EXHIBIT 99.1
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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
CP HOLDCO, LLC,
CP MERGER CO.
AND
CRITICAL PATH, INC.
DATED AS OF DECEMBER 5, 2007
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER.......................................................2
Section 1.01 The Merger..............................................2
Section 1.02 Closing.................................................2
Section 1.03 Effective Time; Effects of the Merger...................3
Section 1.04 Articles of Incorporation and Bylaws....................3
Section 1.05 Directors...............................................3
Section 1.06 Officers................................................3
Section 1.07 Conversion of Shares of Company Capital Stock...........3
Section 1.08 Dissenting Shares.......................................5
Section 1.09 Treatment of Company Restricted Shares, Company
Options and Company Warrants............................5
Section 1.10 Senior Convertible Notes................................7
ARTICLE II PAYMENT FOR SHARES..............................................7
Section 2.01 Exchange of Stock Certificates and Cash.................7
Section 2.02 Stock Transfer Books...................................10
Section 2.03 Further Assurances.....................................10
Section 2.04 Adjustments Upon Stock Splits, Etc.....................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................10
Section 3.01 Corporate Organization.................................10
Section 3.02 Capitalization.........................................11
Section 3.03 Authority; Enforceability..............................12
Section 3.04 No Conflict: Required Filings and Consents............13
Section 3.05 Sec Filings and Financial Statements...................14
Section 3.06 Absence of Certain Changes or Events...................15
Section 3.07 Proxy Statement........................................15
Section 3.08 Litigation.............................................15
Section 3.09 Compliance With Laws...................................16
Section 3.10 Taxes..................................................16
Section 3.11 Real Estate; Assets....................................17
Section 3.12 Employee Benefit Plans and Related Matters; Erisa......17
Section 3.13 Employees, Labor Matters...............................18
Section 3.14 Intellectual Property Rights...........................18
Section 3.15 Privacy of Customer Information........................20
Section 3.16 Potential Conflicts of Interest........................20
Section 3.17 Material Contracts.....................................20
Section 3.18 Environmental Laws and Regulations.....................21
Section 3.19 Insurance Coverage.....................................21
Section 3.20 Related Party Transactions.............................21
Section 3.21 Absence of Undisclosed Liabilities.....................22
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Section 3.22 Opinion of Financial Advisor...........................22
Section 3.23 Brokers................................................22
Section 3.24 Rights Agreement.......................................22
Section 3.25 No Other Representations...............................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT.......................23
Section 4.01 Organization...........................................23
Section 4.02 Authority Relative to This Agreement...................23
Section 4.03 No Conflict; Required Filings and Consents.............24
Section 4.04 Proxy Statement........................................24
Section 4.05 Brokers................................................25
Section 4.06 Formation..............................................25
Section 4.07 No Other Representations...............................25
Section 4.08 Sufficient Funds.......................................25
ARTICLE V COVENANTS AND OTHER AGREEMENTS..................................25
Section 5.01 Conduct of Business of the Company.....................25
Section 5.02 Notification of Certain Matters........................29
Section 5.03 Indemnification; Directors' and Officers' Insurance....29
Section 5.04 Access and Information.................................30
Section 5.05 Publicity..............................................30
Section 5.06 Commercially Reasonable Efforts.......................30
Section 5.07 Company Shareholders Meeting; Proxy Material...........31
Section 5.08 Takeover Proposal and Related Matters..................32
