EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SKILLSOFT CORPORATION, BTF ACQUISITION CORP.,
AND
XXXXX00X0.XXX, INC.
December 6, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER............................................................................................. 1
1.1 The Merger................................................................................................ 1
1.2 The Closing............................................................................................... 1
1.3 Actions at the Closing.................................................................................... 2
1.4 Additional Action......................................................................................... 3
1.5 Conversion of Shares...................................................................................... 3
1.6 Dissenting Shares......................................................................................... 5
1.7 Fractional Shares......................................................................................... 6
1.8 Options and Warrants...................................................................................... 7
1.9 Escrow.................................................................................................... 8
1.10 Payment of Consideration under First Merger Agreement.................................................... 9
1.11 Articles of Organization and By-laws..................................................................... 9
1.12 No Further Rights........................................................................................ 9
1.13 Closing of Transfer Books................................................................................ 9
1.14 Waiver of Notice......................................................................................... 9
1.15 Tax Consequences........................................................................................ 10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................ 10
2.1 Organization, Qualification and Corporate Power.......................................................... 10
2.2 Capitalization........................................................................................... 11
2.3 Authorization of Transaction............................................................................. 12
2.4 Noncontravention......................................................................................... 12
2.5 Subsidiaries............................................................................................. 13
2.6 Financial Statements..................................................................................... 14
2.7 Absence of Certain Changes............................................................................... 15
2.8 Undisclosed Liabilities.................................................................................. 15
2.9 Tax Matters.............................................................................................. 15
2.10 Assets.................................................................................................. 17
2.11 Real Property........................................................................................... 17
2.12 Intellectual Property................................................................................... 18
2.13 Contracts............................................................................................... 20
2.14 Accounts Receivable..................................................................................... 22
2.15 Powers of Attorney...................................................................................... 22
PAGE
2.16 Insurance............................................................................................... 22
2.17 Litigation.............................................................................................. 23
2.18 Warranties.............................................................................................. 23
2.19 Employees............................................................................................... 23
2.20 Employee Benefits....................................................................................... 24
2.21 Environmental Matters................................................................................... 27
2.22 Legal Compliance........................................................................................ 28
2.23 Customers and Suppliers................................................................................. 29
2.24 Permits................................................................................................. 29
2.25 Certain Business Relationships With Affiliates.......................................................... 29
2.26 Brokers' Fees........................................................................................... 30
2.27 Books and Records....................................................................................... 30
2.28 Disclosure.............................................................................................. 30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY........................... 30
3.1 Organization, Qualification and Corporate Power.......................................................... 30
3.2 Capitalization........................................................................................... 31
3.3 Authorization of Transaction............................................................................. 31
3.4 Noncontravention......................................................................................... 32
3.5 Reports and Financial Statements......................................................................... 32
3.6 Absence of Material Adverse Change....................................................................... 33
3.7 Litigation............................................................................................... 33
3.8 Interim Operations of the Transitory Subsidiary.......................................................... 33
3.9 Brokers' Fees............................................................................................ 33
3.10 Disclosure.............................................................................................. 34
ARTICLE IV COVENANTS............................................................................................ 34
4.1 Closing Efforts.......................................................................................... 34
4.2 Governmental and Third-Party Notices and Consents........................................................ 34
4.3 Stockholder Approval..................................................................................... 34
4.4 Operation of Business.................................................................................... 35
4.5 Access to Information.................................................................................... 37
4.6 Exclusivity.............................................................................................. 38
4.7 Expenses................................................................................................. 39
4.8 Indemnification.......................................................................................... 39
4.9 Rule 145 Affiliates...................................................................................... 39
4.10 Listing of Merger Shares................................................................................ 40
PAGE
4.11 Continuity of Business Enterprise....................................................................... 40
4.12 Benefit Plans........................................................................................... 40
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER.................................................................. 41
5.1 Conditions to Each Party's Obligations................................................................... 41
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary..................................... 41
5.3 Conditions to Obligations of the Company................................................................. 43
5.4 Frustration of Closing Conditions........................................................................ 45
ARTICLE VI INDEMNIFICATION...................................................................................... 45
6.1 Indemnification by the Company Stockholders.............................................................. 45
6.2 Indemnification by the Buyer............................................................................. 46
6.3 Indemnification Claims................................................................................... 46
6.4 Survival of Representations and Warranties............................................................... 50
6.5 Limitations.............................................................................................. 51
ARTICLE VII REGISTRATION RIGHTS................................................................................. 52
7.1 Registration of Shares................................................................................... 52
7.2 Limitations on Registration Rights....................................................................... 52
7.3 Registration Procedures.................................................................................. 53
7.4 Requirements of Company Stockholders..................................................................... 54
7.5 Indemnification.......................................................................................... 54
7.6 Assignment of Rights..................................................................................... 54
7.7 Rule 144 Requirements.................................................................................... 55
ARTICLE VIII TERMINATION........................................................................................ 55
8.1 Termination of Agreement................................................................................. 55
8.2 Effect of Termination.................................................................................... 56
ARTICLE IX DEFINITIONS.......................................................................................... 56
ARTICLE X MISCELLANEOUS......................................................................................... 59
10.1 Press Releases and Announcements........................................................................ 59
10.2 No Third Party Beneficiaries............................................................................ 59
10.3 Entire Agreement........................................................................................ 60
10.4 Succession and Assignment............................................................................... 60
10.5 Counterparts and Facsimile Signature.................................................................... 60
10.6 Headings................................................................................................ 60
10.7 Notices................................................................................................. 60
10.8 Governing Law........................................................................................... 61
10.9 Amendments and Waivers.................................................................................. 62
10.10 Severability........................................................................................... 62
PAGE
10.11 Submission to Jurisdiction............................................................................. 62
10.12 Construction........................................................................................... 62
Exhibit A - Escrow Agreement
Exhibit B - Investment Representation Letter
Exhibit C - Opinion of Counsel to the Company
Exhibit D - Opinion of Counsel to the Buyer and the Transitory Subsidiary
Schedule 4.9 Company Rule 145 Affiliates
Schedule 6.1 Indemnifying Stockholders
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of December 6, 2001 by and among SkillSoft
Corporation, a Delaware corporation (the "Buyer"), BTF Acquisition Corp., a
Massachusetts corporation and a wholly-owned subsidiary of the Buyer (the
"Transitory Subsidiary"), and Xxxxx00x0.xxx, Inc., a Massachusetts corporation
(the "Company"). The Buyer, the Transitory Subsidiary and the Company are
referred to collectively herein as the "Parties."
On December 5, 2001 the Company and BTFS, Inc., a Massachusetts
corporation (the "Company Merger Sub") entered into an Agreement and Plan of
Merger (the "First Merger Agreement") pursuant to which the Company Merger Sub
will merge into the Company and the common stockholders of the Company will
receive cash in exchange for their capital stock of the Company (the "First
Merger").
This Agreement contemplates a merger of the Transitory Subsidiary into
the Company which shall take effect after the completion of the First Merger. In
such merger, the stockholders of the Company will receive cash and common stock
of the Buyer in exchange for their capital stock of the Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Surviving
Corporation files Articles of Merger, in accordance with Section 78 of the
Massachusetts Business Corporation Law (the "Articles of Merger"), with the
Secretary of State of the Commonwealth of Massachusetts. The Merger shall have
the effects set forth in Section 80 of the Massachusetts Business Corporation
Law.
1.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxx and Xxxx LLP
in Boston, Massachusetts,
commencing at 9:00 a.m. local time on December 28, 2001, or, if all of the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby have not been satisfied or waived by such date, on such
mutually agreeable later date as soon as practicable (and in any event not later
than three business days) after the satisfaction or waiver of all conditions
(excluding the delivery of any documents to be delivered at the Closing by any
of the Parties) set forth in Article V hereof (the "Closing Date").
1.3 ACTIONS AT THE CLOSING. At the Closing:
(a) the Company shall deliver to the Buyer and the Transitory
Subsidiary the various certificates, instruments and documents referred to in
Section 5.2;
(b) the Buyer and the Transitory Subsidiary shall deliver to
the Company the various certificates, instruments and documents referred to in
Section 5.3;
(c) the Surviving Corporation shall file with the Secretary of
State of the Commonwealth of Massachusetts the Articles of Merger;
(d) each of the stockholders of record of the Company
immediately prior to the Effective Time (the "Company Stockholders") shall
deliver to the Buyer the certificate(s) representing his, her or its Company
Shares (as defined below);
(e) the Buyer shall deliver certificates for the Merger Shares
(as defined below) to be delivered by the Buyer at Closing in accordance with
Section 1.5;
(f) the Buyer shall pay (by check or by wire transfer) to each
Company Stockholder (rounded up to the nearest $.01) the cash portion of the
Merger Consideration into which his, her or its Company Shares (as defined
below) are converted pursuant to Section 1.5;
(g) the Buyer, Xxxxxxx X. Xxxxxxxxxx and Xxxxxxxx X. Xxxxx
(the "Indemnification Representatives") and United States Trust Company (the
"Escrow Agent") shall execute and deliver the Escrow Agreement attached hereto
as EXHIBIT A (the "Escrow Agreement") and the Buyer shall deliver to the Escrow
Agent a certificate for the Escrow Shares (as defined below) being placed in
escrow on the Closing Date pursuant to Section 1.9 and a wire transfer for the
Escrow Cash (as defined below) being placed in escrow on the Closing Date
pursuant to Section 1.9; and
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(h) the Buyer shall pay by wire transfer to Silicon Valley
Bank all amounts due under the Company's credit facility in accordance with
payoff instructions provided by the Company no later than three days prior to
the Closing Date.
1.4 ADDITIONAL ACTION. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of any Party or the holder of any of
the following securities:
(a) Each share of (i) Common Stock, $.01 par value per share,
of the Company ("Common Shares"), (ii) Series A Preferred Stock, $.01 par value
per share, of the Company ("Series A Shares"), (iii) Series B Preferred Stock,
$.01 par value per share, of the Company ("Series B Shares"), (iv) Series C
Preferred Stock, $.01 par value per share, of the Company ("Series C Shares"),
(v) Series D Preferred Stock, $.01 par value per share, of the Company ("Series
D Shares"), and (vi) Series E Preferred Stock, $.01 par value per share, of the
Company ("Series E Shares") (the Series A Shares, the Series B Shares, the
Series C Shares, the Series D Shares and the Series E Shares are collectively
referred to herein as the "Preferred Shares" and the Preferred Shares and the
Common Shares are collectively referred to herein as the "Company Shares")
issued and outstanding immediately prior to the Effective Time (other than
Company Shares owned beneficially by the Buyer or the Transitory Subsidiary,
Dissenting Shares and Company Shares held in the Company's treasury) shall be
converted into and represent the right to receive from Buyer (subject to the
provisions of Section 1.9) consideration equal to the Merger Value (as defined
below).
(b) For purposes of this Agreement, the "Merger Value" shall
equal the Merger Consideration (as defined below) divided by the Fully Diluted
Common Share Equivalents (as defined below). "Merger Consideration" shall mean
the sum of (i) $6,400,000 and (ii) the Closing Value (as defined below) of
1,240,054 shares of common stock, $.001 par value per share, of the Buyer (the
"Buyer Common Stock"), subject to equitable adjustment in the event of any stock
split, stock dividend, reverse stock split or similar event affecting the Buyer
Common Stock between date of this Agreement and the Effective Time, minus (iii)
the consideration to be paid by Buyer under the terms of the First Merger
Agreement (as set forth in Section 1.10 below). "Fully Diluted Common Share
Equivalents" shall mean the sum of (i) the number of outstanding Common Shares
immediately prior to the Effective Time (after giving
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effect to the conversion into Common Shares of all outstanding Preferred
Shares) and (ii) the number of Common Shares issuable upon exercise of all
Options and Warrants (each as defined below) outstanding immediately prior
to the Effective Time, but minus (iii) 337,500 Common Shares, subject to
equitable adjustment in the event of any stock split, stock dividend, reverse
stock split or similar event affecting the Common Shares between date of this
Agreement and the Effective Time. "Closing Value" means the average of the last
reported sale prices per share of the Buyer Common Stock on the Nasdaq National
Market over the five consecutive trading days ending the business day before the
Effective Time, subject to equitable adjustment in the event of any stock split,
stock dividend, reverse stock split or similar event affecting the Buyer Common
Stock during such five consecutive trading days.
(c) Subject to the provisions of paragraph (g) below, each
holder of Company Shares may elect to receive the Merger Consideration payable
to such holder in (i) cash, (ii) such number of shares of Buyer Common Stock as
is equal to the Conversion Ratio (as hereinafter defined) multiplied by the
number of Company Shares held by him, her or it, or (iii) a combination of cash
and Buyer Common Stock. Each holder of Company Shares shall make an irrevocable
election of the form of Merger Value selected by such holder and provide written
notice of such election to the Buyer no less than one day prior to the Effective
Date. Subject to the provisions of paragraph (g) below, any such holder who
fails to make such election shall conclusively be deemed to have elected to
receive cash. It shall be a condition to any such holder's right to receive
Buyer Common Stock that such holder shall have executed and delivered to Buyer
an Investment Representation Letter in the form attached hereto as EXHIBIT B.
The "Conversion Ratio" shall be the Merger Value, in the case of Preferred
Shares, multiplied by the number of Common Shares into which each such Preferred
Share is convertible, and in each case, divided by the Closing Value.
(d) Each Indemnifying Stockholder (as defined below) shall be
entitled to receive at the Closing 90% of the Merger Consideration into which
his, her or its Company Shares were converted pursuant to this Section 1.5 (in
proportion to the amount of cash and Buyer Common Stock received by each such
Indemnifying Stockholder); the remaining 10% of the Merger Consideration into
which his, her or its Company Shares were converted pursuant to this Section 1.5
shall be deposited in escrow pursuant to Section 1.9 (in proportion to the
amount of cash and Buyer Common Stock received by each such Indemnifying
Stockholder) and shall be held and disposed of in accordance with the terms of
the Escrow Agreement. Each Company Stockholder who is not an Indemnifying
Stockholder shall entitled to receive at the Closing
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100% of the Merger Consideration into which his, her or its Company Shares were
converted pursuant to this Section 1.5.
