectively implement the cost reduction plan developed by the Company and
approved by Acquiror prior to the execution of this Agreement, as described in
Section 4.1 of the Company Letter (the "Performance Plan"). Parent, Company and
Acquiror agree and acknowledge that (i) the Performance Plan has been
voluntarily developed by the Company, (ii) the Performance Plan will be
implemented by the Company at the direction of its officers and directors, and
(iii) Parent and Acquiror will have no liability with respect to or arising from
the development or implementation of the Performance Plan by the Company.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated by this Agreement, the Company shall not, and shall not
permit any of its Subsidiaries to, without the prior written consent of Acquiror
(which will not be unreasonably withheld, delayed or conditioned):
(i) (A) other than dividends paid by wholly-owned
Subsidiaries, declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any
of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such, (B) other than in the case of
any Subsidiary, 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
(C) purchase, redeem or otherwise acquire any shares of capital stock
of the Company or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights,
warrants or options (including options under the Company Stock Option
Plans) to acquire any such shares, voting securities, equity equivalent
or
25
convertible securities, other than the issuance of Shares upon the
exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms;
(iii) amend the Company Charter or its Amended and Restated
Bylaws;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of or equity in, or by any other manner, any business or any
corporation, limited liability company, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets;
(v) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets other than sales
in the ordinary course of business;
(vi) incur any indebtedness for borrowed money, guarantee
any such indebtedness or make any loans, advances or capital
contributions to, or other investments in, any other person, other than
indebtedness, loans, advances, capital contributions and investments
between the Company and any of its wholly-owned Subsidiaries, in each
case in the ordinary course of business consistent with past practices;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company or any of its Subsidiaries;
(viii) except for such pre-existing arrangements that are
set forth in the Company Letter, enter into or adopt any, or amend any
existing, severance plan, agreement or arrangement or enter into or
amend any Company Plan or employment or consulting agreement;
(ix) except for such pre-existing arrangements as are set
forth in the Company Letter, increase the compensation payable or to
become payable to its directors, officers or employees or grant any
severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or employee of the
Company or any of its Subsidiaries, or establish, adopt, enter into,
or, except as may be required to comply with applicable law, amend in
any material respect or take action (excluding any acts of the Company
required to be taken, including any notices to be given, under any of
the Company Stock Option Plans) to enhance in any material respect or
accelerate any rights or benefits under, any labor, collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any director, officer or
employee;
(x) knowingly violate or knowingly fail to perform any
obligation or duty imposed upon it or any of its Subsidiaries by any
applicable material federal, state, local or foreign law, rule,
regulation, guideline or ordinance;
26
(xi) make any change to accounting policies or procedures
(other than actions required to be taken by U.S. generally accepted
accounting principles or by the SEC);
(xii) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any
election, or adopt any method that is inconsistent with positions
taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods;
(xiii) make or rescind any express or deemed tax election
related to Taxes or change any of its methods of reporting income or
deductions for Tax purposes;
(xiv) commence any litigation or proceeding with respect to
any material Tax liability or settle or compromise any material Tax
liability or commence any other litigation or proceedings or settle or
compromise any other material claims or litigation;
(xv) enter into or amend any agreement or contract with
any customer, supplier, sales representative or agent (i) having a term
in excess of three months and that is not terminable by the Company or
a Subsidiary without penalty or premium by notice of 30 days or less,
other than customer maintenance agreements entered into in the ordinary
course of business consistent with past practice, or (ii) that involves
or is expected to involve obligations of $25,000 or more during the
term thereof;
(xvi) enter into or amend any other agreement or contract
material to the Company and its Subsidiaries outside the ordinary
course of business;
(xvii) purchase any real property;
(xviii) make or agree to make any new capital expenditure or
expenditures that in the aggregate are in excess of $25,000;
(xix) except in the ordinary course of business consistent
with past practice, enter into or amend any agreement or contract with
any other person pursuant to which the Company or any of its
Subsidiaries is the licensor or licensee of any Intellectual Property;
(xx) pay, accelerate, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent financial
statements (or the notes thereto) of the Company and its Subsidiaries
included in the Company SEC Documents or incurred in the ordinary
course of business consistent with past practice;
(xxi) authorize, recommend, propose or announce an
intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing; or
27
(xxii) enter into any settlement agreement with respect to
the IPO Litigation that results in the payment of funds by the Company
or has a Material Adverse Effect on the Company.
Notwithstanding the foregoing, the Company shall not be prohibited from
paying any investment banking fees, attorneys' fees or accountants' fees related
to the transactions contemplated by this Agreement or paying the costs of
directors' and officers' insurance (including tail insurance to be in effect for
not more than three (3) years after the Closing).
Section 4.2 No Solicitation.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any financial advisor, attorney or other advisor or
representative of, the Company or any of its Subsidiaries directly or indirectly
to, (i) solicit, initiate or encourage the submission of, any Takeover Proposal,
(ii) enter into any agreement with respect to or approve or recommend any
Takeover Proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to the Company
or any of its Subsidiaries in connection with, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, the receipt of any Takeover Proposal;
provided, however, that prior to the Stockholder Meeting, (A) if the Board of
Directors of the Company reasonably determines the Takeover Proposal constitutes
a Superior Proposal, then, to the extent required by the fiduciary obligations
of the Board of Directors of the Company, as determined in good faith by a
majority thereof after consultation with independent counsel (who may be the
Company's regularly engaged independent counsel), the Company may (1) in
response to an unsolicited request therefor, furnish information with respect to
the Company and its Subsidiaries to any person pursuant to a customary
confidentiality agreement no less restrictive than the confidentiality agreement
between the Company and Parent dated August 12, 2002 (the "Confidentiality
Agreement") (as determined by the Company's independent counsel) and (2) engage
in or authorize discussions or negotiations with any person making such Takeover
Proposal, and (B) provided that the Company has satisfied the conditions to its
exercise of its rights to terminate this Agreement pursuant to Section 7.1(g)
hereof, in respect of any Superior Proposal, the Board of Directors of the
Company may (1) recommend such Superior Proposal to its stockholders (and in
connection therewith, withdraw its favorable recommendation to stockholders to
adopt this Agreement) and (2) enter into a letter of intent or other agreement
contemplating or otherwise relating to such Superior Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by any officer or director of the Company or any of
its Subsidiaries or any financial advisor, attorney or other advisor or
representative of the Company or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its Subsidiaries
or otherwise, shall be deemed to be a breach of this Section 4.2(a) by the
Company.
(b) The Company shall advise Acquiror orally and in writing of (i)
any Takeover Proposal or any inquiry with respect to or that could lead to any
Takeover Proposal received by any officer or director of the Company or, to the
Knowledge of the Company, any financial advisor, attorney or other advisor or
representative of the Company, (ii) the material terms of such Takeover Proposal
(including a copy of any written proposal), and (iii) the identity of the
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person making any such Takeover Proposal or inquiry no later than 24 hours
following receipt of such Takeover Proposal or inquiry. If the Company intends
to participate in discussions or negotiations with and/or furnish any person
with any information with respect to any Takeover Proposal in accordance with
Section 4.2(a), the Company shall advise Acquiror orally and in writing of such
intention not less than two business days in advance of providing such
information or participating in such discussions or negotiations. The Company
will keep Acquiror fully informed of the status and details of any such Takeover
Proposal or inquiry.
Section 4.3 Third Party Standstill Agreements. Until the termination
of this Agreement or the Effective Time, whichever occurs first, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company or any of its Subsidiaries is a
party (other than any involving Acquiror). During such period, the Company
agrees to use commercially reasonable best efforts to enforce, to the fullest
extent permitted under applicable law, the provisions of any such agreements,
including obtaining injunctions to prevent any breaches of such agreements and
to enforce specifically the terms and provisions thereof in any court of the
United States or any state thereof having jurisdiction.
V.
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting. The Company will, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of stockholders (the "Stockholder Meeting") for the
purpose of considering the approval and adoption of this Agreement and at such
meeting call for a vote and cause proxies to be voted in respect of the approval
and adoption of this Agreement. The Company will, through its Board of
Directors, recommend to its stockholders the adoption of this Agreement, and
shall not withdraw or modify such recommendation; provided, however, that the
Board of Directors of the Company may withdraw, modify or change such
recommendation if it (i) has not breached Section 4.2 and (ii) enters into a
merger, acquisition or other agreement (including an agreement in principle) to
effect a Superior Proposal or the Board of Directors resolves to do so, provided
that the Company has complied with the procedures of Section 7.1(g) of this
Agreement (other than termination of this Agreement). Notwithstanding the
Company's rights regarding a Superior Proposal in the preceding sentence, the
Company agrees that its obligations pursuant to the first sentence of this
Section 5.1 shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company of a Takeover Proposal.
Section 5.2 Preparation of the Proxy Statement. The Company shall as
soon as practicable after the date hereof, but in no event later than 21 days
following the execution of this Agreement, prepare and file a preliminary Proxy
Statement with the SEC and shall use all commercially reasonable best efforts to
respond to any comments of the SEC or its staff and to cause the Proxy Statement
to be mailed to the Company's stockholders as promptly as practicable after
responding to all such comments to the satisfaction of the SEC. The Company
shall notify Acquiror promptly of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will supply
Acquiror with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC, on the other hand, with
29
respect to the Proxy Statement or the Merger. If at any time prior to the
Stockholder Meeting there shall occur any event that is required to be set forth
in an amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Acquiror timely and reasonably objects unless the Company is
required to do so by applicable law. Acquiror shall cooperate with the Company
in the preparation of the Proxy Statement or any amendment or supplement
thereto.
Section 5.3 Access to Information. The Company shall, and shall cause
each of its Subsidiaries to, afford to the accountants, counsel, financial
advisors and other representatives of Acquiror reasonable access to, and permit
them to make such inspections as they may reasonably require of, during the
period from the date of this Agreement through the Effective Time, all of their
respective properties, books, contracts, commitments and records (including
engineering records and Tax Returns and the work papers of independent
accountants, if available and subject to the consent of such independent
accountants) and, during such period, the Company shall, and shall cause each of
its Subsidiaries to, (i) furnish promptly to Acquiror a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws, (ii)
furnish promptly to Acquiror all other information concerning its business,
properties and personnel as Acquiror may reasonably request, and (iii) promptly
make available to Acquiror all personnel of the Company and its Subsidiaries
knowledgeable about matters relevant to such inspections. No investigation
pursuant to this Section 5.3 shall affect any representation or warranty in this
Agreement of any party hereto or any condition to the obligations of the parties
hereto. All information obtained by Acquiror pursuant to this Section 5.3 shall
be kept confidential in accordance with the Confidentiality Agreement.