Section 5.09 Third Party Consents...................................34
Section 5.10 Shareholder Litigation.................................34
Section 5.11 State Takeover Laws....................................34
ARTICLE VI CONDITIONS.....................................................35
Section 6.01 Conditions to Obligation of Each Party to Effect
the Merger.............................................35
Section 6.02 Conditions to Obligation of Parent and Merger Sub......35
Section 6.03 Conditions to Obligation of the Company................38
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.............................38
Section 7.01 Termination............................................38
Section 7.02 Effect of Termination..................................40
Section 7.03 Fees and Expenses......................................40
ARTICLE VIII MISCELLANEOUS................................................41
Section 8.01 Non-survival of Representations, Warranties
and Agreements....................................41
Section 8.02 Fees and Expenses.................................41
Section 8.03 Notices...........................................41
Section 8.04 Governing Law; Consent to Jurisdiction............42
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Section 8.05 Entire Agreement; Assignment......................43
Section 8.06 Severability......................................43
Section 8.07 Headings..........................................44
Section 8.08 Parties in Interest; Limitation of Liabilities....44
Section 8.09 Counterparts......................................44
Section 8.10 Waiver of Jury Trial..............................44
Section 8.11 Definitions.......................................45
Section 8.12 Amendment.........................................50
Section 8.13 Extension and Waiver..............................50
EXHIBITS:
A Form of Conversion and Contribution Agreement
B Form of Voting Agreement
C Form of Note Exchange Agreement
D Form of Second Amended and Restated Articles of Incorporation
E Form of Agreement of Merger
iii
INDEX OF DEFINED TERMS
TERM SECTION
Agreement Preamble
Agreement of Merger 1.03
Board of Directors Recitals
Business Combination Transaction 5.08(d)
Cap 5.03(b)
Certificates 2.01(g)
CGCL Recitals
Change in the Company Recommendation 5.07(c)
Claims 3.08
Closing 1.02
Closing Date 1.02
Code 2.01(f)
Common Stock Recitals
Common Stock Certificate 1.07(a)
Company Preamble
Company Contracts 3.17(a)
Company Derivatives 3.02(b)
Company Option 1.09(b)
Company Plans 3.12(a)
Company Recommendation 5.07(c)
Company Restricted Share 1.09(a)
Company Shareholder Approval 3.03(c)
Company Shareholders Meeting 5.07(c)
Company Stock Option Plans 3.02(a)
Company Warrant 1.09(c)
Conversion and Contribution Agreement Recitals
Converted Shares Recitals
Dissenting Shares 1.08
Effective Time 1.03
Exchange Act 5.07(a)
Expense Amount 7.03(a)
Expenses 8.02
Financial Statements 3.05(b)
Form 10-K Article III
Governmental Approvals 3.04(b)
Governmental Authority 3.04(b)
Holder Acknowledgement 1.09(b)
Indemnified Person 5.03(a)
Intellectual Property 3.14(a)
IP Agreements 3.14(a)
Liabilities 3.21
Merger Recitals
Merger Consideration Recitals
Merger Filing 1.03
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TERM SECTION
Merger Sub Preamble
Parent Preamble
Parent Affiliate 8.08(b)
Parent Held Shares 1.07(b)
Parties Preamble
Paying Agent 2.01(a)
Paying Agent Agreement 2.01(a)
Payment Fund 2.01(a)
Proceeding 5.01(m)
Proxy Statement 5.07(a)
Restated Articles 6.02(g)
Reverse Split 1.07(d)
Rights Plan 3.24
Xxxxxxxx-Xxxxx Act 3.09(b)
Schedule 13E-3 5.07(a)
SEC Reports 3.05(a)
Senior Convertible Notes 1.10
Series D Preferred Stock Recitals
Series E Distribution 1.07(d)
Series E Distribution Holder 1.07(d)
Series E Preferred Stock Recitals
Series E Stock Certificate 1.07(d)
Special Committee Recitals
Superior Proposal 5.08(d)
Surviving Corporation 1.01
Takeover Proposal 5.08(d)
Termination Date 7.01(b)(i)
Third Party 5.08(d)
Transactions Recitals
Transmittal Documents 2.01(b)
Treasury Shares 1.07(b)
Vote of Outstanding Shares 3.03(c)(i)
Voting Agreement Recitals
Voting Company Debt 3.02(a)
v
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of December
5, 2007, is entered into by and among CP Holdco, LLC, a Delaware limited
liability company ("PARENT"), CP Merger Co., a California corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB") and Critical Path, Inc., a
California corporation (the "COMPANY" and, collectively with Parent and Merger
Sub, the "PARTIES").