(e) Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be cancelled and
retired without payment of any consideration therefor.
(f) Each share of common stock, $.01 par value per share, of
the Transitory Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and thereafter evidence one share of
common stock, $.01 par value per share, of the Surviving Corporation.
(g) In the event the aggregate amount of cash payable (i) to
holders of Company Shares, (ii) to holders of Options and Warrants upon exercise
of such Options and Warrants and (iii) under the provisions of the First Merger
Agreement is less than $6,400,000 (or such lesser sum as shall not prevent the
Merger from being characterized as a tax free reorganization for purposes of
Section 368(a) of the Code) then all holders of Company Shares who have elected
to receive Buyer Common Stock in connection with the Merger shall be deemed to
have irrevocably elected to receive, on a pro rata basis, such lesser amount of
Buyer Common Stock (valued at the Closing Value), and such greater amount of
cash, as shall be required such that the total amount of cash payable by the
Buyer in connection with the Merger and the First Merger shall not be less than
$6,400,000; provided, however that if payment of cash of $6,400,000 under the
Merger and the First Merger would prevent the Merger from being characterized as
a tax free reorganization for purposes of Section 368(a) of the Code, then all
holders of Company Shares who have elected to receive cash in connection with
the Merger (but not the First Merger) shall be deemed to have irrevocably
elected to receive, on a pro rata basis, such additional number of shares of
Buyer Common Stock (valued at the Closing Value), and such lesser amount of
cash, as shall be required to permit the Merger to be characterized as a tax
free reorganization for purposes of Section 368(a) of the Code.
(h) The Company shall provide to the Buyer a final schedule of
all Merger Consideration payable to each Company Stockholder, and specifying the
allocation of Buyer Common Stock and cash, no less than one day prior to the
Effective Date.
1.6 DISSENTING SHARES.
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(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares held as of the Effective Time by a Company Stockholder who has
not voted such Company Shares in favor of the adoption of this Agreement and the
Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Sections 86 through 98 of the Massachusetts
Business Corporation Law and not effectively withdrawn or forfeited prior to the
Effective Time. Dissenting Shares shall not be converted into or represent the
right to receive the Merger Consideration issuable in respect of such Company
Shares pursuant to Section 1.5, unless such Company Stockholder's right to
appraisal shall have ceased in accordance with Section 96 of the Massachusetts
Business Corporation Law. If such Company Stockholder has so forfeited or
withdrawn his, her or its right to appraisal of Dissenting Shares, then (i) as
of the occurrence of such event, such holder's Dissenting Shares shall cease to
be Dissenting Shares and shall be converted into and represent the right to
receive the Merger Consideration issuable in respect of such Company Shares
pursuant to Section 1.5, and (ii) promptly following the occurrence of such
event, the Buyer shall deliver to such Company Stockholder the Merger
Consideration to which such holder is entitled pursuant to Section 1.5 less, in
the case of an Indemnifying Stockholder, 10% of the Merger Consideration to
which such holder is entitled pursuant to Section 1.5, which amount shall be
delivered to the Escrow Agent.
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Massachusetts Business Corporation
Law. The Company shall not, except with the prior written consent of the Buyer,
make any payment with respect to any demands for appraisal of Company Shares or
offer to settle or settle any such demands.
1.7 FRACTIONAL SHARES. No certificates or scrip representing fractional
shares of Buyer Common Stock issuable in connection with the Merger (the "Merger
Shares") shall be issued to former Company Stockholders upon the surrender for
exchange of certificates that, immediately prior to the Effective Time,
represented Company Shares converted into Buyer Common Stock pursuant to Section
1.5 (the "Certificates"), and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Merger Shares that would have otherwise been issued to such former Company
Stockholders. In lieu of any fractional Merger Shares that would have otherwise
been issued, each former Company Stockholder that would have been
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entitled to receive a fractional Merger Share shall, upon proper surrender of
such person's Certificates, receive a cash payment equal to the Closing Value,
multiplied by the fraction of a share that such Company Stockholder would
otherwise be entitled to receive, subject to equitable adjustment in the event
of any stock split, stock dividend, reverse stock split or similar event
affecting the Buyer Common Stock between date of this Agreement and the
Effective Time.
1.8 OPTIONS AND WARRANTS.
(a) As of the Effective Time, all options to purchase Common
Shares issued by the Company pursuant to the Company's 1994 Stock Option Plan or
the Company's 2000 California Stock Option Plan (collectively, the "Option
Plans") or otherwise (collectively such options are referred to herein as the
"Options"), whether vested or unvested, and the Option Plans, insofar as they
relate to Options outstanding under such Plans as of the Closing, shall be
assumed by the Buyer. Immediately after the Effective Time, each Option
outstanding immediately prior to the Effective Time shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Option at the Effective Time, such number of shares of
Buyer Common Stock as is equal to the number of Common Shares subject to the
unexercised portion of such Option multiplied by the Conversion Ratio (with any
fraction resulting from such multiplication to be rounded down to the nearest
whole number). The exercise price per share of each such assumed Option shall be
equal to the exercise price of such Option immediately prior to the Effective
Time, divided by the Conversion Ratio (rounded up to the nearest whole cent).
The term, exercisability, vesting schedule, status as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986 (as amended, the
"Code"), if applicable, and all of the other terms of the Options shall
otherwise remain unchanged.
(b) As of the Effective Time, all warrants to purchase Common
Shares issued by the Company (the "Warrants"), whether vested or unvested, shall
be assumed by the Buyer. Immediately after the Effective Time, each Warrant
outstanding immediately prior to the Effective Time shall be deemed to
constitute a warrant to acquire, on the same terms and conditions as were
applicable under such Warrant at the Effective Time, (i) such number of shares
of Buyer Common Stock as is equal to the number of Common Shares subject to the
unexercised portion of such Warrant multiplied by the Conversion Ratio (with any
fraction resulting from such multiplication to be rounded down to the nearest
whole number) or (ii) cash in an amount equal to the Merger Value subject to the
unexercised portion of such Warrant. The exercise price per share of each such
assumed Warrant shall be equal to the exercise price of such Warrant immediately
prior to the Effective Time, divided by the Conversion Ratio (rounded
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up to the nearest whole cent). The term, exercisability, vesting schedule, and
all of the other terms of the Warrants shall otherwise remain unchanged.
(c) As soon as practicable after the Effective Time, the Buyer
or the Surviving Corporation shall deliver to the holders of Options and
Warrants appropriate notices setting forth such holders' rights pursuant to such
Options and Warrants, as amended by this Section 1.8, and the agreements
evidencing such Options and Warrants shall continue in effect on the same terms
and conditions (subject to the amendments provided for in this Section 1.8 and
such notice).
(d) The Buyer shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Buyer Common Stock for
delivery upon exercise of the Options and Warrants assumed in accordance with
this Section 1.8. Within 10 days after the Effective Time, the Buyer shall file
a Registration Statement on Form S-8 (or any successor form) under the
Securities Act of 1933 (as amended, the "Securities Act") with respect to all
shares of Buyer Common Stock subject to such Options that may be registered on a
Form S-8, and shall use its Reasonable Best Efforts (as defined below) to
maintain the effectiveness of such Registration Statement for so long as such
Options remain outstanding.
(e) The Company shall obtain, prior to the Closing, the
consent from each holder of a Warrant to the amendment of such Warrant pursuant
to this Section 1.8 (unless such consent is not required under the terms of the
applicable agreement).
1.9 ESCROW.
(a) On the Closing Date, the Buyer shall deliver to the Escrow
Agent (i) a certificate (issued in the name of the Escrow Agent or its nominee)
representing 10% of the Merger Shares otherwise issuable to the Indemnifying
Stockholders at the Effective Time (the "Escrow Shares"), and (ii) cash in the
amount of 10% of the cash portion of the Merger Consideration otherwise payable
to the Indemnifying Stockholders at the Effective Time (the "Escrow Cash"), each
as described in Section 1.5, for the purpose of securing the indemnification
obligations of the Indemnifying Stockholders set forth in this Agreement. The
Escrow Shares and the Escrow Cash shall be held by the Escrow Agent under the
Escrow Agreement pursuant to the terms thereof. The Escrow Shares and the Escrow
Cash 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, and shall be held and disbursed solely for the purposes and in accordance
with the terms of the Escrow Agreement.
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(b) The adoption of this Agreement and the approval of the
Merger by the Indemnifying Stockholders shall constitute approval of the Escrow
Agreement and of all of the arrangements relating thereto, including without
limitation the placement of the Escrow Shares and the Escrow Cash in escrow and
the appointment of the Indemnification Representatives.
1.10 PAYMENT OF CONSIDERATION UNDER FIRST MERGER AGREEMENT. At the
Closing, the Buyer shall pay the consideration payable to the Company's
common stockholders under the terms of the First Merger Agreement in accordance
with the terms and conditions of the First Merger Agreement.
1.11 ARTICLES OF ORGANIZATION AND BY-LAWS.
(a) The Articles of Organization of the Surviving Corporation
immediately following the Effective Time shall be the same as the Articles of
Organization of the Transitory Subsidiary immediately prior to the Effective
Time, except that (i) the name of the corporation set forth therein shall be
changed to the name of the Company and (ii) the identity of the incorporator
shall be deleted.
(b) The By-laws of the Surviving Corporation immediately
following the Effective Time shall be the same as the By-laws of the Transitory
Subsidiary immediately prior to the Effective Time, except that the name of the
corporation set forth therein shall be changed to the name of the Company.
1.12 NO FURTHER RIGHTS. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.13 CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Buyer or the Surviving Corporation, they shall be cancelled and
exchanged for the Merger Consideration in accordance with Section 1.5, subject
to Section 1.9 and to applicable law in the case of Dissenting Shares.
1.14 WAIVER OF NOTICE. The adoption of this Agreement and the
approval of the Merger by the holders of the Preferred Shares shall constitute
waiver of the notice provisions of Article IV.C, Section 4(g) and Article IV. D,
Section 4(l) of the Company's articles of organization.
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1.15 TAX CONSEQUENCES. It is intended by the Parties hereto that
the Merger shall constitute a "reorganization" within the meaning of
Section 368 of the Code. Unless this Agreement is otherwise terminated, the
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Buyer on the date hereof (the
"Disclosure Schedule"). The Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II, and the disclosures in any paragraph of the Disclosure Schedule shall
qualify other paragraphs in this Article II only to the extent it is clear from
a reading of the disclosure that such disclosure logically relates to such other
paragraphs. For purposes of this Article II, the phrase "to the knowledge of the
Company" or any phrase of similar import shall be deemed to refer to the actual
knowledge of the executive officers of the Company, as well as any other
knowledge which such executive officers would have possessed had they made
reasonable inquiry of appropriate employees of the Company with respect to the
matter in question.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing and in corporate and
tax good standing under the laws of the Commonwealth of Massachusetts. The
Company is duly qualified to conduct business and is in corporate and tax good
standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect (as defined below). The
Company has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Company has furnished to the Buyer complete and accurate copies
of its Articles of Organization and By-laws. The Company is not in default under
or in violation of any provision of its Articles of Organization or By-laws. For
purposes of this Agreement, "Company Material Adverse Effect" means a material
adverse effect on the assets, business, financial condition or results of
operations of the Company and the Subsidiaries (as defined below), taken as a
whole; other than any event, change or occurrence relating (a) to a worsening of
current conditions caused by acts of terrorism or war (whether or not declared)
occurring after the date of this Agreement, (b) to
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the economy or financial markets in general, (c) in general to the industries
in which the Company operates and not disproportionately relating to the
Company or (d) to the announcement of the transactions contemplated by this
Agreement.
2.2 CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 27,000,000 Common Shares, of which, as of the date of this
Agreement, 459,952.85 shares were issued and outstanding and no shares were
held in the treasury of the Company, (b) 13,114,346 Preferred Shares, of which
(i) 50,000 shares have been designated as Series A Convertible Preferred Stock,
of which, as of the date of this Agreement, no shares were issued and
outstanding, (ii) 7,692 shares have been designated as Series B Convertible
Preferred Stock, of which, as of the date of this Agreement, 7,692 shares were
issued and outstanding, (iii) 5,384 shares have been designated as Series C
Convertible Preferred Stock, of which, as of the date of this Agreement, 5,384
shares were issued and outstanding, (iv) 51,270 shares have been designated as
Series D Convertible Preferred Stock, of which, as of the date of this
Agreement, 51,270 shares were issued and outstanding, and (v) 13,000,000 shares
have been designated as Series E Convertible Preferred Stock, of which, as of
the date of this Agreement, 11,988,153 shares were issued and outstanding.
Section 2.2 of the Disclosure Schedule sets forth a complete and accurate list
of (i) all stockholders of the Company, indicating the number and class or
series of Company Shares held by each stockholder and (for Company Shares other
than Common Shares) the number of Common Shares (if any) into which such Company
Shares are convertible, (ii) all outstanding Options and Warrants indicating (A)
the holder thereof, (B) the number and class or series of Company Shares subject
to each Option and Warrant and (for Company Shares other than Common Shares) the
number of Common Shares (if any) into which such Company Shares are convertible,
(C) the exercise price, date of grant, vesting schedule and expiration date for
each Option or Warrant, and (D) any terms regarding the acceleration of vesting,
and (iii) all stock option plans and other stock or equity-related plans of the
Company. All of the issued and outstanding Company Shares are, and all Company
Shares that may be issued upon exercise of Options and Warrants will be (upon
issuance in accordance with their terms), duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights. Other than the Options
and Warrants listed in Section 2.2 of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, rights, agreements or commitments
to which the Company is a party or which are binding upon the Company providing
for the issuance or redemption of any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company. There are no agreements to which the Company is a
party or by which it is bound with respect to the voting (including without
limitation voting trusts or proxies), registration under the Securities Act, or
-11-
sale or transfer (including without limitation agreements relating to
pre-emptive rights, rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company. To the knowledge of the Company, there
are no agreements among other parties, to which the Company is not a party and
by which it is not bound, with respect to the voting (including without
limitation voting trusts or proxies) or sale or transfer (including without
limitation agreements relating to rights of first refusal, co-sale rights or
"drag-along" rights) of any securities of the Company. All of the issued and
outstanding Company Shares were issued in compliance with applicable federal and
state securities laws.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all requisite
power and authority to execute and deliver this Agreement and the First
Merger Agreement and to perform its obligations hereunder and thereunder.