Section 5.4 Notification of Certain Matters. Acquiror shall use all
commercially reasonable best efforts to give prompt notice to the Company, and
the Company shall use all commercially reasonable best efforts to give prompt
notice to Acquiror, of: (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which it is aware and that would be reasonably
likely to cause (x) any representation or warranty contained in this Agreement
and made by it to be untrue or inaccurate in any material respect or (y) any
covenant, condition or agreement contained in this Agreement and made by it not
to be complied with or satisfied in all material respects, (ii) any failure of
Acquiror or the Company, as the case may be, to comply in a timely manner with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder or (iii) any change or event that would be reasonably likely to
have a Material Adverse Effect on Acquiror or the Company, as the case may be;
provided, however, that the delivery of any notice pursuant to this Section 5.4
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.5 Fees and Expenses.
(a) Except as provided in this Section 5.5, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses.
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(b) Notwithstanding any provision in this Agreement to the
contrary, the Company will be obligated to pay to Acquiror the Termination Fee
if:
(i) the Company's board of directors fails to recommend
or, if requested, confirm its recommendation of the Merger or adversely
modifies or withdraws that recommendation, or recommends a competing
transaction, or publicly announces any of the foregoing prior to the
termination of this Agreement;
(ii) the Company's board of directors receives a Takeover
Proposal and enters into an agreement with the party making the
Takeover Proposal, or approves a Takeover Proposal or completes the
competing transaction that is the subject of the Takeover Proposal, in
each case at any time within nine (9) months after the Company's
termination of this Agreement, unless the Company's termination of this
Agreement was due to Acquiror's or Parent's material breach of its
obligations under this Agreement; or
(iii) the Company breaches any covenant of this Agreement,
including Section 4.2, or any of the Company's representations or
warranties in this Agreement are untrue upon execution of this
Agreement or at the Closing (disregarding for this purpose all
"Material Adverse Effect" and "Material Adverse Change" qualifiers set
forth therein) and such failure of a covenant, representation or
warranty has a Material Adverse Effect on the Company and Acquiror
terminates and is validly entitled to terminate this Agreement as a
result of such failure and the Company was not entitled to terminate
this Agreement due to Acquiror's or Parent's material breach of its
obligations under this Agreement.
(c) Notwithstanding any provision in this Agreement to the
contrary, in the event that (i) the Closing does not occur prior to the
termination of this Agreement for any reason other than a material breach by
Acquiror or Parent of its obligations under this Agreement and (ii) Acquiror is
not entitled to the Termination Fee pursuant to paragraph (b) above, the Company
shall promptly after the termination of this Agreement reimburse Acquiror's
actual costs and expenses incurred in connection with this Agreement including,
without limitation, legal fees and expenses, up to a maximum amount equal to
three percent (3%) of the Cash Consideration.
Section 5.6 Company Stock Options.
(a) The Company shall take such action satisfactory to Acquiror as
shall be necessary to cause the current Offering under the Company's 1999
Employee Stock Purchase Plan (as such terms are defined therein) to terminate
and to terminate each of the Company Stock Option Plans effective no later than
the close of business on the business day immediately preceding the Effective
Time.
(b) The Company shall take such action satisfactory to Acquiror as
shall be necessary to cause each Company Stock Option and warrant that is
outstanding as of the close of business on the business day immediately
preceding the Effective Time, whether or not such Option or warrant is then
exercisable or vested, to be exercised for shares of Company Common Stock or
terminated prior to the Closing.
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Section 5.7 Commercially Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including: (i) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including those in connection with State
Takeover Approvals), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement; provided, however, that (i) no party shall be required to defend any
lawsuits or other legal proceedings (other than the IPO Litigation), whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (ii) no party to this Agreement shall consent to any
voluntary delay of the consummation of the Merger at the behest of any
Governmental Entity without the consent of the other parties to this Agreement,
which consent shall not be unreasonably withheld, conditioned or delayed.
(b) Each party shall not take any action, or enter into any
transaction, that would cause any of its representations or warranties contained
in this Agreement to be untrue or result in a breach of any covenant made by it
such that other party would be entitled to terminate this Agreement pursuant to
Sections 7.1(b) or 7.1(c).
Section 5.8 Public Announcements. Acquiror and the Company will not
issue any written public statements with respect to such transactions without
prior consultation with the other party, except as may be required by applicable
law or by obligations pursuant to any listing agreement with the Toronto Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
Section 5.9 Conduct of IPO Litigation. The Company shall use all
commercially reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable:
(a) to defend all claims asserted in the IPO Litigation and to
obtain a favorable, final resolution of the IPO Litigation;
(b) to maintain the applicability of all D&O Policies and to assert
and prosecute claims for coverage under the D&O Policies for all claims and
expenses related to the IPO Litigation to the maximum extent reasonably
possible;
(c) to keep Acquiror informed of significant developments in the
IPO Litigation;
32
(d) unless counsel to the Company determines it to be adverse to
its representation of the Company in the IPO Litigation, to provide copies of
all correspondence, communications or analyses, all significant facts or
developments in the IPO Litigation promptly upon receipt or discovery by
Company;
(e) to cause Xxxxxxxx X. Xxxx to execute and deliver to Acquiror,
in a form attached as Exhibit C, a letter undertaking certain obligations to
cooperate with and lend assistance to the Surviving Corporation with respect to
the resolution of the IPO Litigation and the prosecution of claims under the D&O
Policies (the "IPO Litigation Undertaking"); and
(f) to cooperate with Acquiror in its efforts to secure insurance
coverage for Acquiror as a named insured under the D&O Policies for the IPO
Litigation, including coordination and communicating with the Company's
insurance broker and all insurers.
The Company has reviewed the settlement proposal received from the
plaintiffs in the IPO Litigation and, subject to review of the language of the
final settlement agreement embodying such proposal, changes in such proposal and
the advice of counsel, will recommend approval of such settlement to its Board
of Directors if it believes such settlement to be in the best interests of the
Company, its creditors and its stockholders.
Section 5.10 Indemnification.
(a) From and after the Effective Time, the Surviving Corporation
will fulfill and honor in all respects the obligations of the Company pursuant
to (i) each indemnification agreement currently in effect between the Company
and each person who is or was a director or officer of the Company at or prior
to the Effective Time and (ii) any indemnification provision under the Company
Charter or the Company's Amended and Restated Bylaws as in effect on the date
hereof (each person who is a director or officer of the Company at or prior to
the Effective Time shall be referred to as an "Indemnified Party"). The
certificate of incorporation and bylaws of the Surviving Corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the Company
Charter and the Company's Amended and Restated Bylaws as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of three (3) years from the Effective Time in any manner that would
adversely affect the rights thereunder of any Indemnified Party unless such
modification is required by law.
(b) The provisions of this Section 5.10 are (i) intended to be for
the benefit of, and will be enforceable by, each of the Indemnified Parties and
(ii) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Indemnified Party may have by
contract or otherwise.
VI.
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions any of which may be waived if waived in writing by Parent and the
Company:
33
(a) Stockholder Approval. This Agreement shall have been duly
approved by the requisite vote of stockholders of the Company in accordance with
applicable law and the Company Charter and Amended and Restated Bylaws of the
Company.
(b) Governmental Approvals. All authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity that are necessary to effect
the Merger or any of the transactions contemplated hereby shall have been
obtained, shall have been made or shall have occurred.
(c) No Order. No court or other Governmental Entity having
jurisdiction over the Company or Acquiror, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) that is then in effect and has the
effect of making the Merger or any of the transactions contemplated hereby
illegal.
(d) Litigation. There shall be no Action or Proceeding pending or
threatened against any of the parties or against any of their respective
Affiliates, or any of their respective directors or officers, for the purpose or
with the consequence of delaying, conditioning, enjoining, preventing or
restraining the completion of the Merger or other transactions contemplated by
this Agreement or that, if adversely decided, could impose any condition,
penalty or requirement that, individually or in aggregate could have a Material
Adverse Effect on the Company or Acquiror.
Section 6.2 Condition to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions, which may be waived in writing exclusively by the Company:
(a) Performance of Obligations; Representations and Warranties.
Acquiror shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time. Each of the representations and warranties of Acquiror contained
in this Agreement shall have been true and correct when made. Each of the
representations and warranties of Acquiror shall be true and correct on and as
of the Effective Time as if made on and as of such date (disregarding for this
purpose all "Material Adverse Effect" and "Material Adverse Change" qualifiers
set forth therein), except where the facts and circumstances giving rise to
inaccuracies in such representations and warranties individually or in the
aggregate have not had and could not have reasonably been expected to have a
Material Adverse Effect on Acquiror. The Company shall have received
certificates signed on behalf of each of Acquiror by one of its officers to such
effect.
(b) Escrow Agreement. The Escrow Agreement shall have been executed
and delivered by Parent and the Escrow Agent.
Section 6.3 Conditions to Obligations of Acquiror to Effect the
Merger. The obligations of Acquiror to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions, any of which may be waived, in writing, exclusively by Acquiror:
34
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time. Each of the representations and warranties of the Company
contained in this Agreement shall have been true and correct when made. Each of
the representations and warranties of the Company contained in this Agreement
shall be true and correct on and as of the Effective Time as if made on and as
of such date (disregarding for this purpose all "Material Adverse Effect" and
"Material Adverse Change" qualifiers set forth therein), except where the facts
and circumstances giving rise to inaccuracies in such representations and
warranties individually or in the aggregate have not had and could not have
reasonably been expected to have a Material Adverse Effect on the Company.
Acquiror shall have received a certificate signed on behalf of the Company by
its Chief Executive Officer and its Chief Financial Officer to such effect.
(b) Consents.
(i) The Company shall have obtained the consent or
approval of each Governmental Entity whose consent or approval shall be
required in connection with the transactions contemplated hereby.
(ii) The Company shall have obtained the consent or
approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby under any lease,
or other contract, agreement or instrument, except as to which the
failure to obtain such consents and approvals would not, individually
or in the aggregate, have a Material Adverse Effect on the Company or
Acquiror.
(iii) In obtaining any approval or consent required to
consummate any of the transactions contemplated herein or any
Stockholder Agreement, no Governmental Entity shall have imposed or
shall have sought to impose any condition, penalty or requirement that,
individually or in aggregate, would have a Material Adverse Effect on
the Company or Acquiror.