R E C I T A L S
WHEREAS, the Board of Directors of the Company (the "BOARD OF DIRECTORS"),
based on the unanimous recommendation of a special committee thereof consisting
solely of disinterested directors of the Company (the "SPECIAL COMMITTEE") has
(i) determined that (x) the merger of Merger Sub with and into the Company (the
"MERGER"), with the Company remaining as the surviving corporation and a
Subsidiary of Parent, whereby each share of the Common Stock of the Company,
par value $0.001 per share (the "COMMON STOCK") (other than Excluded Shares (as
defined herein) and Dissenting Shares (as defined herein)) will, upon the terms
and subject to the conditions set forth herein, be converted into the right to
receive cash in an amount equal to $0.102 per share (subject to adjustments
upon any stock split, stock dividend, stock distribution or reclassifications
of the Common Stock pursuant to Section 2.04) (the "MERGER CONSIDERATION") and
(y) the other transactions (collectively with the Merger, the "TRANSACTIONS")
contemplated by this Agreement and the Note Exchange Agreement (as defined
herein) and the provisions of the Restated Articles (as defined herein) are
fair to, and in the best interests of the shareholders of the Company (other
than the Rollover Shareholders (as defined herein)), (ii) approved and adopted
this Agreement and the Transactions, and declared their advisability, (iii)
recommended the adoption by the shareholders of the Company, subject to the
terms and conditions set forth herein, of this Agreement and the Restated
Articles, and (iv) approved the Merger, the Transactions and this Agreement for
purposes of Section 1201 of the California General Corporation Law (as amended
from time to time, the "CGCL");
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Contributing Shareholders (as defined herein) have entered into an
agreement with Parent, substantially in the form of EXHIBIT A (the "CONVERSION
AND CONTRIBUTION Agreement"), pursuant to which (i) certain of the Contributing
Shareholders have agreed that, subject to the terms and conditions thereof and
prior to the record date established by the Board of Directors for the
determination of shareholders entitled to vote on the Merger and the
Transactions at the Company Shareholders Meeting (as defined below), such
Contributing Shareholders shall convert a portion of their respective shares of
Series D Cumulative Redeemable Convertible Preferred Stock of the Company, par
value $0.001 per share (the "SERIES D PREFERRED STOCK") as set forth in the
Conversion and Contribution Agreement into shares of Common Stock
(collectively, the "CONVERTED SHARES"), and (ii) the Contributing Shareholders
will, immediately prior to the Effective Time, contribute to Parent all of the
shares of Common Stock owned by them (including all of the Converted Shares) in
exchange for units of membership interest of Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement,
each of the Contributing Shareholders and the other shareholders named therein
are entering into a voting agreement with Parent, substantially in the form of
EXHIBIT B (the "VOTING AGREEMENT"), pursuant to which, among other things, each
such Person (as defined herein) has agreed to vote the shares of Common Stock,
Series D Preferred Stock, Series E Redeemable Convertible Preferred Stock of
the Company, par value $0.001 per share (the "SERIES E PREFERRED STOCK") or
other voting securities of the Company owned by such Person for approval of
this Agreement, the Restated Articles, the Merger and the other Transactions;
WHEREAS, the board of managers of Parent and the board of directors of
Merger Sub has each deemed it in the best interests of their respective members
or shareholders, as applicable, to consummate the Merger and the other
Transactions, and such boards have approved this Agreement, the Conversion and
Contribution Agreement, the Voting Agreement, the Merger and the other
Transactions, and
WHEREAS, certain capitalized terms used herein but not otherwise defined
herein shall have the meanings assigned to such terms in Section 8.11 of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the Parties hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.01 THE MERGER. Upon the terms and conditions set forth in this
Agreement, and in accordance with the CGCL, Merger Sub shall be merged with and
into the Company at the Effective Time. At the Effective Time, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation (the "SURVIVING CORPORATION").
Section 1.02 CLOSING. The closing of the Merger (the "CLOSING") shall take
place as soon as practicable, and in any event no later than the fifth (5th)
Business Day after all of the conditions set forth in Article VI have been
satisfied or waived (other than those conditions that by their nature are to be
satisfied at the Closing), unless this Agreement has been theretofore
terminated pursuant to its terms or unless another time or date is agreed to in
writing by the Parties. The date on which the Closing occurs is referred to in
this Agreement as the "CLOSING DATE". The Closing shall be held at the offices
of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP, 1285 Avenue of the Americas,
New York, New York, at 10:00 a.m., New York City time, or at such other place
and time as the Parties shall agree in writing.
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Section 1.03 EFFECTIVE TIME; EFFECTS OF THE MERGER. Prior to the Closing,
Parent and the Company shall prepare, and on the Closing Date the Company shall
cause to be filed with the Secretary of State of the State of California, a
copy of an agreement of merger substantially in the form of EXHIBIT E hereto
(the "AGREEMENT OF MERGER") and the officer's certificates of the Company and
Merger Sub required by Section 1103 of the CGCL (collectively, the "MERGER
FILING"), and the Merger shall become effective at such time when the Merger
Filing is filed with and accepted by the Secretary of State of the State of
California or at such later time as is agreed to by the Parties and is
specified in the Merger Filing (the "EFFECTIVE TIME"). From and after the
Effective Time, the Merger shall have the effects provided for in this
Agreement and in Section 1107 of the CGCL.