The execution and delivery by the Company of this Agreement, subject to the
adoption of this Agreement and the approval of the Merger by (a) holders of two
thirds of all outstanding Company Shares, on an as-converted basis, voting as a
single class, (b) holders of two thirds of all outstanding Preferred Shares, on
an as-converted basis, voting as a single class and (c) holders of a majority
the Series D Shares and the Series E Shares, on an as-converted basis, voting as
a single class (the "Requisite Stockholder Approval"), the execution and
delivery by the Company of the First Merger Agreement, subject to the adoption
of the First Merger Agreement and the approval of the First Merger by (w)
holders of two-thirds of the outstanding Common Shares, (x) holders of
two-thirds of the Preferred Shares, on an as converted basis, voting as a single
class, (y) holders of 67% of the Series D Shares and the Series E Shares, on an
as-converted basis, voting as a single class and (z) holders of two-thirds of
the Common Shares and the Preferred Shares, on an as converted basis, voting as
a single class (the "Requisite First Merger Stockholder Approval"), the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of the Company. Each of this Agreement and the First Merger Agreement has
been duly and validly executed and delivered by the Company and each constitutes
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.
2.4 NONCONTRAVENTION. Subject to the filing of articles of merger
as required by the Massachusetts Business Corporation Law, neither the
execution and delivery by the Company of this Agreement or the First Merger
Agreement, nor the consummation by the Company of the transactions contemplated
hereby or thereby, will (a) conflict with or violate any provision of the
Articles of Organization or By-laws of the Company or the charter, By-laws or
other organizational document of any Subsidiary (as defined below), (b) require
on the part of the
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Company or any Subsidiary any filing with, or any permit, authorization, consent
or approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under (other than an acceleration of the vesting
of Options), create in any party the right to terminate, modify or cancel, or
require any notice, consent or waiver under, any contract or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of their assets is subject, (d) result in
the imposition of any Security Interest (as defined below) upon any assets of
the Company or any Subsidiary or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any Subsidiary or
any of their properties or assets. None of the actions contemplated by the First
Merger Agreement or Section 1.8 of this Agreement requires the consent from the
holder of any Option. For purposes of this Agreement: "Security Interest" means
any mortgage, pledge, security interest, encumbrance, charge or other lien
(whether arising by contract or by operation of law), other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Company and not material to the Company; and
"Ordinary Course of Business" means the ordinary course of the Company's
business, consistent with past custom and practice (including with respect to
frequency and amount).
2.5 SUBSIDIARIES.
(a) Section 2.5 of the Disclosure Schedule sets forth: (i) the
name of each corporation, partnership, joint venture or other entity in which
the Company has, directly or indirectly, an equity interest representing 50% or
more of the capital stock thereof or other equity interests therein
(individually, a "Subsidiary" and, collectively, the "Subsidiaries"); (ii) the
number and type of outstanding equity securities of each Subsidiary and a list
of the holders thereof; (iii) the jurisdiction of organization of each
Subsidiary; (iv) the names of the officers and directors of each Subsidiary; and
(v) the jurisdictions in which each Subsidiary is qualified or holds licenses to
do business as a foreign corporation or other entity.
(b) Each Subsidiary is a corporation duly organized, validly
existing and in corporate and tax good standing under the laws of the
jurisdiction of its incorporation. Each Subsidiary is duly qualified to conduct
business and is in corporate and tax good standing under
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the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing, individually or in the
aggregate, has not had and would not reasonably be expected to have a Company
Material Adverse Effect. Each Subsidiary has all requisite power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. The Company has delivered to the Buyer complete
and accurate copies of the charter, By-laws or other organizational documents of
each Subsidiary. No Subsidiary is in default under or in violation of any
provision of its charter, By-laws or other organizational documents. All of the
issued and outstanding shares of capital stock of each Subsidiary are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. All shares of each Subsidiary that are held of record or owned
beneficially by either the Company or any Subsidiary are held or owned free and
clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and demands. There are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company or any Subsidiary is a party or which are
binding on any of them providing for the issuance, disposition or acquisition of
any capital stock of any Subsidiary. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary.
(c) Except for investments in mutual funds, money market
accounts or similar investments, the Company does not control directly or
indirectly or have any direct or indirect equity participation or similar
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business association which is not a Subsidiary.
2.6 FINANCIAL STATEMENTS. The Company has provided to the Buyer (a) the
audited consolidated balance sheets and statements of operations, stockholders'
deficit and cash flows of the Company as of and for each of the last two fiscal
years; and (b) the audited consolidated balance sheet and statements of
operations, stockholders' deficit and cash flows as of and for the nine months
ended as of September 30, 2001 (the "Most Recent Balance Sheet Date"). Such
financial statements (collectively, the "Financial Statements") have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods covered
thereby, fairly present the financial condition, results of operations and cash
flows of the Company and the Subsidiaries as of the respective dates thereof
-14-
and for the periods referred to therein and are consistent with the books and
records of the Company and the Subsidiaries.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent Balance Sheet
Date, (a) there has occurred no event or development which, individually or in
the aggregate, has had, or could reasonably be expected to have in the future, a
Company Material Adverse Effect, and (b) neither the Company nor any Subsidiary
has taken any of the actions set forth in paragraphs (a) through (n) of Section
4.4.
2.8 UNDISCLOSED LIABILITIES. None of the Company and its Subsidiaries
has any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated and whether due or to become due), except for
(a) liabilities shown on the balance sheet referred to in clause (b) of Section
2.6 (the "Most Recent Balance Sheet"), (b) liabilities which have arisen since
the Most Recent Balance Sheet Date in the Ordinary Course of Business and (c)
contractual and other liabilities incurred in the Ordinary Course of Business
which are not required by GAAP to be reflected on a balance sheet.
2.9 TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or
other similar assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall profits, customs, duties,
franchise and other taxes imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
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(iii) "Affiliated Group" means a group of
corporations with which the Company or any Subsidiary has filed (or was required
to file) consolidated, combined, unitary or similar Tax Returns.
(iv) "Affiliated Period" means any period in which
the Company or a Subsidiary was a member of an Affiliated Group.
(b) Each of the Company and the Subsidiaries has filed on a
timely basis all Tax Returns that it was required to file, and all such Tax
Returns were complete and accurate in all material respects. Neither the Company
nor any Subsidiary is or has ever been a member of a group of corporations with
which it has filed (or been required to file) consolidated, combined or unitary
Tax Returns, other than a group of which only the Company and the Subsidiaries
are or were members. Each of the Company and the Subsidiaries has paid on a
timely basis all Taxes that were due and payable. The unpaid Taxes of the
Company and the Subsidiaries as of the Most Recent Balance Sheet Date do not
exceed the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Most Recent Balance Sheet and do not exceed those
accruals and reserves, as adjusted for the passage of time through the Closing
Date in accordance with past custom and practice of the Company in filing its
Tax Returns. All Taxes that the Company or any Subsidiary is or was required by
law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Entity.
(c) The Company has delivered to the Buyer complete and
accurate copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company or any
Subsidiary since January 1, 1998. Section 2.9(c) of the Disclosure Schedule
lists the federal income Tax Returns of the Company and each Subsidiary for
taxable years ended on or after December 31, 1997, that have been audited by the
Internal Revenue Service. No examination or audit of any Tax Return of the
Company or any Subsidiary by any Governmental Entity is currently in progress or
has been threatened by any Tax authority verbally or in a writing received by
the Company. Neither the Company nor any Subsidiary has been informed verbally
or in writing by any jurisdiction that the jurisdiction believes that the
Company or Subsidiary was required to file any Tax Return that was not filed.
Neither the Company nor any Subsidiary has waived any statute of limitations
with respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
(d) Neither the Company nor any Subsidiary: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or the
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Subsidiaries are subject to an election under Section 341(f) of the Code; (ii)
has been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code; (iii) has made any payments, is obligated to make
any payments, or is a party to any agreement that could obligate it to make any
payments that will be treated as an "excess parachute payment" under Section
280G of the Code; (iv) has any actual or potential liability for any Taxes of
any person (other than the Company and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of federal, state, local,
or foreign law), or as a transferee or successor, by contract, or otherwise; or
(v) is or has been required to make a basis reduction pursuant to Treasury
Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company or any Subsidiary: (i)
is property that is required to be treated as being owned by any other person
pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; or
(iii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
(f) Neither the Company nor any Subsidiary has undergone a
change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481 of the Code or that will result in such
adjustment for any taxable year ending after the Closing Date.
(g) Neither the Company nor any Subsidiary has ever
participated in an international boycott as defined in Section 999 of the Code.
2.10 ASSETS. Each of the Company and the Subsidiaries owns or leases
all tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. Such tangible assets are,
in the aggregate, free from material defects, have been maintained in accordance
with normal industry practice, are in good operating condition and repair
(subject to normal wear and tear) and are suitable for the purposes for which
they are presently used. No asset of the Company or any Subsidiary (tangible or
intangible) is subject to any Security Interest.
2.11 REAL PROPERTY. Neither the Company nor any Subsidiary owns any
real property. Section 2.11 of the Disclosure Schedule lists all real property
leased or subleased to or by the Company or any Subsidiary. The Company has
delivered to the Buyer complete and accurate copies of the leases and subleases
listed in Section 2.11 of the Disclosure Schedule. With respect to each lease
and sublease listed in Section 2.11 of the Disclosure Schedule:
-17-
(a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior to
the Closing;
(c) neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any other party, is in breach or violation of, or
default under, any such lease or sublease, and no event has occurred, is pending
or, to the knowledge of the Company, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a breach or default
by the Company or any Subsidiary or, to the knowledge of the Company, any other
party under such lease or sublease; and
(d) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold.
2.12 INTELLECTUAL PROPERTY.
(a) Each of the Company and the Subsidiaries owns or has the
right to use all Intellectual Property (as defined below) necessary (i) to use,
manufacture, market and distribute the products manufactured, marketed, sold or
licensed, and to provide the services provided, by the Company or the
Subsidiaries to other parties (together, the "Customer Deliverables") and (ii)
to operate the internal systems of the Company or the Subsidiaries that are
material to its business or operations, including, without limitation, computer
hardware systems, software applications and embedded systems (the "Internal
Systems"; the Intellectual Property owned by or licensed to the Company or the
Subsidiaries and incorporated in or underlying the Customer Deliverables or the
Internal Systems is referred to herein as the "Company Intellectual Property").
Each item of Company Intellectual Property will be owned or available for use by
the Surviving Corporation immediately following the Closing on substantially
identical terms and conditions as it was immediately prior to the Closing. The
Company or the appropriate Subsidiary has taken all reasonable measures to
protect the proprietary nature of each item of Company Intellectual Property. To
the knowledge of the Company, (a) no other person or entity has any rights to
any of the Company Intellectual Property owned by the Company or a Subsidiary
(except pursuant to agreements or licenses specified in Section 2.12(c) of the
Disclosure Schedule), and (b) no other person or entity is infringing, violating
or
-18-
misappropriating any of the Company Intellectual Property owned by the
Company. For purposes of this Agreement, "Intellectual Property" means all (i)
patents and patent applications, (ii) copyrights and registrations thereof,
(iii) mask works and registrations and applications for registration thereof,
(iv) computer software, data and documentation, (v) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(vi) trademarks, service marks, trade names, domain names and applications and
registrations therefor and (vii) other proprietary rights relating to any of the
foregoing. Section 2.12(a) of the Disclosure Schedule lists each patent, patent
application, copyright registration or application therefor, mask work
registration or application therefor, and trademark, service xxxx and domain
name registration or application therefor of the Company or any Subsidiary.
(b) None of the Customer Deliverables, or the marketing,
distribution, provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
Section 2.12(b) of the Disclosure Schedule lists any complaint, claim or notice,
or written threat thereof, received by the Company or any Subsidiary alleging
any such infringement, violation or misappropriation; and the Company has
provided to the Buyer complete and accurate copies of all written documentation
in the possession of the Company or any Subsidiary relating to any such
complaint, claim, notice or threat. The Company has provided to the Buyer
complete and accurate copies of all written documentation in the Company's
possession relating to claims or disputes known to the Company concerning any
Company Intellectual Property.
(c) Section 2.12(c) of the Disclosure Schedule identifies each
license or other agreement (or type of license or other agreement), other than
licenses granted in the Ordinary Course of Business under the Company's standard
click through license agreement (the form of which has been provided to Buyer),
pursuant to which the Company or a Subsidiary has licensed, distributed or
otherwise granted any rights to any third party with respect to, any Company
Intellectual Property.
(d) Section 2.12(d) of the Disclosure Schedule identifies each
item of Company Intellectual Property that is owned by a party other than the
Company or a Subsidiary, and the license or agreement pursuant to which the
Company or a Subsidiary uses it (excluding
-19-
off-the-shelf software programs not incorporated into or bundled with the
Customer Receivables licensed by the Company pursuant to "shrink wrap"
licenses).
(e) Neither the Company nor any Subsidiary has disclosed a
material portion of the source code for any of the software owned by the Company
or a Subsidiary (the "Software") or other confidential information constituting,
embodied in or pertaining to the Software to any person or entity, except
pursuant to the agreements listed in Section 2.12(e) of the Disclosure Schedule,
and the Company has taken reasonable measure to prevent disclosure of such
source code.
(f) Except for the copyrightable materials for which a license
or agreement is identified on Section 2.12(d) of the Disclosure Schedule, all of
the copyrightable materials (including Software) incorporated in or bundled with
the Customer Deliverables have been created by employees of the Company or a
Subsidiary within the scope of their employment by the Company or a Subsidiary
or by independent contractors of the Company or a Subsidiary who have executed
agreements expressly assigning all right, title and interest in such
copyrightable materials to the Company or a Subsidiary. No portion of such
copyrightable materials was jointly developed with any third party except for
such jointly developed copyrightable materials for which the Company has been
assigned all right, title and interest of such third party therein.