(c) Material Adverse Change. Since the date of this Agreement,
there shall have been no Material Adverse Change with respect to the Company or
the IPO Litigation. Acquiror shall have received a certificate signed on behalf
of the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.
(d) Company Stock Option Plans. The Company shall have taken all
action required to be taken by the Company to implement the provisions of
Section 5.6 and all Company Stock Options and outstanding warrants shall have
been converted into or exercised for shares of Company Common Stock or shall
have been terminated.
(e) Dissenting Shares. Holders of not more than 5% of the
outstanding Shares shall have properly exercised and not revoked their rights to
dissent to the Merger under Section 262 of the DGCL and Chapter 13 of CGCL.
(f) IPO Litigation Undertaking. Xxxxxxxx X. Xxxx shall have
executed and delivered to Acquiror the IPO Litigation Undertaking.
35
(g) Employment, Non-Compete and Non-Solicitation Agreements. Each
of Xxxxxxxx X. Xxxx, Xxxxx Xxxxxx and Xxx Xxxxxxxxx shall have executed and
delivered to Acquiror on the date of this Agreement an Employment, Non-Compete
and Non-Solicitation Agreement in the form agreed by Acquiror and the Company
(the "Employment, Non-compete and Non-Solicitation Agreements") and on and as of
the Effective Time none of the individual parties thereto shall have breached or
expressed an intention to breach his agreement or shall otherwise be unable to
perform his duties thereunder.
(h) Escrow Agreement. The Escrow Agreement shall have been executed
and delivered by the Stockholder Agent and the Escrow Agent.
(i) Net Cash. The Company's Net Cash at Closing shall be at least
Two Million Five Hundred Thousand Dollars ($2,500,000).
VII.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Acquiror and the Company;
(b) by either Acquiror or the Company if the other party shall have
failed to comply in all material respects with any of its covenants contained in
this Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within five business
days following receipt by such other party of written notice of such failure to
comply;
(c) by Acquiror if the closing condition set forth in Section
6.3(a) with respect to the accuracy of representations and warranties would not
be met as of the Closing, or by the Company if the closing condition set forth
in Section 6.2(a) with respect to the accuracy of representations and warranties
would not be met as of the Closing, in each case if such inaccuracy is not cured
within five business days following receipt by the other party of written notice
of such inaccuracy;
(d) by Acquiror or the Company if the Merger has not been effected
on or prior to the close of business on April 30, 2003; provided, however, that
the right to terminate this Agreement pursuant to this Section 7.1(d) shall not
be available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the failure
of the Merger to have occurred on or prior to the aforesaid date;
(e) by Acquiror or the Company if (i) the Stockholder Meeting
(including any adjournments thereof) shall have been held and completed and the
stockholders of the Company shall have taken a final vote on a proposal to adopt
this Agreement and (ii) the required approval of the stockholders of the Company
shall not have been obtained;
36
(f) by Acquiror if (i) the Board of Directors of the Company shall
not have recommended, or shall have resolved not to recommend, or shall have
qualified, modified or withdrawn its recommendation of the Merger or declaration
that the Merger is advisable and fair to and in the best interest of the Company
and its stockholders, or shall have resolved to do so, (ii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company any Takeover Proposal or shall have resolved to do so or (iii) a tender
offer or exchange offer for 20% or more of the outstanding shares of capital
stock of the Company is commenced, and the Board of Directors of the Company
fails to recommend against acceptance of such tender offer or exchange offer by
its stockholders (including by taking no position with respect to the acceptance
of such tender offer or exchange offer by its stockholders);
(g) by Acquiror or the Company if the Company enters into a merger,
acquisition or other agreement (including an agreement in principle) to effect a
Superior Proposal or the Board of Directors of the Company resolves to do so;
provided, however, that the Company may not terminate this Agreement pursuant to
this Section 7.1(g) unless (i) the Company has delivered to Acquiror a written
notice of the Company's intent to enter into such an agreement to effect the
Superior Proposal, (ii) two business days have elapsed following delivery to
Acquiror of such written notice by the Company and (iii) during such two
business day period the Company has fully cooperated with Acquiror, including
informing Acquiror of the terms and conditions of the Takeover Proposal and the
identity of the person making the Takeover Proposal, with the intent of enabling
Acquiror to agree to a modification of the terms and conditions of this
Agreement so that the transactions contemplated hereby may be effected;
provided, further, that the Company may not terminate this Agreement pursuant to
this Section 7.1(g) unless at the end of such two business day period the Board
of Directors of the Company continues reasonably to believe that the Takeover
Proposal constitutes a Superior Proposal when compared to the Merger (taking
into account any such modification as may be proposed by Acquiror and after
consultation with the Company's independent financial advisor) and concurrently
with such termination the Company pays to Acquiror the amounts specified under
Sections 5.5(b);
(h) by Acquiror if Acquiror reasonably determines that the timely
satisfaction of any condition set forth in Section 6.1 or 6.3 has become
impossible (other than as a result of any failure on the part of Acquiror to
comply with or perform any covenant of Acquiror in this Agreement); or
(i) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 6.1 or 6.2 has become
impossible (other than as a result of any failure on the part of the Company to
comply with or perform any covenant of the Company in this Agreement).
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Acquiror or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Acquiror,
37
Acquiror or their respective officers or directors (except for the last sentence
of Section 5.3 and the entirety of Sections 5.5, 7.2, 9.1, 9.3, 9.5 through
9.10, each of which shall survive the termination); provided, however, that
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for fraud or any willful breach of a representation or warranty
contained in this Agreement or the breach of any covenant contained in this
Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
subject to obtaining approval of the Company Stockholders as provided by
applicable law and the rules of the Nasdaq Stock Market. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein that may legally be waived. 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.
VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING
Section 8.1 Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time; provided,
however, that the representations and warranties set forth in Section 3.11 and
the indemnification and other obligations with respect thereto set forth in this
Article VIII shall survive the execution and delivery of this Agreement and the
Closing hereunder (notwithstanding any investigation, analysis or evaluation by
Acquiror or its Affiliates or agents of the assets, properties, business,
operation or condition (financial or otherwise) of the Company), and shall
continue to survive in full force and effect until the end of the Escrow Period.
Section 8.2 Indemnification.
(a) Out of the Indemnity Escrow Amount. Acquiror, the Surviving
Corporation and Parent, and their respective officers, directors, employees,
affiliates, agents, successors, subsidiaries and assigns (collectively the
"Acquiror Group"), shall be indemnified, defended and held harmless out and to
the extent of the Indemnity Escrow Amount from and against any and all costs,
losses, liabilities, damages, lawsuits, deficiencies, insurance retentions or
deductibles, claims and expenses, including without limitation, interest,
penalties, costs of mitigation, lost profits, losses resulting from any
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing, other than payment of the retention amount under the D&O
Policies not previously paid by the Company (collectively, the "Damages"),
incurred in connection with, arising out of, resulting from or incident to (i)
the IPO Litigation or (ii) any inaccuracy of any representation or warranty in
Section 3.11 of this Agreement.
38
(b) Third Party Claims; Defense of Claims. If any Action or
Proceeding (which for purposes of this Section 8.2(b) shall include the IPO
Litigation) is filed or initiated against any member of the Acquiror Group or if
any member of the Acquiror Group is subject to any Damages that are
indemnifiable pursuant to this Article VIII or if any member of the Acquiror
Group receives notice of the assertion of any claim that is indemnifiable
pursuant to this Article VIII (collectively, a "Third Party Claim"), written
notice thereof shall be given to the Stockholder Agent as promptly as
practicable (and in any event within ten (10) days after the service of the
citation or summons); provided, however, that the failure of the Acquiror Group
to give timely notice shall not affect rights to indemnification and defense
hereunder except to the extent that the Stockholder Agent demonstrates actual
damage caused by such failure.
After such notice, if the Stockholder Agent shall acknowledge in
writing to the Acquiror Group that the Acquiror Group shall be entitled to
indemnification hereunder in connection with such Third Party Claim, then the
Acquiror Group shall be entitled, if it so elects, to take control of the
defense and investigation of such Third Party Claim and to employ and engage
attorneys of its own choice to handle and defend the same, such attorneys to be
reasonably satisfactory to the Stockholder Agent and to be paid out of the
Indemnity Escrow Amount until such amount is exhausted, and to compromise or
settle such Third Party Claim, which compromise or settlement shall be made only
with the written consent of the Stockholder Agent, such consent not to be
unreasonably withheld, conditioned or delayed.
If (i) the Acquiror Group fails to assume the defense of such Third
Party Claim within fifteen (15) days after delivery of notice thereof pursuant
to this Section 8.2, or (ii) the named parties to such Third Party Claim include
both the Stockholder Agent and the Acquiror Group and the Stockholder Agent and
its counsel determine in good faith that there may be one or more legal defenses
available to the Acquiror Group that are different from or additional to those
available to the Stockholder Agent and that joint representation would be
inappropriate, the Stockholder Agent will (upon delivering notice to such effect
to the Acquiror Group) have the right to undertake, the defense, compromise or
settlement of such Third Party Claim on behalf of the Acquiror Group, the costs
of which shall be paid from the Indemnity Escrow Amount until said amount is
exhausted; provided, however, that such Third Party Claim shall not be
compromised or settled without the written consent of the Acquiror Group, which
consent shall not be unreasonably withheld, conditioned or delayed.
In the event the Acquiror Group (or the Stockholder Agent, as
applicable) assumes defense of the Third Party Claim, the Acquiror Group (or the
Stockholder Agent, as applicable) will keep the Stockholder Agent (or the
Acquiror Group, as applicable) reasonably informed of the progress of any such
defense, compromise or settlement and will consult with, when appropriate, and
consider any reasonable advice from, the Stockholder Agent (or the Acquiror
Group, as applicable) with respect to any such defense, compromise or
settlement. To the extent indemnification is required hereunder, the costs of
any settlement of any action effected pursuant to and in accordance with this
Section 8.2 and for any final judgment (subject to any right of appeal) and any
Damages by reason of such settlement or judgment shall be paid from the
Indemnity Escrow Amount until said amount is exhausted.
Notwithstanding the provisions of this paragraph (b), the parties
acknowledge that no notice need be given with respect to the IPO Litigation as
it is pending as of the Closing, that the
39
IPO Litigation as it is pending is a claim entitled to indemnification pursuant
to this Article VIII and that the Company will continue defend all claims
associated with such litigation. In the event the Stockholder Agent is named as
a party in the IPO Litigation in its role as such, the Company will defend the
Stockholder Agent against all claims made against it for so long as it incurs no
incremental cost associated with such defense or such incremental cost is paid
by the Stockholder Agent.