Section 1.04 ARTICLES OF INCORPORATION AND BYLAWS. The articles of
incorporation of the Company as in effect immediately prior to the Effective
Time shall be the articles of incorporation of the Surviving Corporation as of
the Effective Time, until duly amended in accordance with applicable Law. The
by-laws of Merger Sub in effect immediately prior to the Effective Time shall
be the by-laws of the Surviving Corporation as of the Effective Time, until
duly amended in accordance with applicable Law.
Section 1.05 DIRECTORS. The directors of the Company immediately prior to
the Effective Time (other than those who have tendered their resignations as
contemplated by Section 6.02(e)) shall be the initial directors of the
Surviving Corporation as of the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided
in the articles of incorporation and bylaws of the Surviving Corporation, or
until their earlier death, resignation or removal, or otherwise as provided by
applicable Law.
Section 1.06 OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
as of the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the articles of incorporation
and bylaws of the Surviving Corporation, or until their earlier death,
resignation or removal, or otherwise as provided by applicable Law.
Section 1.07 CONVERSION OF SHARES OF COMPANY CAPITAL STOCK. At the
Effective Time, by virtue of the Merger and without any action on the part of
the Parties hereto or any holder of any of the following securities:
(a) COMMON STOCK OF THE COMPANY. Each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than Excluded Shares
and Dissenting Shares) shall be converted into the right to receive the Merger
Consideration. As of the Effective Time, all such shares of Common Stock shall
no longer remain outstanding and shall automatically be cancelled and shall
cease to exist, and each holder of a certificate that immediately prior to the
Effective Time represented such share of Common Stock (a "COMMON STOCK
CERTIFICATE") shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration to be paid in consideration therefor
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upon surrender of such Common Stock Certificate in accordance with Section
2.01(b), without interest.
(b) COMMON STOCK OF THE COMPANY HELD IN TREASURY OR BY PARENT. (i) Each
share of Common Stock that is owned by the Company or by any direct or indirect
wholly-owned Subsidiary of the Company (the "TREASURY SHARES"), and (ii) each
share of Common Stock that is owned by Parent immediately prior to the
Effective Time and after giving effect to the transactions contemplated by the
Conversion and Contribution Agreement (the "PARENT HELD SHARES") shall
automatically be cancelled and cease to exist and shall no longer be
outstanding, and no consideration shall be paid or delivered in exchange
therefor.
(c) SERIES D PREFERRED STOCK. Each share of the Series D Preferred
Stock issued and outstanding immediately prior to the Effective Time shall not
be affected by the Merger and shall, upon the election of holders of a majority
of the then outstanding Series D Preferred Stock, be converted, immediately
after the Reverse Split and simultaneously with the conversion of the Series E
Preferred Stock as contemplated by Section 1.07(d)(ii) below, into that number
of shares of common stock of the Surviving Corporation in accordance with
Section 7(aa) of Article V.B of the Restated Articles then in effect.