(g) To the knowledge of the Company, the Customer Deliverables
and the Internal Systems are free from significant defects or programming errors
and conform in all material respects to the written documentation and
specifications therefor.
2.13 CONTRACTS.
(a) Section 2.13 of the Disclosure Schedule lists the
following agreements (written or oral) to which the Company or any Subsidiary is
a party as of the date of this Agreement:
(i) any agreement (or group of related agreements)
for the lease of personal property from or to third parties providing for future
lease payments in excess of $25,000;
(ii) any agreement (or group of related agreements)
for the purchase or sale of products or for the furnishing or receipt of
services (A) which involves a remaining amount of more than $100,000, or (B) in
which the Company or any Subsidiary has granted
-20-
manufacturing rights, "most favored nation" pricing provisions or exclusive
marketing or distribution rights relating to any products or territory or has
agreed to purchase a minimum quantity of goods or services or has agreed to
purchase goods or services exclusively from a certain party;
(iii) any agreement establishing a partnership or
joint venture;
(iv) any agreement (or group of related agreements)
currently in effect under which it has created, incurred, assumed or guaranteed
(or may create, incur, assume or guarantee) indebtedness (including capitalized
lease obligations) involving an outstanding balance of more than $50,000 or
under which it has imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning noncompetition or by
which the Company is bound by any confidentiality provisions;
(vi) any employment or consulting agreement currently
in effect;
(vii) any agreement not yet fully performed involving
any officer, director or stockholder of the Company or any affiliate (an
"Affiliate"), as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), thereof;
(viii) any agreement not listed elsewhere in Section
2.13 of the Disclosure Schedule under which the consequences of a default or
termination would reasonably be expected to have a Company Material Adverse
Effect;
(ix) any agreement which contains any provisions
requiring the Company or any Subsidiary to indemnify any other party thereto
(excluding indemnities contained in agreements for the purchase, sale or license
of products entered into in the Ordinary Course of Business);
(x) any agreement under which the Company is
obligated to pay royalties, license fees or other amounts based on its sales
revenues; and
(xi) any other agreement (or group of related
agreements) either involving more than $100,000 or not entered into in the
Ordinary Course of Business.
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(b) The Company has delivered to the Buyer a complete and
accurate copy of the First Merger Agreement and each agreement listed in Section
2.12 or Section 2.13 of the Disclosure Schedule. With respect to the First
Merger Agreement and each other agreement so listed: (i) the agreement is legal,
valid, binding and enforceable and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect immediately prior to the Closing; and (iii) neither the Company nor
any Subsidiary nor, to the knowledge of the Company, any other party, is in
breach or violation of, or default under, any such agreement, and no event has
occurred, is pending or, to the knowledge of the Company, is threatened, which,
after the giving of notice, with lapse of time, or otherwise, would constitute a
breach or default by the Company or any Subsidiary or, to the knowledge of the
Company, any other party under such contract.
2.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Company and
the Subsidiaries reflected on the Most Recent Balance Sheet are valid
receivables subject to no setoffs or counterclaims and are current and, to the
Company's knowledge, collectible (within 90 days after the date on which it
first became due and payable), net of the applicable reserve for bad debts on
the Most Recent Balance Sheet. All accounts receivable reflected in the
financial or accounting records of the Company that have arisen since the Most
Recent Balance Sheet Date are valid receivables subject to no setoffs or
counterclaims and are, to the Company's knowledge, collectible (within 90 days
after the date on which it first became due and payable), net of a reserve for
bad debts in an amount proportionate to the reserve shown on the Most Recent
Balance Sheet.
2.15 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company or any Subsidiary.
2.16 INSURANCE. Section 2.16 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company or any Subsidiary is currently a party. Such insurance policies are of
the type and in amounts customarily carried by organizations conducting
businesses or owning assets similar to those of the Company and the
Subsidiaries. There is no material claim pending under any such policy as to
which coverage has been questioned, denied or disputed by the underwriter of
such policy. All premiums due and payable under all such policies have been
paid, neither the Company nor any Subsidiary may be liable for retroactive
-22-
premiums or similar payments, and the Company and the Subsidiaries are otherwise
in compliance in all material respects with the terms of such policies. The
Company has no knowledge of any threatened termination of, or material premium
increase with respect to, any such policy. Each such policy will continue to be
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing.
2.17 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator (a "Legal Proceeding") which is pending or has been threatened in
writing against the Company or any Subsidiary which (a) seeks either damages in
excess of $50,000 or equitable relief or (b) in any manner challenges or seeks
to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement.
2.18 WARRANTIES. The Company has not incurred any material liability in
fulfilling its obligations under any guaranty, warranty, right of return and
indemnity provisions with respect to Customer Deliverables during each of the
fiscal years and the interim period covered by the Financial Statements; and the
Company does not know of any reason why it will incur any material liability
with respect thereto in the future.
2.19 EMPLOYEES.
(a) Section 2.19 of the Disclosure Schedule contains a list of
all current employees of the Company and each Subsidiary whose annual rate of
compensation exceeds $50,000 per year, along with the position and the annual
rate of compensation of each such person. Each current or past employee of the
Company or any Subsidiary has entered into a confidentiality/assignment of
inventions agreement with the Company or such Subsidiary, a copy or form of
which has previously been delivered to the Buyer. Section 2.19 of the Disclosure
Schedule contains a list of all current employees of the Company or any
Subsidiary who are a party to a non-competition agreement with the Company or
any Subsidiary; copies of such agreements have previously been delivered to the
Buyer. To the knowledge of the Company, no key employee or group of employees
has any plans to terminate employment with the Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company has no knowledge of any organizational effort
made or threatened, either currently or within the past
-23-
two years, by or on behalf of any labor union with respect to employees of the
Company or any Subsidiary.
2.20 EMPLOYEE BENEFITS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Employee Benefit Plan" means any "employee
pension benefit plan" (as defined in Section 3(2) of ERISA), any "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA), and any other
written or oral plan, agreement or arrangement involving direct or indirect
compensation, including without limitation insurance coverage, severance
benefits, disability benefits, deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation.
(ii) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or
at any applicable time was, a member of (1) a controlled group of corporations
(as defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Company or a Subsidiary.
(b) Section 2.20(b) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Company, any Subsidiary or any ERISA Affiliate. Complete
and accurate copies of (i) all Employee Benefit Plans which have been reduced to
writing, (ii) written summaries of all unwritten Employee Benefit Plans, (iii)
all related trust agreements, insurance contracts and summary plan descriptions,
and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all
funded plans) all plan financial statements for the last three plan years for
each Employee Benefit Plan, have been delivered to the Buyer. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of the Company, the Subsidiaries and the ERISA Affiliates has
in all material respects met its obligations with respect to such Employee
Benefit Plan and has timely made all required contributions thereto and there
-24-
are no benefit obligations which are not properly accounted for by reserves or
footnoted in accordance with GAAP on the Financial Statements. The Company, each
Subsidiary, each ERISA Affiliate and each Employee Benefit Plan are in
compliance in all material respects with the currently applicable provisions of
ERISA and the Code and the regulations thereunder (including without limitation
Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601
through 608 and Section 701 et seq. of ERISA). All filings and reports as to
each Employee Benefit Plan required to have been submitted to the Internal
Revenue Service or to the United States Department of Labor have been accurately
completed and timely submitted.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders) against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under any
Employee Benefit Plan that could give rise to any material liability. No
Employee Benefit Plan is or within the last three calendar years has been the
subject of or received notice that it is the subject of examination by a
Governmental Entity or has been a participant in a government sponsored amnesty,
voluntary compliance or similar program.
(d) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit Plans
are qualified and the plans and the trusts related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date of
its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost. Each Employee Benefit Plan which is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies the requirements of, Section 401(k)(3) and
Section 401(m)(2) of the Code for each plan year ending prior to the Closing
Date.
(e) Neither the Company, any Subsidiary, nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA.
(f) At no time has the Company, any Subsidiary or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
-25-
(g) There are no unfunded or Company funded obligations under
any Employee Benefit Plan providing benefits after termination of employment to
any employee of the Company or any Subsidiary (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code or other applicable law and insurance
conversion privileges under state law. The assets of each Employee Benefit Plan
which is funded are reported at their fair market value on the books and records
of such Employee Benefit Plan. No Employee Benefit Plan has assets which include
securities issued by the Company or any Affiliate.
(h) No act or omission has occurred and no condition exists
with respect to any Employee Benefit Plan maintained by the Company, any
Subsidiary or any ERISA Affiliate that would subject the Company, any Subsidiary
or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of
any kind imposed under ERISA or the Code or (ii) any contractual indemnification
or contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Employee Benefit Plan. No Employee Benefit Plan is
maintained for employees outside the United States or is subject to the laws of
any country other than the United States.
(i) No Employee Benefit Plan is funded by, associated with or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(j) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as a
result thereof and no Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan. Each individual who has received compensation for
the performance of services on behalf of the Company has been properly
classified as an employee or independent contractor in accordance with
applicable law.
(k) Section 2.20(k) of the Disclosure Schedule discloses each:
(i) agreement with any stockholder, director, executive officer or other key
employee of the Company or any Subsidiary (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company or any Subsidiary of the nature of any of
the transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the
-26-
termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may receive
payments from the Company or any Subsidiary that may be subject to the tax
imposed by Section 4999 of the Code or included in the determination of such
person's "parachute payment" under Section 280G of the Code; and (iii) agreement
or plan binding the Company or any Subsidiary, including without limitation any
stock option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan, severance benefit plan or Employee Benefit Plan, 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.
(l) Section 2.20(l) of the Disclosure Schedule sets forth the
policy of the Company and any Subsidiary with respect to accrued vacation,
accrued sick time and earned time-off and the amount of such liabilities as of
September 30, 2001.
2.21 ENVIRONMENTAL MATTERS.
(a) Each of the Company and the Subsidiaries has complied with
all applicable Environmental Laws (as defined below). There is no pending or, to
the knowledge of the Company, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any Governmental Entity, relating to any Environmental
Law involving the Company or any Subsidiary. For purposes of this Agreement,
"Environmental Law" means any federal, state or local law, statute, rule or
regulation or the common law relating to the environment or occupational health
and safety, including without limitation any statute, regulation, administrative
decision or order pertaining to (i) treatment, storage, disposal, generation and
transportation of industrial, toxic or hazardous materials or substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous materials or substances, or solid
or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine life and wetlands, including without
limitation all endangered and threatened species; (vi) storage tanks, vessels,
containers, abandoned or discarded barrels, and other closed receptacles; (vii)
health and safety of employees and other persons; and (viii) manufacturing,
processing, using, distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants, contaminants, toxic
or hazardous materials or substances or oil or petroleum products
-27-
or solid or hazardous waste. As used above, the terms "release" and
"environment" shall have the meaning set forth in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at any parcel of
real property or any facility formerly or currently owned, operated or
controlled by the Company or a Subsidiary. With respect to any such releases of
Materials of Environmental Concern, the Company or such Subsidiary has given all
required notices to Governmental Entities (copies of which have been provided to
the Buyer). The Company is not aware of any releases of Materials of
Environmental Concern at parcels of real property or facilities other than those
owned, operated or controlled by the Company or a Subsidiary that could
reasonably be expected to have an impact on the real property or facilities
owned, operated or controlled by the Company or a Subsidiary. For purposes of
this Agreement, "Materials of Environmental Concern" means any chemicals,
pollutants or contaminants, hazardous substances (as such term is defined under
CERCLA), solid wastes and hazardous wastes (as such terms are defined under the
Resource Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products or any other material subject to regulation under any
Environmental Law.
(c) Set forth in Section 2.21(c) of the Disclosure Schedule is
a list of all documents (whether in hard copy or electronic form) that contain
any environmental reports, investigations and audits relating to premises
currently or previously owned or operated by the Company or a Subsidiary
(whether conducted by or on behalf of the Company or a Subsidiary or a third
party, and whether done at the initiative of the Company or a Subsidiary or
directed by a Governmental Entity or other third party) which were issued or
conducted during the past five years and which the Company has possession of or
access to. A complete and accurate copy of each such document has been provided
to the Buyer.
(d) The Company is not aware of any material environmental
liability of any solid or hazardous waste transporter or treatment, storage or
disposal facility that has been used by the Company or any Subsidiary.
2.22 LEGAL COMPLIANCE. Each of the Company and the Subsidiaries, and
the conduct and operations of their respective businesses, are in compliance
with each applicable law (including rules and regulations thereunder) of any
federal, state, local or foreign government, or any Governmental Entity,
including, without limitation applicable laws, rules and regulations relating to
privacy, except for any violations or defaults that, individually or in the
aggregate,
-28-
have not had and would not reasonably be expected to have a Company Material
Adverse Effect. Without limitation of the foregoing, the Company is in
compliance with its posted privacy statement and the license agreement governing
the Company's use of the "TRUSTe" xxxx.
2.23 CUSTOMERS AND SUPPLIERS. Section 2.23 of the Disclosure Schedule
sets forth a list of (a) each customer that accounted for more than 5% of the
consolidated revenues of the Company during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product to the Company or
a Subsidiary. No such customer or supplier has indicated within the past year
that it will stop, or decrease the rate of, buying products or supplying
products, as applicable, to the Company or any Subsidiary. No unfilled customer
order or commitment obligating the Company or any Subsidiary to process,
manufacture or deliver products or perform services will result in a loss at the
gross margin (calculated by limiting costs of sales to the cost of publisher
royalties incurred with respect thereto) to the Company or any Subsidiary upon
completion of performance. No purchase order or commitment of the Company or any
Subsidiary is in excess of normal requirements, nor are prices provided therein
in excess of current market prices for the products or services to be provided
thereunder.
2.24 PERMITS. Section 2.24 of the Disclosure Schedule sets forth a list
of all permits, licenses, registrations, certificates, orders or approvals from
any Governmental Entity (including without limitation those issued or required
under Environmental Laws and those relating to the occupancy or use of owned or
leased real property) ("Permits") issued to or held by the Company or any
Subsidiary. Such listed Permits are the only Permits that are required for the
Company and the Subsidiaries to conduct their respective businesses as presently
conducted or as proposed to be conducted, except for those the absence of which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect. Each such Permit is in full
force and effect and, to the knowledge of the Company, no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration. Each such Permit will
continue in full force and effect immediately following the Closing.