(c) Indemnity Claims. A claim for indemnification for any matter
not involving a third-party claim may be asserted by notice to the party from
whom indemnification is sought (or the Stockholder Agent, as applicable)
pursuant to the terms and conditions set forth in the Escrow Agreement.
(d) Limitation on Indemnification.
(i) Except as provided below, the indemnification
provisions of Section 8.2 shall be the exclusive remedy for any member of the
Acquiror Group for Damages arising from the IPO Litigation or for a breach of
any representation, warranty or covenant by the Company in this Agreement
related to the IPO Litigation and shall be in lieu of any rights any member of
the Acquiror Group may have under law or in equity with respect to any such
breaches or otherwise. Any and all Damages that members of the Acquiror Group
may have against the Company or the Company Stockholders related to the IPO
Litigation, in the aggregate, shall be limited to and payable only up to the
limit of the Indemnity Escrow Amount and the Acquiror Group shall have no other
recourse for any such claims, actions or losses, whatsoever, in excess thereof.
The foregoing does not release the officers and directors of the Company,
individually, for any actions against such officers and directors for fraud.
(ii) Upon making any payments to any member of the
Acquiror Group for any indemnification claim pursuant to Section 8.2, the
Company Stockholders shall be subrogated, to the extent of such payment to any
member of the Acquiror Group, to any rights the Surviving Corporation may have
against third parties with respect to the subject matter underlying such
indemnification claim.
Section 8.3 Indemnity Escrow Account. The Indemnity Escrow Amount
shall be maintained in the escrow account established pursuant to the Escrow
Agreement for the purpose of satisfying claims by any member of the Acquiror
Group for indemnification under this Article VIII. Upon expiration of the Escrow
Period, and subject to the terms of this Agreement and the Escrow Agreement, the
Escrow Agent shall deliver or cause to be delivered to the Company Stockholders
the balance, if any, remaining in the escrow account. If, upon expiration of the
Escrow Period, Acquiror or any member of the Acquiror Group shall have asserted
a claim for indemnity in accordance with this Article VIII and such claim is
pending or unresolved at the time of such expiration, the Escrow Agent shall
retain in escrow an amount of cash equal to the value of the asserted claim
until such matter is resolved.
Section 8.4 Further Assurances. In case at any time after the Closing
any further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, at the sole cost and expense of the
40
requesting party (unless the requesting party is entitled to indemnification
therefor under this Article VIII).
IX.
GENERAL PROVISIONS
Section 9.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given on the day of delivery when
delivered personally or sent via facsimile (receipt confirmed) or one business
day after being delivered by an overnight courier to the parties at the
following addresses or facsimile numbers or at such other address for a party or
facsimile number as shall be specified by like notice):
If to Acquiror or Parent, to:
Open Text Corporation
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: General Counsel
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxxx Xxxxx + Xxxxxx LLP
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
U.S.A.
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to the Company, to:
Eloquent, Inc.
0000 X. Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000 X.X.X.
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
41
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
U.S.A.
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to the Stockholder Agent, to:
White & Xxx LLP
000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
X.X.X.
Attention: Xxxxx Xxx, Esq.
Facsimile No.: (000) 000-0000
Section 9.2 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. 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. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
Section 9.3 Definitions. For purposes of this Agreement:
(a) "Action" or "Proceeding" means any action, claim, suit,
proceeding, arbitration, order, inquiry, hearing, assessment with respect to
fines or penalties or litigation (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Entity.
(b) "Affiliate" shall have the meaning set forth in Rule 405 under
the Securities Act.
(c) "Affiliated Person" means (i) any holder of 5% or more of the
Company Common Stock, (ii) any director, officer or senior executive of the
Company or any of its Subsidiaries, (iii) any person, firm or corporation that
directly or indirectly controls, is controlled by, or is under common control
with, any of the Company or any of its Subsidiaries or (iv) any member of the
immediate family or any of such persons.
(d) "Company Plan" means a "pension plan" (as defined in Section
3(2) of ERISA (other than a Company Multiemployer Plan)), a "welfare plan" (as
defined in Section 3(1) of ERISA), or any other written or oral bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, restricted stock, stock appreciation
right, holiday pay, vacation, severance, medical, dental, vision, disability,
death benefit, sick leave, fringe benefit, personnel policy, insurance or other
plan, arrangement or understanding, in each case established or maintained by
the Company or any of its Subsidiaries or ERISA Affiliates or as to which the
Company or any of its Subsidiaries or ERISA Affiliates has contributed or
otherwise may have any liability.
42
(e) "Company Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which the Company or any of its
Subsidiaries or ERISA Affiliates is or has been obligated to contribute or
otherwise may have any liability.
(f) "Company Stockholders" means all holders of record of the
Shares.
(g) "Copyrights" means all copyrightable works, all copyrights and
all applications, registrations and renewals in connection therewith and all
applications, registrations and renewals in connection therewith.
(h) "Environmental Law" means any law currently in effect, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, or common law, relating to
pollution or protection of the environment, health or safety or natural
resources, including those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous Substances.
(i) "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law.
(j) "ERISA Affiliate" means any trade or business (whether or not
incorporated) that would be considered a single employer with the Company
pursuant to Section 414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to Section 4001(b) of ERISA and the
regulations promulgated thereunder.
(k) "Hazardous Substances" means (A) petroleum and petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (B) any other
chemicals, materials or substances regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law;
(l) "Intellectual Property" means all (i) Patents; (ii) Trademarks,
(iii) Copyrights; (iv) Trade Secrets and Other Proprietary Information; and (v)
any similar or equivalent rights to any of the foregoing anywhere in the world.
(m) "Knowledge of the Company" means the actual knowledge of the
directors and executive officers of the Company after due inquiry.
(n) "Material Adverse Change" or "Material Adverse Effect" means,
when used with respect to the Company or Acquiror, as the case may be, any
change, event, occurrence, state of facts or effect that is or could reasonably
be expected to be materially adverse to the business, operations, assets
(whether tangible or intangible), liabilities, customer or supplier
relationships, earnings or results of operations or the business prospects and
condition (financial or otherwise), of the Company and its Subsidiaries, taken
as a whole, or Acquiror, taken as a whole, as the case may be, or a material
adverse effect on the ability of such party to perform its obligations under
this Agreement or on the ability of the party to consummate the Merger and the
transactions contemplated hereby without material deviation from the terms,
conditions and time frame with and in which such actions would otherwise be
consummated in the absence of such change, occurrence, state of facts or effect;
provided, that "Material Adverse Change" and "Material
43
Adverse Effect" shall not include any change, event, occurrence, state of facts
or effect relating to (i) the economy or securities markets of the United States
or any other region in general, (ii) the software industry in general or (iii)
the implementation of the Performance Plan in accordance with the terms thereof;
other than in the case where the effects of (i) and (ii) on the Company or the
Acquiror, as the case may be, are materially disproportionate to the effects on
the other entities operating in those markets or the software industry.
"Material Adverse Change" or "Material Adverse Effect" means, when used with
respect to the IPO Litigation, any change, event, occurrence, state of facts or
effect that has resulted or could reasonably be expected to result in any amount
being payable by Acquiror or the Company with respect to the IPO Litigation
(other than the retention under the D&O Policies) that is not covered by the D&O
Policies.
(o) "Net Cash" and "Net Cash at Closing" mean the difference
between (1) the sum of the Company's cash and cash equivalents and accounts
receivable, net of customary reserves for doubtful accounts, and (2) the sum of
the Company's (i) trade accounts payable, (ii) accrued liabilities with respect
to attorneys' fees, investment banker fees, accountants' fees, consulting fees,
rent, return of the Company's New York sublease deposit, employee compensation
(including wages, bonuses, commissions, severance and accrued vacation),
settlement of the Company's lease obligations, purchase of directors' and
officers' insurance (including "tail" insurance to be in effect for not more
than three (3) years after the Closing) and taxes and (iii) other liabilities
that are accrued or required to be accrued associated with the business
operations of the Company excluding warranty accruals, deferred revenues and
other reasonable accruals that do not represent an obligation to make cash
payments; provided, however, that "Net Cash" shall not be less than zero and
shall be calculated as of the earlier to occur of March 31, 2003 and the close
of business five (5) business days prior to the Closing, and that "Net Cash at
Closing" shall be calculated at the close of business five (5) business days
prior to the Closing; and provided, further, that in each case the Company shall
accrue all liabilities for investment banking fees, attorneys' fees,
accountants' fees and for the purchase of directors' and officers' insurance and
other expenses associated with the Closing of the transaction contemplated by
this Agreement that the Company reasonably expects to accrue between said
calculation date and the Closing. An illustration of the manner of calculation
of Net Cash is included in Section 9.3(o) of the Company Letter.
(p) "Net Cash Shortfall" means the positive difference, if any,
between (1) Four Million Three Hundred Thousand Dollars ($4,300,000) and (2) Net
Cash.
(q) "Patents" means any and all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof.
(r) "Software" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (iii) descriptions, schematics, flow-charts and other work product
used to design, plan, organize and develop any of the foregoing, and (iv) all
documentation, including user manuals and training materials, relating to any of
the foregoing.
44
(s) "Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other legal entity of which Acquiror or the
Company, as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other legal entity.
(t) "Superior Proposal" means a bona fide written Takeover Proposal
not solicited in violation of Section 4.2 with terms that a majority of the
disinterested members of the Board of Directors of the Company determines, at a
duly constituted meeting of the Board of Directors or by unanimous written
consent, in its reasonable good faith judgment to be more favorable to the
Company's Stockholders than this Agreement and the Merger (after consultation
with the Company's outside legal counsel and independent financial advisor that
the value of the consideration provided for in such proposal exceeds the value
of the consideration provided for in the Merger) and for which financing, to the
extent required, is then committed or, in the reasonable good faith judgment of
a majority of such disinterested members, as expressed in a resolution adopted
at a duly constituted meeting of such members (after consultation with the
Company's independent financial advisor), is reasonably capable of being
obtained by such third party.
(u) "Takeover Proposal" means any proposal or offer for (i) a
merger or other business combination involving the Company or any of its
Subsidiaries where the stockholders of the Company immediately prior to such
merger or business combination would own, immediately following such merger or
business combination, less than eighty percent (80%) of the equity securities of
the surviving entity; or (ii) an acquisition in any manner, directly or
indirectly, of greater than twenty percent (20%) of the equity interests in,
greater than twenty percent (20%) of voting securities of, or a material portion
of the assets of the Company and its Subsidiaries, taken as a whole; or (iii)
any other transaction, the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the transaction contemplated
by this Agreement or that could reasonably be expected to dilute or adversely
affect materially the benefits to Acquiror of the transaction contemplated by
this Agreement, other than the transactions contemplated by this Agreement.