(d) SERIES E PREFERRED STOCK. Each share of the Series E Preferred
Stock issued and outstanding immediately prior to the Effective Time shall not
be affected by the Merger and shall be automatically reverse split, immediately
after the Effective Time, on a 70,000 to 1 basis in accordance with the terms
of the Restated Articles (the "REVERSE SPLIT"). Immediately after the Reverse
Split, (i) each holder holding fractional shares of Series E Preferred Stock
(each, a "SERIES E DISTRIBUTION HOLDER") shall receive, in exchange for the
cancellation of all fractional shares of Series E Preferred Stock held by such
Series E Distribution Holder, an amount in cash equal to the product of (x) the
fractional shares of the Series E Preferred Stock held by such Series E
Distribution Holder, multiplied by (y) the quotient referred to in Section
7(a)(ii) of Article V.C of the Restated Articles then in effect, as adjusted
pursuant to the Restated Articles after the Reverse Split, multiplied by (z)
the Merger Consideration (such amount of cash payable to each Series E
Distribution Holder shall be referred to as the "SERIES E DISTRIBUTION" for
such Series E Distribution Holder), and (ii) all other shares of Series E
Preferred Stock shall remain issued and outstanding, and shall, upon the
election of holders of a majority of the then outstanding Series E Preferred
Stock, be converted into that number of shares of common stock of the Surviving
Corporation (rounded up to the nearest whole number) in accordance with Section
7(aa) of Article V.C of the Restated Articles then in effect. Immediately after
the Reverse Split, all fractional shares of Series E Preferred Stock shall no
longer remain outstanding and shall automatically be cancelled and shall cease
to exist, and each Series E Distribution Holder of a certificate that
represented such fractional shares of Series E Preferred Stock as a result of
the Reverse Split (a "SERIES E STOCK CERTIFICATE") shall cease to have any
rights with respect thereto, except the right to receive his, her or its Series
E Distribution, to be paid in consideration therefor upon surrender of such
Series E Stock Certificate in accordance with Section 2.01(b), without
interest.
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(e) MERGER SUB CAPITAL STOCK. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
Section 1.08 DISSENTING SHARES. For purposes of this Agreement,
"DISSENTING SHARES" means shares of Common Stock of the Company held
immediately prior to the Effective Time by a shareholder who did not vote in
favor of the Merger (or consent thereto in writing) and with respect to which
demand to the Company for purchase of such shares is duly made and perfected in
accordance with Section 1301 of the CGCL and not subsequently and effectively
withdrawn or forfeited. Notwithstanding the provisions of Section 1.07(a) or
any other provision of this Agreement to the contrary, Dissenting Shares shall
not be converted into or be exchangeable for the right to receive the Merger
Consideration at or after the Effective Time, but shall entitle the holder
thereof to receive such consideration as may be determined to be due to holders
thereof pursuant to the CGCL, unless and until the holder of such Dissenting
Shares withdraws his, her or its demand for such appraisal or shall become
ineligible for such appraisal (through failure to perfect or otherwise). If a
holder of Dissenting Shares shall withdraw his, her or its demand for such
appraisal or shall become ineligible for such appraisal (through failure to
perfect or otherwise), then, as of the Effective Time or the occurrence of such
event, whichever last occurs, such holder's Dissenting Shares shall
automatically be converted into and represent the right to receive the Merger
Consideration for each Dissenting Share, without interest, as provided in
Section 1.07(a) and in accordance with the CGCL. The Company shall give Parent
(i) prompt notice of any demands received by the Company for appraisal of
shares of Common Stock and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
Section 1.09 TREATMENT OF COMPANY RESTRICTED SHARES, COMPANY OPTIONS AND
COMPANY WARRANTS.
(a) COMPANY RESTRICTED SHARES. Pursuant to the Company Stock Option
Plans and the applicable agreements evidencing the grant of any restricted
shares of Common Stock (each, a "COMPANY RESTRICTED SHARE"), prior to the
Effective Time, the Company shall take any action required to provide that as
of the Effective Time, and without any further action or consent required of
the holder of any Company Restricted Share, all transferability restrictions
and vesting conditions shall be waived with respect to each Company Restricted
Shares and all Company Restricted Shares that vest at the Effective Time
pursuant to this sentence or pursuant to an applicable agreement evidencing the
grant of any such Company Restricted Shares shall be entitled to receive
payment of the Merger Consideration (without any interest thereon and less any
required withholding of Taxes) for each such Company Restricted Share, unless
such share is an Excluded Share, and shall be treated the same as other shares
of Common Stock for purposes of this Agreement.