2.25 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No Affiliate of
the Company or of any Subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of the Company or any Subsidiary, (b)
has any claim or cause of action against the Company
-29-
or any Subsidiary, or (c) owes any money to, or is owed any money by, the
Company or any Subsidiary. Section 2.25 of the Disclosure Schedule describes
any transactions or relationships between the Company or a Subsidiary and any
Affiliate thereof which are on other than market terms and conditions for the
provision of good or services not previously disclosed in Section 2.13 of the
Disclosure Schedule and which have occurred or existed during the time period
covered by the Financial Statements.
2.26 BROKERS' FEES. Neither the Company nor any Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
2.27 BOOKS AND RECORDS. The minute books and other similar records of
the Company and each Subsidiary contain records, whether in final or draft form,
which are complete and accurate in all material respects, of actions taken at
any meetings of the Company's or such Subsidiary's stockholders, Board of
Directors or any committee thereof and of all written consents executed in lieu
of the holding of any such meeting. The books and records of the Company and
each Subsidiary accurately reflect in all material respects the assets,
liabilities, business, financial condition and results of operations of the
Company or such Subsidiary and have been maintained in accordance with good
business and bookkeeping practices.
2.28 DISCLOSURE. No representation or warranty by the Company contained
in this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company pursuant to Section 5.2(f) of this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants
to the Company as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of the Buyer
and the Transitory Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The Buyer
is duly qualified to conduct business
-30-
and is in corporate and tax good standing under the laws of each jurisdiction
in which the nature of its businesses or the ownership or leasing of its
properties requires such qualification, except where the failure to be so
qualified or in good standing would not have a Buyer Material Adverse Effect (as
defined below). The Buyer has all requisite corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. The Buyer has furnished or made available to the Company
complete and accurate copies of the charter and by-laws of the Buyer and the
Transitory Subsidiary. For purposes of this Agreement, "Buyer Material Adverse
Effect" means a material adverse effect on the assets, business, condition
(financial or otherwise), results of operations or future prospects of the Buyer
and its subsidiaries, taken as a whole; other than any event, change or
occurrence relating (a) to a worsening of current conditions caused by acts of
terrorism or war (whether or not declared) occurring after the date of this
Agreement, (b) to the economy or financial markets in general, (c) in general to
the industries in which the Buyer operates and not disproportionately relating
to the Buyer or (d) to the announcement of the transactions contemplated by this
Agreement; provided, further, that a decline in the trading price of the Buyer
Common Stock in and of itself shall not constitute a Buyer Material Adverse
Effect.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer consists
of (a) 50,000,000 shares of Buyer Common Stock, of which 16,304,319 shares were
issued and outstanding as of November 30, 2001, and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. As of November 30, 2001, there were an aggregate of 2,541,086
shares of Buyer Common Stock subject to outstanding options pursuant to the
Buyer's 1998 Stock Incentive Plan, 1999 Non-Employee Director Stock Option Plan
and 2001 Stock Incentive Plan. All of the issued and outstanding shares of Buyer
Common Stock are duly authorized, validly issued, fully paid, nonassessable and
free of all preemptive rights. All of the Merger Shares and all of the shares of
Buyer Common Stock issuable upon the exercise of any Option or Warrant will be,
when issued in accordance with this Agreement, duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. Except as set forth
above and pursuant to the Buyer's 2001 Employee Stock Purchase Plan, there are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Buyer is a party or which are binding upon the Buyer
providing for the issuance or redemption of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Buyer.
3.3 AUTHORIZATION OF TRANSACTION. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of
-31-
the Buyer) the Escrow Agreement and to perform its obligations hereunder
and thereunder. The execution and delivery by the Buyer and the
Transitory Subsidiary of this Agreement and (in the case of the Buyer) the
Escrow Agreement and the consummation by the Buyer and the Transitory Subsidiary
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer and
Transitory Subsidiary, respectively. This Agreement has been duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.
3.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Articles of Merger as required by the
Massachusetts Business Corporation Law, neither the execution and delivery by
the Buyer or the Transitory Subsidiary of this Agreement or (in the case of the
Buyer) the Escrow Agreement, nor the consummation by the Buyer or the Transitory
Subsidiary of the transactions contemplated hereby or thereby, will (a) conflict
with or violate any provision of the charter or By-laws of the Buyer or the
Transitory Subsidiary, (b) require on the part of the Buyer or the Transitory
Subsidiary any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (c) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party any right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which the Buyer or the Transitory Subsidiary is a
party or by which either is bound or to which any of their assets are subject,
or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer or the Transitory Subsidiary or any of their properties
or assets.
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously
furnished or made available to the Company complete and accurate copies, as
amended or supplemented, of its (a) Annual Report on Form 10-K for the fiscal
year ended January 31, 2001, as filed with the Securities and Exchange
Commission (the "SEC"), and (b) all other reports filed by the Buyer under
Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the
SEC since January 31, 2000 (such reports are collectively referred to herein as
the "Buyer Reports"). The Buyer Reports constitute all of the documents required
to be filed by the Buyer under Section 13 or subsections (a) or (c) of Section
14 of the Exchange Act with the SEC from January 31, 2000 through the date of
this Agreement. The Buyer Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder when
filed. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact
-32-
or omit 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. No event has occurred since July 31, 2001
which, with the passage of time, would require the filing by the Buyer of a
current report on Form 8-K. The audited financial statements and unaudited
interim financial statements of the Buyer included in the Buyer Reports (i)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto when filed, (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of the Buyer as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of the
Buyer. Buyer is eligible to use Form S-3 in connection with the registration of
the Merger Shares and the shares of Buyer Common Stock issuable upon the
exercise of any Option or Warrant in accordance with the provisions of Article
VII of this Agreement. The description of capital stock contained in Buyer's
Form 8-A filed with the SEC on January 10, 2000 is true and correct in all
material respects as of the date hereof.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since July 31, 2001, there has
occurred no event or development which, individually or in the aggregate, has
had, or could reasonably be expected to have in the future, a Buyer Material
Adverse Effect.
3.7 LITIGATION. Except as disclosed in the Buyer Reports, as of the
date of this Agreement, there is no Legal Proceeding which is pending or, to the
Buyer's knowledge, threatened against the Buyer or any subsidiary of the Buyer
which, if determined adversely to the Buyer or such subsidiary, could have,
individually or in the aggregate, a Buyer Material Adverse Effect or which in
any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
3.8 INTERIM OPERATIONS OF THE TRANSITORY SUBSIDIARY. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
3.9 BROKERS' FEES. Neither the Buyer nor the Transitory Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
-33-
3.10 DISCLOSURE. No representation or warranty by the Buyer contained
in this Agreement, and no statement contained in the any document, certificate
or other instrument delivered or to be delivered by or on behalf of the Buyer
pursuant to Section 5.3(f) of this Agreement, contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading.
ARTICLE IV
COVENANTS
4.1 CLOSING EFFORTS. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that the conditions to the obligations of
the other Parties to consummate the Merger are satisfied.
4.2 GOVERNMENTAL AND THIRD-PARTY NOTICES AND CONSENTS. Each Party shall
use its Reasonable Best Efforts to obtain, at its expense, all waivers, permits,
consents, approvals or other authorizations from Governmental Entities, and to
effect all registrations, filings and notices with or to Governmental Entities,
as may be required for such Party to consummate the transactions contemplated by
this Agreement and to otherwise comply with all applicable laws and regulations
in connection with the consummation of the transactions contemplated by this
Agreement. The Company shall use its Reasonable Best Efforts to obtain, at its
expense, all such waivers, consents or approvals from third parties, and to give
all such notices to third parties, as are required to be listed in Section 2.4
of the Disclosure Schedule.
4.3 STOCKHOLDER APPROVAL.
(a) The Company shall use its Reasonable Best Efforts to
obtain, as promptly as practicable, the Requisite Stockholder Approval, either
at a special meeting of stockholders or pursuant to a written stockholder
consent, all in accordance with the applicable requirements of the Massachusetts
Business Corporation Law. In connection with such special meeting of
stockholders, the Company shall provide to its stockholders a written proxy or
information statement (the "Disclosure Statement") which includes a statement
that appraisal rights are available for the Company Shares pursuant to Sections
86 through 98 of the Massachusetts Business Corporation Law. The Buyer agrees to
cooperate with the Company in the preparation of the Disclosure Statement. The
Company agrees not to distribute the Disclosure Statement
-34-
until the Buyer has had a reasonable opportunity to review and comment on
the Disclosure Statement and the Disclosure Statement has been approved by
the Buyer (which approval may not be unreasonably withheld or delayed). The
Company shall include in the Disclosure Statement the recommendation of the
Board of Directors that the stockholders of the Company vote in favor of the
adoption of this Agreement and the approval of the Merger.
(b) The Company shall use its Reasonable Best Efforts to
obtain, as promptly as practicable, the Requisite First Merger Stockholder
Approval of the First Merger, either at a special meeting of stockholders or
pursuant to a written stockholder consent, all in accordance with the applicable
requirements of the Massachusetts Business Corporation Law. In connection with
such special meeting of stockholders or written stockholder consent, the Company
shall provide to its stockholders a written proxy or information statement (the
"First Merger Disclosure Statement") which includes a statement that appraisal
rights are available for the Company Shares pursuant to Sections 86 through 98
of the Massachusetts Business Corporation Law. The Company shall include in the
First Merger Disclosure Statement the recommendation of the Board of Directors
that the stockholders of the Company vote in favor of the adoption of the First
Merger Agreement and the approval of the First Merger.
(c) Xxxxx X. Xxxxxxxxx, Commonwealth Capital Ventures, L.P.,
Sigma Partners III, L.P., Sigma Associates III, L.P. and Sigma Investors III,
L.P. each agree (i) to vote all Company Shares that are beneficially owned by
him, her or it in favor of the adoption of the First Merger Agreement and this
Agreement and the approval of the First Merger and this Merger and (ii) not to
vote any Company Shares in favor of any other acquisition (whether by way of
merger, consolidation, share exchange, stock purchase or asset purchase) of all
or a majority of the outstanding capital stock or assets of the Company. The
obligations of the Company Stockholders set forth in this Section 4.3(c) shall
terminate upon the termination of this Agreement.
4.4 OPERATION OF BUSINESS. Except as contemplated by this Agreement
(including, without limitation, consummation of the First Merger), during the
period from the date of this Agreement to the Effective Time, the Company shall
(and shall cause each Subsidiary to) conduct its operations in the Ordinary
Course of Business and in compliance with all applicable laws and regulations
and, to the extent consistent therewith, use its Reasonable Best Efforts to
preserve intact its current business organization, keep its physical assets in
good working condition, 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
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its goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, prior to the Effective Time,
except pursuant to the terms of the First Merger Agreement, the Company shall
not (and shall cause each Subsidiary not to), without the written consent of the
Buyer:
(a) issue or sell, or redeem or repurchase, any stock or other
securities of the Company or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the conversion or exercise of
convertible securities, Options or Warrants outstanding on the date hereof) in
such a manner as would reasonably be expected to result in a Company Material
Adverse Effect or would prevent or hinder the transactions contemplated by this
Agreement;
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock;
(c) other than in the Ordinary Course of Business: create,
incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person or entity; or make any loans, advances or capital contributions to, or
investments in, any other person or entity;
(d) other than amendments to Option vesting schedules or
reduction of shares subject thereto, enter into, adopt or amend any Employee
Benefit Plan or any employment or severance agreement or arrangement of the type
described in Section 2.20(k) or (except for normal increases in the Ordinary
Course of Business for employees who are not Affiliates) increase in any manner
the compensation or fringe benefits of, or materially modify the employment
terms of, its directors, officers or employees, generally or individually, or
pay any bonus or other benefit to its directors, officers or employees (except
for existing payment obligations listed in Section 2.18 of the Disclosure
Schedule);
(e) acquire, sell, lease, license or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any Subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases and sales
of assets in the Ordinary Course of Business;
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(f) mortgage or pledge any of its property or assets or
subject any such property or assets to any Security Interest (other than
Security Interests created under the after acquired property clause of any
existing credit facility);
(g) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational
documents;
(i) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(j) other than amendments to Option vesting schedules or
shares subject thereto, and other than amendments to Warrants permitted by the
terms of this Agreement, enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive any
rights under, any material contract or agreement;
(k) make or commit to make any capital expenditure in excess
of $20,000 in the aggregate;
(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in any of the conditions to the Merger set forth in Article V not
being satisfied; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
4.5 ACCESS TO INFORMATION.
(a) The Company shall (and shall cause each Subsidiary to)
permit representatives of the Buyer to have full access (at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Company and the Subsidiaries) to all premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel, of or pertaining to the Company and each Subsidiary.
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(b) Each of the Buyer and the Transitory Subsidiary (i) shall
treat and hold as confidential any Confidential Information (as defined below),
(ii) shall not use any of the Confidential Information except in connection with
this Agreement, and (iii) if this Agreement is terminated for any reason
whatsoever, shall return to the Company all tangible embodiments (and all
copies) thereof which are in its possession. For purposes of this Agreement,
"Confidential Information" means any confidential or proprietary information of
the Company or any Subsidiary that is furnished to the Buyer or the Transitory
Subsidiary by the Company or any Subsidiary in connection with this Agreement;
PROVIDED, HOWEVER, that it shall not include any information (A) which, at the
time of disclosure, is available publicly, (B) which, after disclosure, becomes
available publicly through no fault of the Buyer or the Transitory Subsidiary,
(C) which the Buyer or the Transitory Subsidiary knew or to which the Buyer or
the Transitory Subsidiary otherwise had rightful access prior to disclosure or
(D) which the Buyer or the Transitory Subsidiary rightfully obtains from a
source other than the Company or a Subsidiary.
(c) The Buyer shall permit representatives of the Company to
have reasonable access (at reasonable times, and in a manner so as not to
interfere with the normal business operations of the Buyer) to financial and
accounting records, contracts, other records and documents, and personnel, of or
pertaining to the Buyer.