(v) "Taxes" means any federal, state, local, foreign or provincial
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or added minimum, custom, duty, ad
valorem, value-added, transfer or excise tax, or other tax of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Entity.
(w) "Tax Return" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to any Tax,
including any information return, claim for refund, amended return or
declaration of estimated Tax.
(x) "Termination Fee" means an amount equal to the sum of (A) five
percent (5%) of the Cash Consideration and (B) if Company consummates a
transaction contemplated by a Takeover Proposal within nine (9) months after the
termination of this Agreement, the product obtained by multiplying (i) thirteen
percent (13%) by (ii) the excess consideration received by
45
Company or the Company Stockholders, as applicable, in said transaction over the
Cash Consideration.
(y) "Trade Secrets and Other Proprietary Information" means (i) any
and all trade secrets and confidential business information (including without
limitation, product specifications, data, know-how, inventions and ideas, past,
current and planned research and development, customer lists, current and
anticipated customer requirements, price lists, market studies, business plans,
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names of key personnel
and personnel training and techniques and materials), however documented; (ii)
proprietary computer software and programs (including object code and source
code) and other proprietary rights and copies and tangible embodiments thereof
(in whatever form or medium); (iii) database technologies, systems, structures
and architectures (and related processes, formulae, compositions, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information) and any other related information, however, documented; (iv)
any and all notes, analysis, compilations, studies, summaries, and other
material containing or based, in whole or in part, on any information included
in the foregoing, however documented; (v) all industrial designs and any
registrations and applications therefor; and (vi) all databases and data
collections and all rights therein.
(z) "Trademarks" means any and all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith.
Section 9.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement, except for the provisions of Article VIII
and Section 5.10, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Northern District of
California or the California state courts located in the City and County of San
Francisco in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such courts (and waives any objection based on forum non conveniens or
any other objection to venue therein). Each party hereto waives any right to a
trial by jury in connection with any such action, suit or proceeding.
Section 9.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by Company (whether by
operation of law or otherwise)
46
without the prior written consent of the Acquiror, not to be unreasonably
conditioned, withheld or delayed. Parent, without the consent of the Company, is
expressly permitted to assign this Agreement and the rights, interests and
obligations hereunder to Open Text, Inc. and to transfer its ownership interests
in Acquiror to Open Text, Inc.
Section 9.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement may be
consummated as originally contemplated to the fullest extent possible.
Section 9.9 Enforcement of this Agreement. 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 wording or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof.
Section 9.10 Attorneys' Fees. In the event of any arbitration or
litigation between the parties, whether based on contract, tort or other cause
of action, in any way related to this Agreement, the non-prevailing party shall
pay to the prevailing party all reasonable attorneys' fees and costs and
expenses of any type, without restriction by statute, court rule or otherwise,
incurred by the prevailing party in connection with any action or proceeding
(including arbitration proceedings, any appeals and the enforcement of any
judgment or award), whether or not the dispute is prosecuted to final judgment.
The "prevailing party" shall be determined based on an assessment of which
party's major arguments or positions taken in the action or proceeding could be
fairly said to have prevailed (whether by compromise, settlement, abandonment by
the other party of its claim or defense, final decision, after any appeals, or
otherwise) over the other party's major arguments or positions on major disputed
issues. Any fees and costs incurred in enforcing a judgment shall be recoverable
separately from any other amount included in the judgment and shall survive and
not be merged in the judgment.
IN WITNESS WHEREOF, Parent, Acquiror and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
1220 ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
______________________________
Name: Xxxxxxx Xxxxxxxx
______________________________
Title: Secretary
______________________________
47
ELOQUENT, INC.
By: /s/ Xxxxxxxx X. Xxxx
______________________________
Name: Xxxxxxxx X. Xxxx
Title: Chief Executive Officer
OPEN TEXT CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
______________________________
Name: Xxxxxxx Xxxxxxxx
______________________________
Title: Secretary
______________________________
48
EXHIBIT A
Stockholder Agreement
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of January __, 2003 (this "Agreement"),
by the undersigned stockholder (the "Stockholder") of Eloquent, Inc., a Delaware
corporation (the "Company"), for the benefit of Open Text, Inc., a Illinois
corporation ("Parent") and 1220 Acquisition Corporation, a Delaware corporation
("Acquiror").
RECITALS
WHEREAS, Parent, Acquiror and the Company are entering into the
Agreement and Plan of Merger, dated as of January __, 2003 (the "Merger
Agreement"), which provides (subject to the conditions set forth therein) for
the merger of Acquiror with and into the Company;
WHEREAS, the Stockholder is the record owner and is the beneficial
owner within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934
(the "Beneficial Owner") of that number of shares of common stock, par value
$.001 per share, of the Company ("Company Common Stock"), appearing on the
signature page hereof (such shares of Company Common Stock, together with any
other shares of capital stock of the Company acquired by such Stockholder after
the date hereof and during the term of this Agreement, being collectively
referred to herein as the "Subject Shares");
WHEREAS, as a condition to its willingness to enter into this
Agreement, Parent and Acquiror have required that the Board of Directors of the
Company, and in order to induce Parent and Acquiror to enter into this
Agreement, the Board of Directors of the Company has approved this Agreement;
and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent and Acquiror have required that the Stockholder agree, and in
order to induce Parent and Acquiror to enter into the Merger Agreement the
Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein and subject to the prior approval of
this Agreement by the Board of Directors of the Company, the Stockholder agrees
as follows:
1. Covenants of Stockholder. Until the termination of this
Agreement in accordance with Section 4:
(a) The Stockholder shall attend the Stockholder Meeting,
in person or by proxy, and at the Stockholder Meeting (or at any
adjournment thereof) or in any other circumstances upon which a vote,
consent or other approval with respect to the Merger and the Merger
Agreement is sought, the Stockholder shall vote (or cause to be voted)
the Subject Shares in favor of the Merger, the adoption of the Merger
Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at
any adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other
1
approval is sought, the Stockholder shall vote (or cause to be voted)
the Subject Shares against (i) any merger agreement or merger (other
than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any of
its Subsidiaries or any other Takeover Proposal or (ii) any amendment
of the Company's Certificate of Incorporation, as amended, or Amended
and Restated Bylaws or other proposal or transaction involving the
Company or any of its Subsidiaries, which amendment or other proposal
or transaction would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement or change in any
manner the voting rights of any class of capital stock of the Company.
The Stockholder further agrees not to commit or agree to take any
action inconsistent with the foregoing.
(c) The Stockholder agrees not to, directly or
indirectly, (i) sell, transfer, pledge, assign or otherwise dispose of
(including by gift) (collectively, "Transfer"), or enter into any
contract, option or other arrangement (including any profit-sharing
arrangement) with respect to the Transfer of the Subject Shares to any
person; (ii) enter into any voting arrangement, whether by proxy,
voting agreement or otherwise, in relation to the Subject Shares, and
agrees not to commit or agree to take any of the foregoing actions; or
(iii) take any action that would reasonably be expected to make any of
its representations or warranties contained herein untrue or incorrect
or have the effect of impairing the ability of such Stockholder to
perform such Stockholder's obligations under this Agreement or
preventing or delaying the consummation of any of the transactions
contemplated hereby. Notwithstanding the foregoing, this Agreement
shall not prohibit a Transfer of Company Common Stock by Stockholder
(i) to any member of his immediate family, or to a trust for the
benefit of Stockholder or any member of his immediate family; (ii) on
the death of Stockholder; or (iii) if Stockholder is a partnership or
limited liability company, to one or more partners or members of
Stockholder or to an affiliated corporation under common control with
Stockholder; provided, however, that a Transfer referred to in this
sentence shall be permitted only if, as a precondition to such
Transfer, the transferee agrees in a writing, reasonably satisfactory
in form and substance to Parent and Acquiror, to be bound by the terms
of this Agreement.
(d) The Stockholder shall not, nor shall the Stockholder
authorize any investment banker, attorney or other advisor or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to the Company or any Subsidiary in connection with, or take
any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to, any
Takeover Proposal.
(e) The Stockholder shall use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with Acquiror in doing, all things
reasonably necessary, proper or advisable to support and to consummate
and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by the Merger Agreement.
2
(f) In the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares
of capital stock or other securities of the Company on, of or affecting
the Shares or the like or any other action that would have the effect
of changing a Stockholder's ownership of the Company's capital stock or
other securities or (ii) a Stockholder becomes the beneficial owner of
any additional Shares or other securities of the Company, then the
terms of this Agreement will apply to the shares of capital stock held
by the Stockholder immediately following the effectiveness of the
events described in clause (i) or the Stockholder becoming the
beneficial owner thereof, as described in clause (ii), as though they
were Subject Shares hereunder.
(g) The Stockholder agrees to promptly notify Acquiror in
writing of the nature and amount of any acquisition, or any other
transaction which has the effect of increasing the number of shares
held directly or beneficially by such Stockholder, of any voting
securities of the Company acquired by such Stockholder after the date
hereof.
2. Irrevocable Proxy.
(a) Grant of Proxy. Stockholder hereby appoints Acquiror
and any designee of Acquiror, each of them individually, Stockholder's
proxy and attorney-in-fact, with full power of substitution and
resubstitution, to vote or act by written consent with respect to all
of the Subject Shares which it has the right to vote (i) in accordance
with Section 1 hereof and (ii) to sign its name (as a stockholder) to
any consent, certificate or other document relating to the Company that
the law of the State of Delaware may permit or require in connection
with any matter referred to in Section 1. This proxy is given to secure
the performance of the duties of Stockholder under this Agreement and
its existence will not be deemed to relieve Stockholder of its
obligations under Section 1. Stockholder affirms that this proxy is
coupled with an interest and is irrevocable (to the fullest extent
permitted by law) until termination of this Agreement pursuant to
Section 4, whereupon such proxy and power of attorney shall
automatically terminate. Stockholder will take such further action or
execute such other instruments as may be reasonably necessary to
effectuate the intent of this proxy. For Subject Shares as to which
Stockholder is the beneficial but not the record owner, Stockholder
will use reasonable best efforts to cause any record owner of such
Subject Shares to grant to Acquiror a proxy to the same effect as that
contained herein.