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(b) COMPANY OPTIONS. Pursuant to the Company Stock Option Plans and the
applicable agreements evidencing the grant of any option to purchase shares of
Common Stock (each, a "COMPANY OPTION"), prior to the Effective Time, the
Company shall take any action required to provide that as of the Effective
Time, and without any further action or consent required of the holder of any
Company Option, each Company Option (whether vested or unvested) outstanding
immediately prior to the Effective Time shall immediately vest and be cancelled
and cease to exist, in exchange for the right to receive a cash payment
(without any interest thereon and less any required withholding of Taxes) equal
to the product of (A) the excess, if any, of (x) the Merger Consideration, over
(y) the per share exercise price of such Company Option, multiplied by (B) the
number of shares of Common Stock covered by such Company Option. Prior to the
Effective Time, the Company shall deliver to each holder of Company Options
entitled to receive the cash payment pursuant to this Section 1.09(b) a holder
acknowledgement in form and substance reasonably satisfactory to Parent (the
"HOLDER ACKNOWLEDGEMENT"), which shall specify that the right to receive such
cash payment in respect of such Company Options is conditioned upon the
execution and delivery of such Holder Acknowledgement by such holder to the
Company, which shall terminate such Company Options. Upon the delivery of the
relevant Holder Acknowledgement executed by such holder of Company Options at
or prior to the Effective Time, the Surviving Corporation shall pay any such
cash payment, without interest and less any withholding Taxes as described in
Section 2.01(f) as soon as practicable after the Effective Time. As of the
Effective Time, each holder of any Company Option shall cease to have any
rights in respect thereof, or under the Company Stock Option Plans or
applicable agreement evidencing the grant of any such Company Option except as
described in this Section 1.09(b). As of the Effective Time, any Company Option
with an exercise price per share greater than the Merger Consideration shall be
canceled without consideration and be of no further force or effect.
(c) COMPANY WARRANTS. As of the Effective Time, (i) any warrant to
purchase shares of Common Stock or shares of Series F Redeemable Convertible
Preferred Stock of the Company (each, a "COMPANY WARRANT") outstanding
immediately prior to the Effective Time shall be cancelled and cease to exist,
in exchange for the right, in the case of each Company Warrant to purchase
shares of Common Stock, to receive a cash payment (without any interest thereon
and less any required withholding of Taxes) equal to the product of (A) the
excess, if any, of (x) the Merger Consideration, over (y) the per share
exercise price of such Company Warrant, multiplied by (B) the number of shares
of Common Stock covered by such Company Warrant. The Company shall pay any such
cash payment as soon as practicable after the Effective Time. As of the
Effective Time, each holder of any Company Warrant shall cease to have any
rights in respect thereof, or under any applicable agreement evidencing the
issuance of any such Company Warrant except as described in this Section
1.09(c). As of the Effective Time, any Company Warrant for shares of Common
Stock with an exercise price per share greater than the Merger Consideration
shall be canceled without consideration and be of no further force or effect.
(d) TERMINATION OF COMPANY STOCK OPTION PLANS. The Company shall cause
all Company Stock Option Plans to terminate as of the Effective Time and except
6
as provided herein, shall cause the provisions in any other plan, program or
arrangement providing for the issuance or grant by the Company of any interest
in respect of the capital stock of the Company or any of its Subsidiaries to
terminate and have no further force or effect as of the Effective Time.
Section 1.10 SENIOR CONVERTIBLE NOTES. Pursuant to the Note Exchange
Agreement substantially in the form attached hereto as EXHIBIT C, immediately
after, and conditioned upon, the conversion of all outstanding shares of Series
D Preferred Stock and Series E Preferred Stock, all principal of the then
outstanding 13.9% Senior Convertible Notes of the Company (the "SENIOR
CONVERTIBLE NOTES"), together with all interest accrued thereon up to and
including the Closing Date, shall be converted, at a per share price equal to
the Merger Consideration, into shares of common stock of the Surviving
Corporation.
ARTICLE II
PAYMENT FOR SHARES
Section 2.01 EXCHANGE OF STOCK CERTIFICATES AND CASH.
(a) PAYING AGENT. As soon as practicable after the execution of this
Agreement, Parent and the Company shall enter into an agreement, providing for
the matters set forth in this Section 2.01 (the "PAYING AGENT AGREEMENT") with
a bank or trust company selected by Parent (the "PAYING AGENT"), authorizing
such Paying Agent to act as Paying Agent in connection with the Merger and the
other Transactions. Prior to the Effective Time, Parent shall deposit or shall
cause to be deposited with or for the account of the Paying Agent, for the
benefit of the holders of shares of Common Stock and the Series E Distribution
Holders, funds in an amount necessary for payment of the aggregate Merger
Consideration upon surrender of the Common Stock Certificates and the aggregate
Series E Distribution upon surrender of the Series E Stock Certificates,
pursuant to Section 1.07(a) and 1.07(d), respectively. Cash deposited with the
Paying Agent shall hereinafter be referred to as the "PAYMENT FUND."