(d) The Company (i) shall treat and hold as confidential any
Confidential Information, (ii) shall not use any of the Confidential Information
except in connection with this Agreement, and (iii) if this Agreement is
terminated for any reason whatsoever, shall return to the Buyer all tangible
embodiments (and all copies) thereof which are in its possession.
4.6 EXCLUSIVITY.
(a) Except with respect to the First Merger, the Company shall
not, and the Company shall require each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (i) initiate,
solicit, encourage or otherwise facilitate any inquiry, proposal, offer or
discussion with any party (other than the Buyer) concerning any merger,
reorganization, consolidation, recapitalization, business combination,
liquidation, dissolution, share exchange, sale of stock, sale of material assets
or similar business transaction involving the Company, any Subsidiary or any
division of the Company, (ii) furnish any non-public information concerning the
business, properties or assets of the Company, any Subsidiary or any division of
the Company to any party (other than the Buyer or customers of the Company in
the
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Ordinary Course of Business) or (iii) engage in discussions or negotiations
with any party (other than the Buyer) concerning any such transaction.
(b) The Company shall immediately notify any party with which
discussions or negotiations of the nature described in paragraph (a) above were
pending that the Company is terminating such discussions or negotiations. If the
Company receives any inquiry, proposal or offer of the nature described in
paragraph (a) above, the Company shall, within one business day after such
receipt, notify the Buyer of such inquiry, proposal or offer, including the
identity of the other party and the terms of such inquiry, proposal or offer
4.7 EXPENSES. Except as set forth in Article VI and the Escrow
Agreement, each of the Parties shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement, the First
Merger Agreement and the transactions contemplated hereby and thereby; provided,
however, that if the Merger is consummated, the Company and the Subsidiaries
shall not incur more than an aggregate of $100,000 in legal and accounting fees
and expenses in connection with the Merger and the First Merger (which fees and
expenses shall be paid at Closing).
4.8 INDEMNIFICATION. The Buyer shall not take any action to alter or
impair any exculpatory or indemnification provisions now existing in the
Articles of Organization or By-laws of the Company for the benefit of any
individual who served as a director or officer of the Company at any time prior
to the Effective Time, except for any changes which may be required to conform
with changes in applicable law and any changes which do not affect the
application of such provisions to acts or omissions of such individuals prior to
the Effective Time.
4.9 RULE 145 AFFILIATES. SCHEDULE 4.9 sets forth a list of those
persons who are, in the Company's reasonable judgment, "affiliates" of the
Company, within the meaning of Rule 145 promulgated under the Securities Act
(each such person, a "Rule 145 Affiliate"). The Company shall notify the Buyer
in writing regarding any change in the identity of its Rule 145 Affiliates prior
to the Closing Date. The Buyer shall be entitled to place appropriate legends on
the certificates evidencing any shares of Buyer Common Stock to be received by
Rule 145 Affiliates pursuant to the terms of this Agreement reflecting the
restrictions set forth in Rule 145 and to issue appropriate stop transfer
instructions to the transfer agent for Buyer Common Stock (provided that such
legends or stop transfer instructions shall be removed, two years after the
Effective Time, upon the request of any holder of shares of Buyer Common Stock
issued in the Merger that is not then a Rule 145 Affiliate of the Buyer). The
forgoing shall not prohibit a
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transfer by a Company Stockholder which is a partnership to a partner of such
partnership; provided that that such partner shall be bound by the terms of
this Section 4.8.
4.10 LISTING OF MERGER SHARES. The Buyer shall list the Merger Shares
and the shares of Buyer Common Stock issuable upon the exercise of any Option or
Warrant on the Nasdaq National Market.
4.11 CONTINUITY OF BUSINESS ENTERPRISE. After the Closing, the Buyer
will continue at least the historic business of the Company, or use a
significant portion of the Company's historic business assets in a business,
within the meaning of Treasury Regulation section 1.368-1(d).
4.12 BENEFIT PLANS.
(a) Within a reasonable period of time after the Effective
Time, Buyer shall take all reasonable action so that employees of the Company
shall be entitled to participate in each employee benefit plan, program or
arrangement of the Buyer of general applicability (the "Buyer Benefits Plans")
to the same extent as similarly-situated employees of the Buyer and its
Subsidiaries (it being understood that inclusion of the employees of the Company
in the Buyer Benefits Plans may occur at different times with respect to
different plans.) To the extent permitted by law and the terms of the plans, the
Buyer shall cause each Buyer Benefits Plan in which employees of the Company are
eligible to participate to take into account for purposes of eligibility and
vesting thereunder the service of such employees with the Company to the same
extent as such service was credited for such purpose by the Company. Nothing
herein shall limit the ability of the Buyer to amend or terminate any of the
Company's Benefits Plans in accordance with their terms at any time.
(b) If employees of the Company become eligible to participate
in a medical, dental or health plan of the Buyer, the Buyer shall use its
Reasonable Best Effots to provide that each such plan may (i) waive any
preexisting condition limitations to the extent such conditions are covered
unconditionally under the applicable medical, health or dental plans of Buyer
and (ii) waive any waiting period limitation or evidence of insurability
requirement which would otherwise be applicable to such employee on or after the
Effective Time to the extent such employee had satisfied any similar limitation
or requirement under an analogous plan prior to the Effective Time to the extent
required by law.
(c) The Company shall terminate its plan which is qualified
under Section 401(k) of the Code (the "Company 401k Plan") by resolution adopted
by the Company prior to
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the Effective Time, on terms reasonably acceptable to the Buyer and shall
simultaneously amend said Company 401k Plan to the extent necessary to
comply with all applicable law to the extent not previously amended. The Buyer
hereby agrees that, with the approval of the plan administrator of the Buyer's
tax-qualified 401(k) plan (the "Buyer's 401(k) Plan"), which approval will not
be unreasonably withheld, the Buyer will cause Buyer's 401(k) Plan to accept
rollovers or direct rollovers of "eligible rollover distributions" within the
meaning of Section 402(c) of the Code made with respect to Company's employees
pursuant to the Company's 401(k) Plan by reason of the transactions contemplated
by this Agreement. Rollover amounts contributed to Buyer's 401(k) Plan in
accordance with this Section 4.12(d) shall at all times be 100% vested and shall
be invested in accordance with the provisions of the Buyer's 401(k) Plan. In
this regard, Company represents (i) that Company's 401(k) Plan has obtained a
determination letter from the Internal Revenue Service to the effect that
Company's 401(k) Plan is qualified under Section 401(a) of the Code and that the
related trust is exempt from federal income taxes under Section 501(a) of the
Code, or (ii) that Company's 401(k) Plan has been established under a
standardized prototype plan for which an IRS opinion letter has been obtained by
the plan sponsor and is valid as to the adopting employer. The Company has
furnished to Buyer a copy of the most recent IRS determination or opinion letter
with respect to Company's 401(k) Plan and nothing has occurred which could
reasonably be expected to cause the loss of the tax-qualified status of
Company's 401(k) Plan. In the case of any Company employee, the Buyer's Plan
will take into account, for eligibility and vesting purposes, such employee's
pre-Closing service creditable to such employee for purposes of Company's 401(k)
Plan.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations
of each Party to consummate the Merger are subject to the satisfaction of the
condition that this Agreement and the Merger shall have received the Requisite
Stockholder Approval and the satisfaction of the condition that the First Merger
shall have become effective.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE TRANSITORY
SUBSIDIARY. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of
the following additional conditions:
(a) the aggregate number of (i) Dissenting Shares and (ii)
dissenting shares under the First Merger shall not exceed 10% of the number of
outstanding Common Shares as of
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the date of this Agreement (calculated after giving effect to the conversion
into Common Shares of all outstanding Company Shares);
(b) the Company and the Subsidiaries shall have obtained (and
shall have provided copies thereof to the Buyer) all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.2 which are
required on the part of the Company or the Subsidiaries;
(c) the representations and warranties of the Company set
forth in this Agreement shall be true and correct as of the date of this
Agreement and shall be true and correct as of the Effective Time as though made
as of the Effective Time, except to the extent that the inaccuracy of any such
representation or warranty, individually or in the aggregate, would not have a
Company Material Adverse Effect or a material adverse effect on the ability of
the Parties to consummate the transactions contemplated by this Agreement (it
being agreed that any materiality qualifications in particular representations
and warranties shall be disregarded in determining whether any such inaccuracies
would have a Company Material Adverse Effect for purposes of this Section
5.2(c));
(d) the Company shall have performed or complied in all
material respects with its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(e) no Legal Proceeding shall be pending or threatened wherein
an unfavorable judgment, order, decree, stipulation or injunction would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) have, individually or in the
aggregate, a Company Material Adverse Effect, and no such judgment, order,
decree, stipulation or injunction shall be in effect;
(f) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate (the "Company Certificate") to the effect
that each of the conditions specified in Section 5.1 and clauses (a) through (e)
(insofar as clause (e) relates to Legal Proceedings involving the Company or a
Subsidiary) of this Section 5.2 is satisfied in all respects;
(g) each of the Company Stockholders receiving Buyer Common
Stock as part of their Merger Consideration shall have executed and delivered to
the Buyer an Investment
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Representation Letter and the Buyer shall have no reason to believe that
the statements set forth therein are not true and shall be reasonably
satisfied that the issuance and sale of the Merger Shares is exempt from the
registration requirements of the Securities Act;
(h) the Buyer shall have received from counsel to the Company
an opinion with respect to the matters set forth in EXHIBIT C attached hereto,
addressed to the Buyer and dated as of the Closing Date;
(i) the Buyer shall have received copies of the resignations,
effective as of the Effective Time, of each director and officer of the Company
and the Subsidiaries; and
(j) the Buyer shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Company and the Subsidiaries in their jurisdiction of organization and the
various foreign jurisdictions in which they are qualified, certified charter
documents, certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request no less than five
business days prior to the Closing in connection with the Closing.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
(a) the Merger Shares, and all shares of Buyer Common Stock
issuable upon the exercise of any Option or Warrant, shall have been authorized
for listing on the Nasdaq National Market upon official notice of issuance;
(b) the Buyer shall have obtained (and shall have provided
copies thereof to the Company) all of the waivers, permits, consents, approvals
or other authorizations, and effected all of the registrations, filings and
notices, referred to in Section 4.2 which are required on the part of the Buyer
or the Transitory Subsidiary;
(c) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in this Agreement shall be true and correct as
of the date of this Agreement and shall be true and correct as of the Effective
Time as though made as of the Effective Time, except to the extent that the
inaccuracy of any such representation or warranty, individually or in the
aggregate, would not have a Buyer Material Adverse Effect or a material adverse
effect on the ability of the Parties to consummate the transactions contemplated
by this Agreement (it being agreed that any materiality qualifications in
particular representations and warranties shall
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be disregarded in determining whether any such inaccuracies would have a Buyer
Material Adverse Effect for purposes of this Section 5.3(c));
(d) each of the Buyer and the Transitory Subsidiary shall have
performed or complied in all material respects with its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Effective Time;
(e) no Legal Proceeding shall be pending wherein an
unfavorable judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) have, individually or in the aggregate, a Buyer
Material Adverse Effect, and no such judgment, order, decree, stipulation or
injunction shall be in effect;
(f) the Buyer shall have delivered to the Company a
certificate (the "Buyer Certificate") to the effect that each of the conditions
specified in clauses (a) through (e) (insofar as clause (e) relates to Legal
Proceedings involving the Buyer) of this Section 5.3 is satisfied in all
respects;
(g) the Company shall have received a written opinion from
Xxxxx, Xxxx & Xxxxx to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code; provided that if Xxxxx, Xxxx & Xxxxx does not render such opinion,
this condition shall nonetheless be deemed satisfied if Xxxx and Xxxx LLP
renders such opinion to the Company in form and substance reasonably
satisfactory to the Company (it being agreed that the Company and the Buyer
shall each provide reasonable cooperation, including making reasonable and
customary representations, to Xxxxx, Xxxx & Xxxxx or Xxxx and Xxxx LLP, as the
case may be, to enable them to render such opinion);
(h) the Company shall have received from counsel to the Buyer
and the Transitory Subsidiary an opinion with respect to the matters set forth
in Exhibit D attached hereto, addressed to the Company and dated as of the
Closing Date; and
(i) the Company shall have received such other certificates
and instruments (including without limitation certificates of good standing of
the Buyer and the Transitory Subsidiary in their jurisdiction of organization,
certified charter documents, certificates as to the incumbency of officers and
the adoption of authorizing resolutions) as it shall reasonably request no less
than five business days prior to the Closing in connection with the Closing.
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5.4 FRUSTRATION OF CLOSING CONDITIONS. None of the Company, Buyer or
Transitory Subsidiary may rely on the failure of any condition set forth in
Article V to be satisfied if such failure was caused by such party's failure to
use Reasonable Best Efforts to satisfy such condition and consummate the Merger
and the other transactions contemplated by this Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE COMPANY STOCKHOLDERS. The Company
Stockholders listed on SCHEDULE 6.1 attached hereto (the "Indemnifying
Stockholders") shall indemnify the Buyer in respect of, and hold it harmless
against, any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court costs, reasonable costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other reasonable expenses of litigation)
("Damages") incurred or suffered by the Surviving Corporation or the Buyer
resulting from, relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Company contained in this Agreement or
the Company Certificate;
(b) any failure of any Company Stockholder to have good, valid
and marketable title to the issued and outstanding Company Shares issued in the
name of such Company Stockholder, free and clear of all Security Interests; or
(c) any claim by a stockholder or former stockholder of the
Company, or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of any shares of stock of the Company (other
than (A) rights arising under this Agreement or the First Merger Agreement, (B)
the right to receive the merger consideration to which such stockholder is
entitled pursuant to this Agreement or the First Merger Agreement, (C) appraisal
rights under the applicable provisions of the Massachusetts Business Corporation
Law, and (D) rights under the Options and Warrants assumed by the Buyer under
the terms of this Agreement); (ii) any rights of a stockholder (other than (A)
rights arising under this Agreement or the First Merger Agreement, (B) the right
to receive the merger consideration to which such stockholder is entitled
pursuant to this Agreement or the First Merger Agreement, (C) appraisal
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rights under the applicable provisions of the Massachusetts Business
Corporation Law, and (D) rights under the Options and Warrants assumed by the
Buyer under the terms of this Agreement), including any option, preemptive
rights or rights to notice or to vote; (iii) any rights under the Articles of
Organization or By-laws of the Company; or (iv) any claim that his, her or its
shares were wrongfully repurchased or acquired by the Company.