(b) Other Proxies Revoked. Stockholder represents that
any proxy heretofore given in respect of the Subject Shares is not
irrevocable, and hereby revokes any and all such proxies.
3. Representations and Warranties. The Stockholder represents and
warrants to Acquiror as follows:
(a) As of the date of this Agreement: (a) the Stockholder
is the record owner of, and has good and marketable title to, the
number of Subject Shares set forth under the heading "Subject Shares
Held of Record" on the signature page hereof; and (b) Stockholder is
the Beneficial Owner of the number of Subject Shares set forth under
the heading "Additional Subject Shares Beneficially Owned" on the
signature page hereof. The Stockholder does not own, of record or
beneficially, any shares of capital stock of the
3
Company other than the Subject Shares. The Stockholder has the sole
right to vote, and the sole power of disposition, with respect to the
Subject Shares set forth under the heading "Subject Shares Held of
Record." None of the Subject Shares is subject to any voting trust,
proxy or other agreement, arrangement or restriction with respect to
the voting or disposition of such Subject Shares, except as
contemplated by this Agreement.
(b) This Agreement has been duly executed and delivered
by the Stockholder. Assuming the due authorization, execution and
delivery of this Agreement by Acquiror, this Agreement constitutes the
valid and binding agreement of the Stockholder enforceable against the
Stockholder in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief
of debtors, and (ii) rules of laws governing specific performance,
injunctive relief and other equitable relief. The execution and
delivery of this Agreement by the Stockholder does not and will not
conflict with any agreement, order or other instrument binding upon the
Stockholder, nor require any regulatory filing or approval.
(c) The execution and delivery of this Agreement do not,
and, subject to compliance with the HSR Act and appropriate filings
under securities laws (which each Stockholder agrees to make promptly),
to the extent applicable, the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, result in a violation or breach of, or constitute a
default (or an event that, with notice or lapse of time or both, would
result in a default) or give rise to any right of termination,
amendment, cancellation, notice or acceleration under, (i) the
Stockholder's certificate of incorporation, certificate of limited
partnership, articles of organization, operating agreement, partnership
agreement or similar constituent documents, (ii) any material contract,
commitment, agreement, understanding, arrangement or restriction of any
kind to which the Stockholder is a party or by which the Stockholder is
bound, (iii) any injunction judgment, writ, decree, order or ruling
applicable to the Stockholder or (iv) any law, statute, rule or
regulation applicable to the Stockholder; except in the case of clauses
(ii) and (iii) for violations, breaches or defaults that would not (1)
impair the ability of the Stockholder to perform its obligations under
this Agreement or (2) prevent or delay the consummation of any of the
transactions contemplated hereby.
(d) Except as set forth in Section 3.28 of the Merger
Agreement, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement or the Merger Agreement
based upon arrangements made by or on behalf of the Stockholder that is
or will be payable by the Company or any of its Subsidiaries.
4. Termination. The obligations of the Stockholder hereunder shall
terminate on the earlier to occur of (i) the termination of the Merger Agreement
pursuant to Section 7.1 thereof and (ii) the Effective Time. Notwithstanding
anything to the contrary contained in this Agreement, if this Agreement is
terminated for any reason, Sections 7, 8, 9, 10, 11 and 12 and this Section 4
will survive any termination of this Agreement indefinitely.
5. Further Assurances. The Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other
4
instruments as Acquiror may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
6. Successors, Assigns and Transferees Bound. Any successor,
assignee or transferee (including a successor, assignee or transferee as a
result of the death of the Stockholder, such as an executor or heir) shall be
bound by the terms hereof, and the Stockholder shall take any and all actions
necessary to obtain the written confirmation from such successor, assignee or
transferee that it is bound by the terms hereof.
7. Remedies. The Stockholder acknowledges that money damages would
be both incalculable and an insufficient remedy for any breach of this Agreement
by it, and that any such breach would cause Acquiror irreparable harm.
Accordingly, the Stockholder agrees that in the event of any breach or
threatened breach of this Agreement, Acquiror, in addition to any other remedies
at law or in equity it may have, shall be entitled, without the requirement of
posting a bond or other security, to equitable relief, including injunctive
relief and specific performance.
8. Severability. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.
9. Amendment. This Agreement may be amended only by means of a
written instrument executed and delivered by both the Stockholder and Acquiror.
10. Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of California or the California state courts located in the City and
County of San Francisco in any action, suit or proceeding arising in connection
with this Agreement, and agrees that any such action, suit or proceeding shall
be brought only in such courts (and waives any objection based on forum non
conveniens or any other objection to venue therein). Each party hereto waives
any right to a trial by jury in connection with any such action, suit or
proceeding.
11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
12. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or if sent by
telex or telecopier (and also confirmed in writing) to the person at the address
set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
(a) if to Parent or Acquiror, to:
1220 Acquisition Corporation
Attention: General Counsel
Facsimile No.: (000) 000-0000
5
with copies to:
Xxxxxxx Xxxxx + Xxxxxx LLP
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile No.: 000-000-0000
(b) if to the Stockholder to:
____________________________
____________________________
____________________________
____________________________
Attention: ________________
Facsimile No.: ____________
13. Capitalized Terms. Capitalized terms used in this Agreement
that are not defined herein shall have such meanings as set forth in the Merger
Agreement.
14. Counterparts. For the convenience of the parties, this
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
15. No Limitation on Actions of the Stockholder as Director.
Notwithstanding anything to the contrary in this Agreement, nothing in this
Agreement is intended or shall be construed to require the Stockholder to take
or in any way limit any action that the Stockholder may take to discharge the
Stockholder's fiduciary duties as a director of the Company, including but not
limited to the right to vote for or support a Superior Proposal in accordance
with the terms of the Merger Agreement.
6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
_________________________________
Name:
NUMBER OF SUBJECT ADDITIONAL SUBJECT
SHARES HELD OF RECORD SHARES BENEFICIALLY OWNED
OPEN TEXT, INC.
By: ____________________________
Name:
Title:
1220 ACQUISITION CORPORATION
By: ____________________________
Name:
Title:
Approved For Purposes of Section 203 of the Delaware General Corporation Law:
ELOQUENT, INC.
By: ____________________________
Name:
Title: Chairman
7
EXHIBIT B
Escrow Agreement
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as of
____________, 2003 the "Effective Date"), by and among Open Text, Inc., an
Illinois corporation ("Parent"), White & Xxx LLP, a California limited liability
partnership ("Stockholder Agent"), as agent for the stockholders immediately
prior to the Effective Time (the "Stockholders") of Eloquent, Inc., a Delaware
corporation ("Target"), and U. S. Bank, N.A., (the "Escrow Agent").
RECITALS
A. Parent, 1220 Acquisition Corporation, a Delaware corporation
that is Parent's wholly-owned subsidiary ("Acquiror"), and Target have entered
into an Agreement and Plan of Merger dated as of January __, 2003 (the "Merger
Agreement"), pursuant to which Acquiror will be merged with and into Target,
which will be the surviving corporation (the "Surviving Corporation").
B. Article VIII of the Merger Agreement, a copy of which is
attached hereto as Exhibit A, provides that an escrow account will be
established to satisfy indemnification obligations in favor of the Acquiror
Group under the Merger Agreement. Additionally, Sections 1.7(b) and 1.7(d),
respectively, of the Merger Agreement provide that the escrow account, under
specified circumstances, will be available to satisfy claims for indemnification
in favor of the Acquiror Group and the Stockholder Agent in connection with,
arising out of, resulting from or incident to actions or inactions of the
Stockholder Agent.
C. The parties hereto desire to establish the terms and conditions
pursuant to which such escrow account will be established and maintained.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Defined Terms; References to "Article VIII". Capitalized terms
used in this Agreement and not otherwise defined shall have the meanings given
them in the Merger Agreement. All references herein to "Article VIII" shall mean
the copy of Article VIII of the Merger Agreement that is attached hereto as
Exhibit A. Escrow Agent shall be entitled to rely solely upon Exhibit A as the
full and correct statement of the provisions of the Merger Agreement.
2. Escrow and Indemnification.
(a) Escrow Fund. Upon consummation of the Closing, Parent
shall deposit with the Escrow Agent an amount equal to One Million Dollars
($1,000,000), such deposit, together with all interest accrued thereon, to
constitute an escrow fund (the "Escrow Fund"). The Escrow Fund shall be held as
a trust fund and shall not be subject to any lien, attachment, trustee process
or any other judicial process of any creditor of any party hereto. The Escrow
Agent agrees to accept delivery of the Escrow Fund and to hold the Escrow Fund
in an escrow account (the "Escrow Account") subject to the terms and conditions
of this Agreement.
1
(b) Acquiror Group Indemnification. The Escrow Fund shall
be used to indemnify and hold harmless the Acquiror Group from and against
Damages in accordance with the terms of Article VIII and in the manner provided
in this Agreement. Subject to first fulfilling any claims for Damages under
Article VIII, the Escrow Fund shall be used to indemnify and hold harmless the
Acquiror Group from and against Damages in accordance with the terms of Section
1.7(b) of the Merger Agreement and in the manner provided in this Agreement.
(c) Stockholder Agent Indemnification. Subject to first
fulfilling any claims for Damages under Article VIII and Section 1.7(b) of the
Merger Agreement, the Escrow Fund shall be used to indemnify and hold harmless
the Stockholder Agent from and against Damages in accordance with the terms of
Section 1.7(d) of the Merger Agreement and in the manner provided in this
Agreement.
(d) Investments. The Escrow Agent shall invest the cash
held in the Escrow Fund in a tax-exempt interest-bearing account or tax-exempt
money market instruments in accordance with instructions from Parent and the
Stockholder Agent. Any interest payable on the funds held in the Escrow Fund
shall be added to the Escrow Fund until the Escrow Fund is terminated. Parent's
tax identification number shall be used for any filings related to the Escrow
Fund. To the extent that any portion of the interest accrued on the Escrow Fund
is subject to taxes despite the intended tax-exempt investment of the Escrow
Fund, Parent shall be entitled, in priority to any payment other than the
payment of escrow fees under Section 5, to a payment from the Escrow Fund equal
to the amount of taxable interest multiplied by the highest marginal combined
federal and state income tax rates (which will be deemed equal to 44% for
purposes of this Agreement).
(e) Transferability. The interests of the Stockholders in
the Escrow Fund shall not be assignable or transferable, other than by operation
of law. Notice of any such assignment or transfer by operation of law shall be
given to the Escrow Agent, Parent, and the Stockholder Agent, and no such
assignment or transfer shall be valid until such notice is given.