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable, and in any
event within five (5) Business Days after the Effective Time, the Surviving
Corporation will instruct the Paying Agent to mail to (A) each holder of record
of a Common Stock Certificate that immediately prior to the Effective Time
evidenced outstanding shares (other than Excluded Shares and Dissenting Shares)
of Common Stock and (B) each Series E Distribution Holder, (1) a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Common Stock Certificates or Series E Stock Certificates,
as applicable, shall pass, only upon proper delivery of the Common Stock
Certificates or Series E Stock Certificates, as applicable, to the Paying Agent
and shall be in such form and have such other provisions as the Surviving
Corporation may reasonably specify) and (2) instructions for use in effecting
the surrender of the Common Stock Certificates in exchange for the amount of
Merger Consideration therefor pursuant to Section 1.07(a) and the surrender of
the Series E Stock Certificates in exchange for the amount of the Series E
Distribution therefor pursuant to Section 1.07(d). Upon surrender of a Common
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Stock Certificate or a Series E Stock Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with a letter of transmittal, duly executed,
and such other customary documents as may be required pursuant to such
instructions (collectively, the "TRANSMITTAL DOCUMENTS"), the holder of such
Common Stock Certificate or Series E Stock Certificate shall be entitled to
receive in exchange therefor, (i) in the case of the Common Stock Certificate,
the Merger Consideration for each share of Common Stock formerly represented by
such Common Stock Certificate, and (ii) in the case of the Series E Stock
Certificate, the Series E Distribution for the fractional shares of Series E
Preferred Stock formerly represented by such Series E Stock Certificate, in
each case without any interest thereon, less any required withholding of Taxes,
and the Common Stock Certificate or Series E Stock Certificate so surrendered
shall thereupon be canceled. In the event of a transfer of ownership of Common
Stock or Series E Preferred Stock that is not registered in the transfer
records of the Company, the Merger Consideration or Series E Distribution may
be issued and paid in accordance with this Article II to the transferee of such
shares if the Common Stock Certificate or Series E Stock Certificate, as
applicable, evidencing such shares is presented to the Paying Agent and is
properly endorsed or otherwise in proper form for transfer. In such event, the
signature on the Common Stock Certificate or Series E Stock Certificate, as
applicable, or any related stock power must be properly guaranteed and the
Person requesting payment of the Merger Consideration or Series E Distribution
must either pay any transfer or other Taxes required by reason of the payment
to a Person other than the registered holder of the Common Stock Certificate or
Series E Stock Certificate so surrendered or establish to the satisfaction of
the Surviving Corporation that such Tax has been paid or is not applicable. The
Merger Consideration or Series E Distribution will be delivered by the Paying
Agent as promptly as practicable following surrender of a Common Stock
Certificate or Series E Stock Certificate, as applicable, and the related
Transmittal Documents. Cash payments may be made by check unless otherwise
required by a depositary institution in connection with the book-entry delivery
of securities. No interest will be payable on any Merger Consideration or
Series E Distribution. Until surrendered in accordance with this Section 2.01,
each Common Stock Certificate or Series E Stock Certificate held by a Series E
Distribution Holder shall be deemed at any time after the Effective Time to
evidence only the right to receive, upon such surrender, in the case of Common
Stock Certificate, the Merger Consideration for each share of Common Stock
(other than Excluded Shares and Dissenting Shares) formerly represented by such
Common Stock Certificate, and in the case of Series E Stock Certificate, the
Series E Distribution for the fractional shares of Series E Preferred Stock
formerly represented by such Series E Stock Certificate. The Payment Fund shall
not be used for any purpose other than as set forth in this Article II. Any
interest, dividends or other income earned on the investment of cash held in
the Payment Fund shall be for the account of the Surviving Corporation. The
Merger Consideration delivered upon surrender of the Common Stock Certificates
in accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares. The Series E Distribution
delivered upon surrender of the Series E Stock Certificates in accordance with
the terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to such fractional shares of Series E Preferred Stock.
8
(c) TERMINATION OF PAYMENT FUND. Any portion of the Payment Fund
(including the proceeds of any investments thereof) which remains undistributed
to the holders of Common Stock and Series E Distribution Holder for one year
following the Effective Time shall be delivered by the Paying Agent to the
Surviving Corporation. Any holders of Common Stock or any Series E Distribution
Holder who have not theretofore complied with this Article II shall thereafter
look only to the Surviving Corporation for payment of the Merger Consideration
or Series E Distribution, as applicable.