6.2 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify the
Indemnifying Stockholders in respect of, and hold them harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholders resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Buyer or the Transitory
Subsidiary contained in this Agreement or the Buyer Certificate.
6.3 INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to
indemnification under this Article VI (an "Indemnified Party") shall give
written notification to the party from whom indemnification is sought (an
"Indemnifying Party") of the commencement of any suit or proceeding relating to
a third party claim for which indemnification pursuant to this Article VI may be
sought. Such notification shall be given within 20 business days after receipt
by the Indemnified Party of notice of such suit or proceeding, and shall
describe in reasonable detail (to the extent known by the Indemnified Party) the
facts constituting the basis for such suit or proceeding and the amount of the
claimed damages; provided, however, that no delay on the part of the Indemnified
Party in notifying the Indemnifying Party shall relieve the Indemnifying Party
of any liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges in writing to the Indemnified Party that any damages,
fines, costs or other liabilities that may be assessed against the Indemnified
Party in connection with such suit or proceeding constitute Damages for which
the Indemnified Party shall be indemnified pursuant to this Article VI and (B)
the ad damnum is less than or equal to the amount of Damages for which the
Indemnifying Party is liable under this Article VI and (ii) the Indemnifying
Party may not assume control of the defense of a suit or proceeding involving
criminal liability or in which equitable relief is sought against the
Indemnified Party. If the Indemnifying Party does not so assume control of such
defense, the Indemnified Party shall control such defense. The party not
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controlling such defense (the "Non-controlling Party") may participate therein
at its own expense; provided that if the Indemnifying Party assumes control of
such defense and the Indemnified Party reasonably concludes that the
Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such suit or proceeding, the
reasonable fees and expenses of counsel to the Indemnified Party shall be
considered "Damages" for purposes of this Agreement. The party controlling such
defense (the "Controlling Party") shall keep the Non-controlling Party advised
of the status of such suit or proceeding and the defense thereof and shall
consider in good faith recommendations made by the Non-controlling Party with
respect thereto. The Non-controlling Party shall furnish the Controlling Party
with such information as it may have with respect to such suit or proceeding
(including copies of any summons, complaint or other pleading which may have
been served on such party and any written claim, demand, invoice, billing or
other document evidencing or asserting the same) and shall otherwise cooperate
with and assist the Controlling Party in the defense of such suit or proceeding.
The Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld or
delayed; provided that the consent of the Indemnified Party shall not be
required if the Indemnifying Party agrees in writing to pay any amounts payable
pursuant to such settlement or judgment and such settlement or judgment includes
a complete release of the Indemnified Party from further liability and has no
other adverse effect on the Indemnified Party. The Indemnified Party shall not
agree to any settlement of, or the entry of any judgment arising from, any such
suit or proceeding without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article VI for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages. If the
Indemnified Party is the Buyer, the Indemnifying Party shall deliver a copy of
the Claim Notice to the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party a written response
(the "Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the
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Claimed Amount (in which case the Response shall be accompanied by a payment
by the Indemnifying Party to the Indemnified Party of the Claimed Amount,
by check or by wire transfer; provided that if the Indemnified Party is
the Buyer, the Indemnifying Party and the Indemnified Party shall deliver to the
Escrow Agent, within three days following the delivery of the Response, a
written notice executed by both parties instructing the Escrow Agent to
distribute to the Buyer such amount of Escrow Cash and such number of Escrow
Shares as have an aggregate Value (as defined below) equal to the Claimed
Amount), (ii) agree that the Indemnified Party is entitled to receive part, but
not all, of the Claimed Amount (the "Agreed Amount") (in which case the Response
shall be accompanied by a payment by the Indemnifying Party to the Indemnified
Party of the Agreed Amount, by check or by wire transfer; provided that if the
Indemnified Party is the Buyer, the Indemnifying Party and the Indemnified Party
shall deliver to the Escrow Agent, within three days following the delivery of
the Response, a written notice executed by both parties instructing the Escrow
Agent to distribute to the Buyer such amount of Escrow Cash and such number of
Escrow Shares as have an aggregate Value equal to the Agreed Amount, which
notice shall also inform the Escrow Agent that the remaining amount due with
respect to the Claimed Amount shall be the original Claimed Amount less the
Agreed Amount) or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount. If the Indemnifying Party in the Response
disputes its liability for all or part of the Claimed Amount, the Indemnifying
Party and the Indemnified Party shall follow the procedures set forth in Section
6.3(d) for the resolution of such dispute (a "Dispute"). For purposes of this
Article VI, the "Value" of any Escrow Shares delivered in satisfaction of an
indemnity claim shall be the average of the last reported sale prices per share
of the Buyer Common Stock on the Nasdaq National Market over the five
consecutive trading days ending one business day before such delivery is to be
made by the Escrow Agent, multiplied by the number of such Escrow Shares,
subject to equitable adjustment in the event of any stock split, stock dividend,
reverse stock split or similar event affecting the Buyer Common Stock during
such five consecutive trading days.
(d) During the 60-day period following the delivery of a
Response that reflects a Dispute, the Indemnifying Party and the Indemnified
Party shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Indemnifying Party and the Indemnified
Party shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"),
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promptly agree upon a format and timetable for the ADR Procedure, agree upon
the rules applicable to the ADR Procedure, and promptly undertake the ADR
Procedure. The provisions of this Section 6.3(d) shall not obligate the
Indemnifying Party and the Indemnified Party to pursue an ADR Procedure or
prevent either such party from pursuing the Dispute in a court of competent
jurisdiction; provided that, if the Indemnifying Party and the Indemnified Party
agree to pursue an ADR Procedure, neither the Indemnifying Party nor the
Indemnified Party may commence litigation or seek other remedies with respect to
the Dispute prior to the completion of such ADR Procedure. Any ADR Procedure
undertaken by the Indemnifying Party and the Indemnified Party shall be
considered a compromise negotiation for purposes of federal and state rules of
evidence, and all statements, offers, opinions and disclosures (whether written
or oral) made in the course of the ADR Procedure by or on behalf of the
Indemnifying Party, the Indemnified Party or the ADR Service shall be treated as
confidential and, where appropriate, as privileged work product. Such
statements, offers, opinions and disclosures shall not be discoverable or
admissible for any purposes in any litigation or other proceeding relating to
the Dispute (provided that this sentence shall not be construed to exclude from
discovery or admission any matter that is otherwise discoverable or admissible).
The fees and expenses of any ADR Service used by the Indemnifying Party and the
Indemnified Party shall be shared equally by the Indemnifying Party and the
Indemnified Party. If the Indemnified Party is the Buyer, the Indemnifying Party
and the Indemnified Party shall deliver to the Escrow Agent, promptly following
the resolution of the Dispute (whether by mutual agreement, pursuant to an ADR
Procedure, as a result of a judicial decision or otherwise), a written notice
executed by both parties instructing the Escrow Agent as to what (if any)
portion of the Escrow Shares shall be distributed to the Buyer and/or the
Indemnifying Stockholders (which notice shall be consistent with the terms of
the resolution of the Dispute).
(e) Notwithstanding the other provisions of this Section 6.3,
if a third party asserts (other than by means of a lawsuit) that an Indemnified
Party is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article VI, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VI, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article VI,
for any such Damages for which it is entitled to indemnification pursuant to
this Article VI (subject to the right of the Indemnifying Party to dispute the
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Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article VI).
(f) For purposes of this Section 6.3 and the last two
sentences of Section 6.4, (i) if the Indemnifying Stockholders comprise the
Indemnifying Party, any references to the Indemnifying Party (except provisions
relating to an obligation to make or a right to receive any payments provided
for in Section 6.3 or Section 6.4) shall be deemed to refer to the
Indemnification Representatives, and (ii) if the Indemnifying Stockholders
comprise the Indemnified Party, any references to the Indemnified Party (except
provisions relating to an obligation to make or a right to receive any payments
provided for in Section 6.3 or Section 6.4) shall be deemed to refer to the
Indemnification Representatives. The Indemnification Representatives shall have
full power and authority on behalf of each Indemnifying Stockholder to take any
and all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the Indemnifying Stockholders under this
Article VI. The Indemnification Representatives shall have no liability to any
Indemnifying Stockholder for any action taken or omitted on behalf of the
Indemnifying Stockholders pursuant to this Article VI.
6.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement, the Company Certificate or the Buyer
Certificate shall (a) survive the Closing and any investigation at any time made
by or on behalf of an Indemnified Party and (b) expire on the date one year
following the Closing Date. If an Indemnified Party delivers to an Indemnifying
Party, before expiration of a representation or warranty, either a Claim Notice
based upon a breach of such representation or warranty, or a notice that, as a
result a legal proceeding instituted by or written claim made by a third party,
the Indemnified Party reasonably expects to incur Damages as a result of a
breach of such representation or warranty (an "Expected Claim Notice"), then
such representation or warranty shall survive until, but only for purposes of,
the resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party; and if the
Indemnified Party has delivered a copy of the Expected Claim Notice to the
Escrow Agent and Escrow Cash or Escrow Shares have been retained in escrow after
the Termination Date (as defined in the Escrow Agreement) with respect to such
Expected Claim Notice, the Indemnifying Party and the Indemnified Party shall
promptly deliver to the Escrow Agent a written notice executed by both parties
instructing the Escrow Agent to distribute such retained Escrow Cash and Escrow
Shares to the Indemnifying Stockholders in accordance with the terms of the
Escrow Agreement.
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6.5 LIMITATIONS.
(a) Notwithstanding anything to the contrary herein, (i) the
aggregate liability of the Indemnifying Stockholders under this Article VI shall
not exceed the Escrow Cash and the Escrow Shares and the aggregate liability of
the Buyer under this Article VI shall not exceed an amount equal to the Escrow
Cash and the value of the Escrow Shares as of the Closing Date (calculated at
the Closing Value), (ii) neither the Indemnifying Stockholders, on the one hand,
nor the Buyer, on the other hand, shall be liable pursuant to Section 6.1(a) or
Section 6.2, respectively, for any individual claim that is less than $5,000,
and (iii) neither the Indemnifying Stockholders nor the Buyer shall be liable
under this Article VI unless and until the aggregate Damages for which they or
it would otherwise be liable exceed $150,000 (at which point the Indemnifying
Stockholders and the Buyer shall become liable for the aggregate Damages, and
not just amounts in excess of $150,000). Notwithstanding the foregoing, (i) the
limitations set forth in clause (iii) of the previous sentence shall not apply
to (A) a claim pursuant to Section 6.1(a) relating to a breach of the
representations and warranties set forth in Sections 2.1, 2.2 or 2.3 (or the
portion of the Company Certificate relating thereto) or to a breach of the
covenants set forth in Sections 4.5(b) or 4.7 or (B) a claim pursuant to Section
6.2 relating to a breach of the representations and warranties set forth in
Sections 3.1, 3.2 or 3.3 (or the portion of the Buyer Certificate relating
thereto) and (ii) the limitations set forth in clauses (i), (ii) and (iii) of
the previous sentence shall not apply to a claim pursuant to Section 6.2
relating to the Buyer's failure to comply with the provisions of Sections
1.3(e), 1.3(f), 1.3(g), 1.3(h), 1.5, 1.7, 1.8, 1.9, 1.10, 4.5(b), 4.8, 4.10 and
4.11 and Article VII of this Agreement. For purposes solely of this Article VI,
all representations and warranties of the Company in Article II (other than
Section 2.28) and all representations and warranties of the Buyer and the
Transitory Subsidiary in Article III (other than Section 3.10) shall be
construed as if the term "material" and any reference to "Company Material
Adverse Effect" and "Buyer Material Adverse Effect" (and variations thereof)
were omitted from such representations and warranties.
(b) The Escrow Agreement shall be the exclusive means for the
Buyer to collect any Damages for which it is entitled to indemnification under
this Article VI.
(c) After the Closing, the rights of the Indemnified Parties
under this Article VI and the Escrow Agreement shall be the exclusive remedy of
the Indemnified Parties with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement.
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(d) No Indemnifying Stockholder shall have any right of
contribution against the Company or the Surviving Corporation with respect to
any breach by the Company of any of its representations, warranties, covenants
or agreements.
ARTICLE VII
REGISTRATION RIGHTS
7.1 REGISTRATION OF SHARES. The Buyer shall submit to the
Indemnification Representatives for their prior review, and file with the SEC
within 30 days following the Closing, a registration statement on Form S-3
covering the resale to the public by the Company Stockholders of the Merger
Shares and all shares of Buyer Common Stock issuable upon the exercise of any
Warrant exercised within 15 days after the Closing Date (the "Stockholder
Registration Statement"). The Buyer shall deal with and respond in good faith to
all SEC comments within 10 days of receipt thereof and shall use its best
efforts to cause the Stockholder Registration Statement to be declared effective
by the SEC within 60 days after the Closing Date. The Buyer shall cause the
Stockholder Registration Statement to remain effective until the date one year
after the effective date of such Stockholder Registration Statement or such
earlier time as all of the Merger Shares covered by the Stockholder Registration
Statement have been sold pursuant thereto.
7.2 LIMITATIONS ON REGISTRATION RIGHTS.
(a) The Buyer may, by written notice to the Company
Stockholders, suspend the Stockholder Registration Statement after
effectiveness, for one or more periods of up to 30 days each (but not more often
than 30 days in any consecutive six month period), and require that the Company
Stockholders immediately cease sales of shares pursuant to the Stockholder
Registration Statement, in the event that the Buyer is engaged in any activity
or transaction or preparations or negotiations for any activity or transaction
that the Buyer desires to keep confidential for business reasons, if the Buyer
determines in good faith that the public disclosure requirements imposed on the
Buyer under the Securities Act in connection with the Stockholder Registration
Statement would require disclosure of such activity, transaction, preparations
or negotiations.