3. Administration of Escrow Account. The Escrow Agent shall
administer the Escrow Account as follows:
(a) Upon receipt of a written demand for payment
("Demand") from the Escrow Account signed by an officer of Parent or by
Stockholder Agent (as the case may be and hereinafter referred to as the
"Demanding Party"), the Escrow Agent shall, for a period of 20 calendar days
after such receipt, make no delivery of money pursuant to the Demand unless the
Escrow Agent shall have received written authorization from the other party (the
"Other Party") to make such delivery. The Demanding Party shall send a copy of
the Demand to the Other Party at the same time that it sends the Demand to the
Escrow Agent.
(b) If the Other Party does not deliver to the Escrow
Agent within such 20-day period a written objection to the claim, then upon the
expiration of such 20-day period, the Escrow Agent shall deliver to Demanding
Party the amount requested in the Demand in accordance with the Demand.
(c) If the Other Party does deliver to the Escrow Agent
within such 20-day period a written objection to the claim, then the Escrow
Agent shall make no delivery of money
2
pursuant to the Demand until the Escrow Agent shall have received (i) written
authorization executed by both Parent and the Stockholder Agent directing
delivery of money or (ii) a copy of a final non-appealable order of a court of
competent jurisdiction directing delivery of money together with, at the written
request of Escrow Agent, a legal opinion by counsel for the party presenting the
order that the order is final and non-appealable, and upon receipt of such
authorization or a copy of such order, the Escrow Agent shall make delivery in
accordance with the instructions contained in such authorization or order.
Escrow Agent shall act on any such court order and accompanying legal opinion
(if any) without further question.
(d) In delivering any funds to Parent or Stockholder
Agent under this Section 3, the Escrow Agent shall be entitled to rely entirely
on the procedures specified herein and upon any Demands and written
authorizations received by Escrow Agent as described in such procedures. Escrow
Agent shall not release any escrow funds to the Stockholders except in
accordance with Section 4, below.
4. Release of Escrow Fund.
(a) At such time as either the Parent or the Stockholder
Agent reasonably believes that the Escrow Period has terminated, either the
Parent or the Stockholder Agent may send a written notice ("Termination Notice")
to the Escrow Agent (with a copy to the other party) informing Escrow Agent of
the date of the termination of the Escrow Period and instructing Escrow Agent to
disburse the funds as provided in Section 4(c). If Parent sends the Termination
Notice it may direct Escrow Agent to retain in the Escrow Fund an amount of cash
equal to the value of unresolved but previously asserted claims under Article
VIII or Section 1.7(b) of the Merger Agreement. If Stockholder Agent sends the
Termination Notice it may direct Escrow Agent to retain in the Escrow Fund an
amount of cash equal to value of unresolved but previously asserted claims under
Section 1.7(d) of the Merger Agreement.
(b) The Escrow Agent shall, for a period of 20 calendar
days after receipt of the Termination Notice, not disburse the funds until it
has received written authorization from the party that did not generate the
Termination Notice. If the other party does not deliver to the Escrow Agent
within such 20-day period a written objection, then upon the expiration of such
20-day period, the Escrow Agent shall disburse the funds to the Stockholders as
provided in Section 4(c). If the other party does deliver to the Escrow Agent
within such 20-day period a written objection, then the Escrow Agent shall not
disburse funds until the Escrow Agent shall have received (i) written
authorization executed by both parties or (ii) a copy of a final non-appealable
order of a court of competent jurisdiction directing delivery of money together
with, at the written request of Escrow Agent, a legal opinion by counsel for
party submitting the order that the order is final and non-appealable, and upon
receipt of such authorization or a copy of such order, the Escrow Agent shall
disburse funds to the Stockholders as provided in Section 4(c). Escrow Agent
shall act on any such court order and accompanying legal opinion (if any)
without further question.
(c) Any distribution of all or a portion of the Escrow
Fund to the Stockholders shall be made pro rata in proportion to the amounts
each Stockholder shall have been deemed to have contributed to the Escrow Fund,
in accordance with the following procedures: Prior to each distribution to be
made to Stockholders hereunder, Parent and the Stockholder Agent will deliver to
Escrow Agent a jointly executed list (a "Distribution List") setting forth (i)
the name and address of each Stockholder who is to participate in such
3
distribution, (ii) for each such Stockholder, the percentage of such
distribution to be delivered to such Stockholder, (iii) for each such
Stockholder who is a U.S. domestic Stockholder, such Stockholder's U.S. taxpayer
identification number and a Form W-9, and (iv) for each such Stockholder who is
a foreign person, a Form W-8. The Escrow Agent shall then make such distribution
to the Stockholders, in the percentages, specified in such Distribution List. In
releasing any funds to the Stockholders under this Section 4, the Escrow Agent
shall be entitled to rely entirely on the procedures specified herein and upon
any written instructions and Distribution List received by Escrow Agent as
described in such procedures.
(d) If only a portion of the Escrow Fund is distributed
to the Stockholders under this Section 4, the remaining portion of the Escrow
Fund will be distributed to Parent or to the Stockholders in accordance with the
provisions of Section 3 or Section 4, as the case may be.
5. Fees and Expenses.
(a) Upon execution of this Agreement and initial deposit
of the Escrow Fund, fees of $3,030 (comprising a one-time $2,000 acceptance fee,
a $1,000 annual administrative fee and a $30 incidental expense fee) will be
payable to the Escrow Agent. These fees will cover the first year of the escrow.
Thereafter, an annual administrative fee of $1,000 together with an annual
incidental expense fee of $30 will be payable at the commencement of the second
year of the escrow. A fee of $10 per disbursement by check or wire transfer
shall apply to each disbursement from the Escrow Fund. The foregoing fees are
fixed fees that are inclusive of all Escrow Agent's fees and any expenses
ordinarily incurred by Escrow Agent; Escrow Agent may charge additional fees in
connection with extraordinary services.
(b) The amounts payable to the Escrow Agent for the
services to be rendered by the Escrow Agent hereunder shall be paid from the
Escrow Fund and shall be a charge upon the Escrow Fund with priority over all
other disbursements to be made therefrom, and Escrow Agent shall be deemed to
have a lien on the Escrow Fund for payment of all such amounts.
6. Limitation of Escrow Agent's Liability.
(a) The Escrow Agent shall incur no liability with
respect to any action taken or suffered by it in reliance upon any notice,
direction, instruction, consent, statement or other documents believed by it to
be genuine and duly authorized, nor for other action or inaction except its own
willful misconduct or gross negligence. The Escrow Agent shall not be
responsible for the validity or sufficiency of this Agreement. In all questions
arising under this Agreement, the Escrow Agent may rely on the advice of
counsel, and for anything done, omitted or suffered in good faith by the Escrow
Agent based on such advice the Escrow Agent shall not be liable to anyone. The
Escrow Agent shall not be required to take any action hereunder involving any
expense unless the payment of such expense is made or provided for in a manner
reasonably satisfactory to it.
(b) Parent shall indemnify, defend and hold the Escrow
Agent harmless from and against any and all loss, damage, liability and expense,
including reasonable counsel fees (and including allocated costs of in-house
counsel) ("Escrow Agent Losses") that may be incurred by the Escrow Agent
hereunder as a consequence of Parent's actions. The Stockholders
4
shall severally indemnify, defend and hold the Escrow Agent harmless from and
against any and all Escrow Agent Losses that may be incurred by the Escrow Agent
hereunder as a consequence of actions of the Stockholder Agent or of the
Stockholders. Each of Parent and the Stockholders shall indemnify, defend and
hold the Escrow Agent harmless from and against one-half of any and all Escrow
Agent Losses arising out of or in connection with its acceptance of appointment
as Escrow Agent hereunder which are not a consequence of any action of any other
party hereto, except as caused by the Escrow Agent's willful misconduct or gross
negligence. The Stockholders' obligation to indemnify Escrow Agent under this
Section 6(b) for Escrow Agent Losses may be satisfied by use of the Escrow Fund
and shall be limited to the amounts therein, provided that any such use of the
Escrow Fund is subordinated to the satisfaction of all other claims for
indemnification for Damages under Article VIII, Section 1.7(b) and Section
1.7(d) of the Merger Agreement.
7. Controversies. If any controversy arises among the parties to
this Agreement concerning the subject matter of this Agreement, its terms or
conditions, Escrow Agent will not be required to resolve the controversy or to
take any action in connection with the controversy. Escrow Agent may hold all
documents and funds and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in Escrow Agent's discretion,
Escrow Agent may require, despite what may be set forth elsewhere in this
Agreement. In such event, Escrow Agent will not be liable for interest or
damage. Furthermore, Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and rights
among themselves. Escrow Agent is authorized to deposit with the clerk of the
court all documents and funds held in escrow, except all costs, expenses,
charges and reasonable attorney fees incurred by Escrow Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, Escrow Agent shall be fully released and discharged
of and from all obligations and liability imposed by the terms of this
Agreement.
8. Termination. This Agreement shall terminate upon the release
by the Escrow Agent of all of the Escrow Fund in accordance with this Agreement.
9. Notices. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is sent prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to Parent: Open Text, Inc.
c/o Open Text Corporation
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attn: General Counsel
5
With a copy to: Xxxxxxx Xxxxx + Xxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
If to Stockholder Agent: White & Xxx LLP
000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxx, Esq.
With a copy to: Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
If to the Escrow Agent: U.S. Bank, N.A.
Xxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall not be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered by
giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 9.
10. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
resignation to the parties to this Escrow Agreement, specifying not less than 60
days' prior written notice of the date when such resignation shall take effect.
Parent may appoint a successor Escrow Agent with the consent of the Stockholder
Agent, which shall not be unreasonably withheld. If, within such notice period,
Parent provides to the Escrow Agent written instructions with respect to the
appointment of a successor Escrow Agent and directions for the transfer of the
Escrow Fund then held by the Escrow Agent to such successor, the Escrow Agent
shall act in accordance with such instructions and promptly transfer the Escrow
Fund to such designated successor.
11. General.
(a) Governing Law: Assigns: Forum. This Agreement shall
be governed by and construed as a sealed instrument in accordance with the
internal laws of the State of California without regard to conflict-of-law
principles and shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns. The California state courts
of San Francisco County, California (or, if there is exclusive federal
jurisdiction, the United States District Court for the Northern District of
California) shall have exclusive
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jurisdiction and venue over any dispute arising out of this Agreement, and the
parties hereby consent to the jurisdiction and venue of such courts.
(b) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(c) Entire Agreement. This Agreement and the Exhibits
hereto constitute the entire understanding and agreement of the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements or understandings, written or oral, between the parties with respect
to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement shall be effective
unless in writing. No waiver by any party of any such condition or breach, in
any one instance, shall be deemed to be a further or continuing waiver of any
such condition or breach or a waiver of any other condition or breach of any
other provision contained herein.
(e) Amendment. This Agreement may be amended only with
the written consent of Parent, the Escrow Agent and the Stockholder Agent as
representatives of the Stockholders (or their duly designated successors).
(f) Attorneys Fees. In the event of any litigation or
arbitration between the parties respecting or in any way related to this
Agreement, whether based on contract, tort or other cause of action, the
prevailing party shall be entitled, in addition to all expenses, fees,
consultants' and expert witness fees, costs or damages, to reasonable attorneys
fees, whether or not such controversy was prosecuted to judgment. The
"prevailing party" shall be determined by the court or arbitrator before whom
the action was brought based upon an assessment of which party's major arguments
or positions taken in the suit or proceeding could fairly be said to have
prevailed over the other party's major arguments or positions on major disputed
issues in the court's or arbitrator's decision. Any attorneys fees and other
costs and expenses incurred by either party in enforcing a judgment in its favor
under this Agreement shall be recoverable separately from and in addition to any
other amount included in such judgment, and such attorneys fees obligation is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
PARENT
OPEN TEXT, INC.
By: _________________________________
Name: _________________________________
Title: _________________________________
STOCKHOLDER AGENT
WHITE & XXX LLP
By: _________________________________
Name: _________________________________
Title: _________________________________
ESCROW AGENT
U.S. BANK, N.A.
By: _________________________________
Name: _________________________________
Title: _________________________________
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
EXHIBIT C
IPO Litigation Undertaking
EXHIBIT C TO THE
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY __, 2003
IPO LITIGATION UNDERTAKING AGREEMENT
IPO LITIGATION UNDERTAKING AGREEMENT, dated as of ____________, 2003
(this "IPO Litigation Undertaking Agreement"), among Open Text, Inc., an
Illinois corporation ("Parent"), 1220 Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Acquiror"), Eloquent,
Inc., a Delaware corporation (the "Company"), and Xxxxxxxx X. Xxxx, an
individual, former chief executive officer, and a stockholder of the Company
("CAR").
W I T N E S S E T H:
WHEREAS, Parent, Acquiror and the Company are party to that certain
Agreement and Plan of Merger of even date hereof ("Merger Agreement"). Pursuant
to the terms of the Merger Agreement and in accordance with the General
Corporation Law of the State of Delaware, as amended, Acquiror will be merged
into the Company (the "Merger"). Following the Merger, the separate corporate
existence of Acquiror shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Acquiror in accordance with the Merger
Agreement and the General Corporation Law of the State of Delaware, as amended.
WHEREAS, in order to induce Parent and Acquiror to enter into the
Merger Agreement, CAR and other directors and officers of the Company and their
affiliates that are stockholders of the Company are each entering into a
stockholder agreement concurrently with the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
I.
THE MERGER AGREEMENT
Section 1.1 Condition Precedent to the Merger. Pursuant to Section
6.3(g) of the Merger Agreement, the obligations of Acquiror to effect the Merger
shall be subject to the execution and delivery to Acquiror, at or prior to the
Effective Time, of this IPO Litigation Undertaking Agreement by CAR.
Section 1.2 Inducement to Enter into Merger Agreement. In order to
induce Parent and Acquiror to enter into the Merger Agreement, CAR, as a
director, officer and stockholder in the Company, has agreed to enter into this
IPO Litigation Undertaking Agreement.
II.
THE IPO LITIGATION UNDERTAKING
Section 2.1 IPO Litigation Undertaking. Upon execution of this IPO
Litigation Undertaking Agreement, CAR agrees to fully cooperate with Parent and
Surviving Corporation in connection with any and all aspects of the IPO
Litigation, including, but not limited to: (a) executing any and all documents
as reasonably requested by Parent, Surviving Corporation or their respective
counsel; (b) making himself reasonably available to answer inquiries from
Parent, Surviving Corporation or their respective counsel; (c) traveling in
connection with the IPO Litigation as reasonably necessary at the request of
Parent, Surviving Corporation or their respective counsel; and (d) asserting and
prosecuting claims for coverage under the D&O Policies for all claims and
expenses related to the IPO Litigation (collectively, the "IPO Litigation
Undertaking").
Section 2.2 No Compensation; Reasonable Out-of-Pocket Expenses. CAR
will not be entitled to any payments from Parent or Surviving Corporation in
connection with his IPO Litigation Undertaking. CAR will, however, be entitled
to be reimbursed by the Surviving Corporation for all reasonable out-of-pocket
expenses (e.g., travel, lodging) incurred as a direct result of his IPO
Litigation Undertaking; provided, however, that CAR will not be entitled to any
reimbursement for any legal fees he might incur in satisfying his obligations
under this IPO Litigation Undertaking Agreement.
III.
NO EMPLOYMENT/NO LIMITATIONS TO MERGER AGREEMENT
Section 3.1 No Employment. The parties to this IPO Litigation
Undertaking Agreement expressly agree that the CAR, in connection with his IPO
Litigation Undertaking, is not intending to enter into any employment or
independent contractor relationship with the Acquiror or Surviving Corporation
and the obligations undertaken by CAR under this agreement shall not be
construed to constitute Parent, Surviving Corporation and CAR as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking. CAR shall have no power or authority, express or implied, to
represent, act for, or otherwise create or assume any obligation on behalf of
Acquiror or Surviving Corporation.
Section 3.2 No Limitation to Merger Agreement. The parties to this
IPO Litigation Undertaking Agreement have entered into this agreement solely to
delineate CAR's responsibility to cooperate and assist with the IPO Litigation
after the Merger and this IPO Litigation Undertaking Agreement is not intended
to limit or modify, in any way, any of the parties' rights and obligations under
the Merger Agreement.
IV.
GENERAL PROVISIONS
Section 4.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given on the day of delivery when
delivered personally or sent via facsimile (receipt confirmed) or one business
day after being delivered by an overnight courier to
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the parties at the following addresses or facsimile numbers or at such other
address for a party or facsimile number as shall be specified by like notice):
If to Acquiror, to:
Open Text, Inc.
c/o Open Text Corporation
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: General Counsel
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxxx Xxxxx + Xxxxxx LLP
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Surviving Corporation, to:
Eloquent, Inc.
0000 X. Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 9411
Xxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to CAR, to:
Xxxxxxxx X. Xxxx
c/o Eloquent, Inc.
0000 X. Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
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with a copy to:
Cooley Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 9411
Xxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Section 4.2 Interpretation. The headings contained in this IPO
Litigation Undertaking Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this IPO Litigation
Undertaking Agreement. Whenever the words "include," "includes" or "including"
are used in this IPO Litigation Undertaking Agreement, they shall be deemed to
be followed by the words "without limitation."
Section 4.3 Definitions. For purposes of this IPO Litigation
Undertaking Agreement:
(a) "D&O Policy" or "D&O Policies" shall have the same meaning
ascribed these terms in the Merger Agreement.
(b) "Effective Time" shall have the same meaning ascribed this
term in the Merger Agreement
(c) "IPO Litigation" shall have the same meaning ascribed this
term in the Merger Agreement.
Section 4.4 Counterparts. This IPO Litigation Undertaking Agreement
may be executed in counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
Section 4.5 Entire Agreement. This IPO Litigation Undertaking
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
CAR's agreement to cooperate with and lend assistance to the Surviving
Corporation with respect to the resolution of the IPO Litigation and the
prosecution of claims under the D&O Policies.
Section 4.6 Governing Law. This IPO Litigation Undertaking Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Each party hereby irrevocably submits
to the exclusive jurisdiction of the United States District Court for the
Northern District of California or the California state courts located in the
City and County of San Francisco in any action, suit or proceeding arising in
connection with this IPO Litigation Undertaking Agreement, and agrees that any
such action, suit or proceeding shall be brought only in such courts (and waives
any objection based on forum non conveniens or any other objection to venue
therein). Each party hereto waives any right to a trial by jury in connection
with any such action, suit or proceeding.
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Section 4.7 Assignment. Neither this IPO Litigation Undertaking
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by CAR.
Section 4.8 Severability. If any term or other provision of this IPO
Litigation Undertaking Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other terms, conditions and
provisions of this IPO Litigation Undertaking Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this IPO Litigation Undertaking Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this IPO
Litigation Undertaking Agreement may be consummated as originally contemplated
to the fullest extent possible.
Section 4.9 Enforcement of this Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this IPO Litigation Undertaking Agreement were not performed in accordance with
their specific wording or were otherwise breached. It is accordingly agreed that
the parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this IPO Litigation Undertaking Agreement and to enforce
specifically the terms and provisions hereof.
Section 4.10 Attorneys' Fees. In the event of any arbitration or
litigation between the parties, whether based on contract, tort or other cause
of action, in any way related to this IPO Litigation Undertaking Agreement, the
non-prevailing party shall pay to the prevailing party all reasonable attorneys'
fees and costs and expenses of any type, without restriction by statute, court
rule or otherwise, incurred by the prevailing party in connection with any
action or proceeding (including arbitration proceedings, any appeals and the
enforcement of any judgment or award), whether or not the dispute is litigated
or prosecuted to final judgment. The "prevailing party" shall be determined
based upon an assessment of which party's major arguments or positions taken in
the action or proceeding could fairly be said to have prevailed (whether by
compromise, settlement, abandonment by the other party of its claim or defense,
final decision, after any appeals, or otherwise) over the other party's major
arguments or positions on major disputed issues. Any fees and costs incurred in
enforcing a judgment shall be recoverable separately from any other amount
included in the judgment and shall survive and not be merged in the judgment.
[Signature Page Follows]
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IN WITNESS WHEREOF, Acquiror, the Surviving Corporation, and CAR have
caused this IPO Litigation Undertaking Agreement to be signed either
individually or by their respective officers or thereunto duly authorized all as
of the date first written above.
OPEN TEXT, INC. 1220 ACQUISITION CORPORATION
By: _________________________ By: _________________________
Name: _________________________ Name: _________________________
Title: _________________________ Title: _________________________
ELOQUENT, INC.
By: _________________________ By: _________________________
Name: Xxxxxxxx X. Xxxx Name: Xxxxxxxx X. Xxxx
Title: Chief Executive Officer
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