(b) If the Buyer suspends the Stockholder Registration
Statement or requires the Company Stockholders to cease sales of shares pursuant
to paragraph (a) above, the Buyer shall, as promptly as practicable following
the termination of the circumstance which entitled the Buyer to do so, take such
actions as may be necessary to reinstate the effectiveness of the
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Stockholder Registration Statement and/or give written notice to all Company
Stockholders authorizing them to resume sales pursuant to the Stockholder
Registration Statement. If as a result thereof the prospectus included
in the Stockholder Registration Statement has been amended to comply with
the requirements of the Securities Act, the Buyer shall enclose such
revised prospectus with the notice to Company Stockholders given pursuant to
this paragraph (b), and the Company Stockholders shall make no offers or sales
of shares pursuant to the Stockholder Registration Statement other than by means
of such revised prospectus.
7.3 REGISTRATION PROCEDURES.
(a) In connection with the filing by the Buyer of the
Stockholder Registration Statement, the Buyer shall furnish to each Company
Stockholder a copy of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act.
(b) The Buyer shall use its best efforts to register or
qualify the Merger Shares covered by the Stockholder Registration Statement
under the securities laws of each state of the United States within 60 days
after the Closing Date; PROVIDED, HOWEVER, that the Buyer shall not be required
in connection with this paragraph (b) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction.
(c) If the Buyer has delivered preliminary or final
prospectuses to the Company Stockholders and after having done so the prospectus
is amended or supplemented to comply with the requirements of the Securities
Act, the Buyer shall promptly notify the Company Stockholders and, if requested
by the Buyer, the Company Stockholders shall immediately cease making offers or
sales of shares under the Stockholder Registration Statement and return all
prospectuses to the Buyer. The Buyer shall promptly provide the Company
Stockholders with revised or supplemented prospectuses and, following receipt of
the revised or supplemented prospectuses, the Company Stockholders shall be free
to resume making offers and sales under the Stockholder Registration Statement.
(d) The Buyer shall pay the expenses incurred by it in
complying with its obligations under this Article VII, including all
registration and filing fees, exchange listing fees, fees and expenses of
counsel for the Buyer, and fees and expenses of accountants for the Buyer, but
excluding (i) any brokerage fees, selling commissions or underwriting discounts
incurred by the Company Stockholders in connection with sales under the
Stockholder Registration Statement and (ii) the fees and expenses of any counsel
retained by Company Stockholders in excess of $7,500 (which fees up to $7,500
shall be paid by the Buyer).
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7.4 REQUIREMENTS OF COMPANY STOCKHOLDERS. The Buyer shall not be
required to include any Merger Shares in the Stockholder Registration Statement
unless:
(a) the Company Stockholder owning such shares furnishes to
the Buyer in writing such information regarding such Company Stockholder and the
proposed sale of Merger Shares by such Company Stockholder as the Buyer may
reasonably request in writing in connection with the Stockholder Registration
Statement or as shall be required in connection therewith by the SEC or any
state securities law authorities;
(b) such Company Stockholder shall have provided to the Buyer
its written agreement:
(i) to indemnify the Buyer and each of its directors
and officers against, and hold the Buyer and each of its directors and
officers harmless from, any losses, claims, damages, expenses or liabilities
(including reasonable attorneys fees) to which the Buyer or such directors and
officers may become subject by reason of any statement or omission in the
Stockholder Registration Statement made in reliance upon, or in conformity with,
a written statement by such Company Stockholder furnished pursuant to this
Section 7.4; and
(ii) to report to the Buyer sales made pursuant to
the Stockholder Registration Statement.
7.5 INDEMNIFICATION. The Buyer agrees to indemnify and hold harmless
each Company Stockholder whose shares are included in the Stockholder
Registration Statement against any losses, claims, damages, expenses or
liabilities to which such Company Stockholder may become subject by reason of
any untrue statement of a material fact contained in the Stockholder
Registration Statement or any omission to state therein a fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, expenses or liabilities arise
out of or are based upon information furnished to the Buyer in writing by or on
behalf of a Company Stockholder for use in the Stockholder Registration
Statement. The Buyer shall have the right to assume the defense and settlement
of any claim or suit for which the Buyer may be responsible for indemnification
under this Section 7.5.
7.6 ASSIGNMENT OF RIGHTS. A Company Stockholder may not assign any of
its rights under this Article VII except in connection with the transfer of some
or all of his, her or its Merger Shares to a child or spouse, or trust for their
benefit or, in the case of a partnership, to the
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partners of such partnership pursuant to a pro rata distribution, PROVIDED
each such transferee agrees in a written instrument delivered to the Buyer to
be bound by the provisions of this Article VII.
7.7 RULE 144 REQUIREMENTS. For a period of two years after the Closing
Date, the Company agrees to use its Reasonable Best Efforts to file with the SEC
in a timely manner all reports and other documents required of the Buyer under
the Exchange Act.
ARTICLE VIII
TERMINATION
8.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval), as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company in the event the Company is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (c) or (d) of Section 5.2 not to be
satisfied and (ii) is not cured within 20 days following delivery by the Buyer
to the Company of written notice of such breach;
(c) the Company may terminate this Agreement by giving written
notice to the Buyer in the event the Buyer or the Transitory Subsidiary is in
breach of any representation, warranty or covenant contained in this Agreement,
and such breach, individually or in combination with any other such breach, (i)
would cause the conditions set forth in clauses (c) or (d) of Section 5.3 not to
be satisfied and (ii) is not cured within 20 days following delivery by the
Company to the Buyer of written notice of such breach;
(d) any Party may terminate this Agreement by giving written
notice to the other Parties at any time after the Company Stockholders have
voted on whether to approve this Agreement and the Merger in the event this
Agreement and the Merger failed to receive the Requisite Stockholder Approval;
(e) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before
January 31, 2002 by reason of the
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failure of any condition precedent under Section 5.1 or 5.2 hereof (unless
the failure results primarily from a breach by the Buyer or the Transitory
Subsidiary of any representation, warranty or covenant contained in this
Agreement); or
(f) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before January 31, 2002 by reason of the failure of any condition
precedent under Section 5.1 or 5.3 hereof (unless the failure results primarily
from a breach by the Company of any representation, warranty or covenant
contained in this Agreement).
8.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 8.1, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for
obligations under Section 4.5 and except for any liability of any Party for
breaches of this Agreement).
ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
DEFINED TERM SECTION
------------ -------
ADR Procedure 6.3(d)
ADR Service 6.3(d)
Affiliate 2.13(a)(vii)
Affiliated Group 2.9(a)(iii)
Affiliated Period 2.9(a)(iv)
Agreed Amount 6.3(c)
Articles of Merger 1.1
Buyer Introduction
Buyer Benefit Plans 4.12(a)
Buyer Certificate 5.3(f)
Buyer Common Stock 1.5(c)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
Buyer's 401(k) Plans 4.12(d)
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CERCLA 2.21(a)
Certificates 1.7
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.2
Closing Date 1.2
Closing Value 1.5(b)
Code 1.8(a)
Common Shares 1.5(a)
Company Introduction
Company Certificate 5.2(f)
Company Intellectual Property 2.12(a)
Company Material Adverse Effect 2.1(a)
Company Merger Sub Introduction
Company Shares 1.5(a)
Company Stockholders 1.3(d)
Company's 401(k) Plan 4.12(d)
Confidential Information 4.5(b)
Controlling Party 6.3(a)
Conversion Ratio 1.5(c)
Customer Deliverables 2.12(a)
Damages 6.1
Disclosure Schedule Article II
Disclosure Statement 4.3(a)
Dispute 6.3(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.20(a)(i)
Environmental Law 2.21(a)
ERISA 2.20(a)(ii)
ERISA Affiliate 2.20(a)(iii)
Escrow Agent 1.3(g)
Escrow Agreement 1.3(g)
Escrow Cash 1.9(a)
Escrow Shares 1.9(a)
Expected Claim Notice 6.4
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Exchange Act 2.13(a)(vii)
Financial Statements 2.6
First Merger Introduction
First Merger Agreement Introduction
First Merger Disclosure Statement 4.3(b)
Fully Diluted Common Share Equivalents 1.5(b)
GAAP 2.6
Governmental Entity 2.4
Indemnification Representatives 1.3(g)
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Indemnifying Stockholders 6.1
Intellectual Property 2.12(a)
Internal Systems 2.12(a)
Legal Proceeding 2.17
Materials of Environmental Concern 2.21(b)
Merger 1.1
Merger Consideration 1.5(b)
Merger Shares 1.7
Merger Value 1.5(b)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-controlling Party 6.3(a)
Option Plans 1.8(a)
Options 1.8(a)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.24
Preferred Shares 1.5(a)
Reasonable Best Efforts 4.1
Requisite First Merger Stockholder Approval 2.3
Requisite Stockholder Approval 2.3
Response 6.3(c)
Rule 145 Affiliate 4.9
SEC 3.5
Securities Act 1.8(c)
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Security Interest 2.4
Series A Shares 1.5(a)
Series B Shares 1.5(a)
Series C Shares 1.5(a)
Series D Shares 1.5(a)
Series E Shares 1.5(a)
Software 2.12(e)
Stockholder Registration Statement 7.1
Subsidiary 2.5(a)
Surviving Corporation 1.1
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
Transitory Subsidiary Introduction
Value 6.3(c)
Warrants 1.8(b)
ARTICLE X
MISCELLANEOUS
10.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; PROVIDED, HOWEVER, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use reasonable efforts to advise the other Parties and provide them
with a copy of the proposed disclosure prior to making the disclosure).
10.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; PROVIDED, HOWEVER, that (a) the provisions in
Article I concerning the payment of the Merger Consideration and the assumption
of Options and Warrants, Sections 4.10 and 4.11 and the provisions of Article
VII concerning registration rights are intended for the benefit of the Company
Stockholders and the holders of Options and Warrants, as applicable, (b) the
provisions in Section 4.8 concerning indemnification are intended for the
benefit of the individuals specified therein and their successors and assigns,
(c) the provisions of Section 6.2 concerning the indemnification of the
Indemnifying Stockholders are intended for the benefit of the Indemnifying
Stockholders, (d) the provisions of Section 1.3(h) are for the benefit of
Silicon
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Valley Bank and (e) the provisions of Section 1.10 are for the benefit of the
Company's common stockholders receiving the consideration under the First
Merger Agreement.
10.3 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
Mutual Non-Disclosure Agreement dated October 29, 2001 between the Buyer and the
Company and paragraph 10 of the Letter of Intent dated November 20, 2001 between
the Buyer and the Company shall remain in effect in accordance with their
respective terms.
10.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties; provided that the Transitory Subsidiary may
assign its rights, interests and obligations hereunder to an Affiliate of the
Buyer.
10.5 COUNTERPARTS AND FACSIMILE SIGNATURE. 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. This
Agreement may be executed by facsimile signature.
10.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
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IF TO THE COMPANY: COPY TO:
Xxxxx00x0.xxx, Inc. Xxx X. Xxxxx, Esq.
000 Xxxxx Xxxxx Xxxxx Xxx Xxxxxxxxx Xxxxxx
Xxxxx 000 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
AND TO:
Xxxxx, Xxxx & Xxxxx
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxx, Esq.
IF TO THE BUYER OR COPY TO:
THE TRANSITORY SUBSIDIARY:
Xxxx and Xxxx LLP
SkillSoft Corporation 00 Xxxxx Xxxxxx
00 Xxxxxxxxxx Xxxx Xxxxx Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxx, Xxx Xxxxxxxxx 00000 Attention: Xxxxxxx X. Xxxxxxx, Esq.
Attention: Xxxxxxx X. Xxxxx
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the Commonwealth of Massachusetts
without giving effect to any choice or conflict of law provision or rule
(whether of the Commonwealth of Massachusetts or any other jurisdiction) that
would cause the application of laws of any jurisdictions other than those of the
Commonwealth of Massachusetts.
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10.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time; PROVIDED,
HOWEVER, that any amendment effected subsequent to the Requisite Stockholder
Approval shall be subject to any restrictions contained in the Massachusetts
Business Corporation Law. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by all of the Parties.
No waiver of any right or remedy hereunder shall be valid unless the same shall
be in writing and signed by the Party giving such waiver. No waiver by any Party
with respect to any default, misrepresentation or breach of warranty or covenant
hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
10.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
10.11 SUBMISSION TO JURISDICTION. Each of the Parties (a) submits to
the jurisdiction of any state or federal court sitting in Boston, Massachusetts
in any action or proceeding arising out of or relating to this Agreement, (b)
agrees that all claims in respect of such action or proceeding may be heard and
determined in any such court, and (c) agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other Party with respect thereto. Each
Party agrees to accept service of any summons, complaint or other initial
pleading made in the manner provided for the giving of notices in Section 10.7.
Nothing in this Section 10.11, however, shall affect the right of any Party to
serve such summons, complaint or initial pleading in any other manner permitted
by law.
10.12 CONSTRUCTION.
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(a) The language used in this Agreement shall be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
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IN WITNESS WHEREOF, the Parties have executed this Agreement under seal
as of the date first above written.
SKILLSOFT CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Title: President and Chief Executive Officer
BTF ACQUISITION CORP.
By: /s/ Xxxxxx X. XxXxxxxx
-----------------------------------------
Title: Vice President and Treasurer
XXXXX00x0.xxx, Inc.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------
Title: President
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Title: Treasurer
The following stockholders of the Company hereby execute this Agreement
for the limited purpose of agreeing to and becoming bound by the provisions of
Section 4.3(c).
/s/ Xxxxx X. Xxxxxxxxx
---------------------------------------------
Xxxxx X. Xxxxxxxxx
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COMMONWEALTH CAPITAL VENTURES L.P.
By: Commonwealth Venture Partners,
L.P., Its General Partner
By: /s/ R. Xxxxxxx XxXxxxxxx
--------------------------------
General Partner
SIGMA ASSOCIATES III, L.P.
By: Sigma Management III, L.P.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
General Partner
SIGMA INVESTORS III, L.P.
By: Sigma Management III, L.P.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
General Partner
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SIGMA PARTNERS III, L.P.
By: Sigma Management III, L.P.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
General Partner
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