(d) NO LIABILITY. None of the Surviving Corporation, Parent, the
Company or the Paying Agent shall be liable to any Person for any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
(e) INVESTMENT OF THE PAYMENT FUND. The Paying Agent shall invest any
cash included in the Payment Fund as directed by the Surviving Corporation on a
daily basis; PROVIDED that no such gain or loss thereon shall affect the
amounts payable to the shareholders of the Company pursuant to Article I or
this Article II. Any interest and other income resulting from such investments
shall promptly be paid to the Surviving Corporation. If for any reason
(including as a result of losses) the cash in the Payment Fund shall be
insufficient to fully satisfy all of the payment obligations to be made in cash
by the Paying Agent hereunder, the Surviving Corporation shall promptly deposit
cash into the Payment Fund in an amount which is equal to the deficiency in the
amount of cash required to fully satisfy such cash payment obligations.
(f) WITHHOLDING RIGHTS. Each of the Surviving Corporation, the Parent
and the Paying Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any Series E
Distribution Holder or holder of Common Stock, Company Restricted Shares,
Company Options or Company Warrants such amounts as it is required to deduct
and withhold with respect to the making of such payment under the United States
Internal Revenue Code of 1986, as amended (the "CODE"), or any provision of
state, local or foreign Tax Law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Series E Distribution Holder or the holder of the
Common Stock, Company Restricted Shares, Company Options or Company Warrants in
respect of which such deduction and withholding was made.
(g) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Common
Stock Certificates or Series E Stock Certificates (collectively, the
"CERTIFICATES") shall have been lost, stolen or destroyed, the holder of such
lost, stolen or destroyed Certificate(s) shall execute an affidavit of that
fact in form and substance reasonably satisfactory to Parent, the Surviving
Corporation and the Paying Agent. The holder of any such lost, stolen or
destroyed Certificate(s) shall also deliver a reasonable indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Paying
Agent with respect to the Certificate(s) alleged to have been lost, stolen or
destroyed. The affidavit and any indemnity which may be required hereunder
shall be delivered to the Paying Agent, who shall be responsible for making
payment for such lost, stolen or destroyed Certificates(s) pursuant to the
terms hereof.
9
Section 2.02 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Common Stock, Series D Preferred Stock or Series E
Preferred Stock thereafter on the records of the Company.
Section 2.03 FURTHER ASSURANCES. After the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Parent, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Parent, any other actions and things to vest, perfect
or confirm of record or otherwise in the Surviving Corporation any and all
right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger and the other Transactions.
Section 2.04 ADJUSTMENTS UPON STOCK SPLITS, ETC.. In the event that after
the date hereof but prior to the Effective Time, solely as a result of a
reclassification, stock split (including a reverse stock split), stock dividend
or stock distribution which in any such event is made on a pro rata basis to
all holders of Common Stock, there is a change in the number of shares of
Common Stock outstanding, then the Merger Consideration shall be equitably
adjusted to eliminate the effects of such event. In the event that after the
date hereof but prior to the Effective Time, solely as a result of a
reclassification, stock split (including a reverse stock split), stock dividend
or stock distribution (other than the Reverse Split) which in any such event is
made on a pro rata basis to all holders of Series E Preferred Stock, there is a
change in the number of shares of Series E Preferred Stock outstanding, then
the amount of Series E Distribution payable pursuant to Section 1.07(d) shall
be equitably adjusted to eliminate the effects of such event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Annual Report on Form 10-K of the Company for
the fiscal period ended December 31, 2006 (the "FORM 10-K"), the Quarterly
Reports on Form 10-Q and the Current Reports on Form 8-K filed from the date of
the filing of the Form 10-K and any amendments to any such reports, in the case
of all such reports and amendments through and until not later than four (4)
Business Days prior to the date of this Agreement (excluding any disclosures
set forth in any risk factor section thereof or in any other disclosures
included therein to the extent that they are cautionary, predictive or
forward-looking in nature), the Company hereby represents and warrants to
Parent as follows:
Section 3.01 CORPORATE ORGANIZATION. The Company and each of its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has all
requisite corporate power and authority to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which
it is currently engaged; and (c) is duly qualified as a foreign corporation,
10
licensed and in good standing under the laws of each jurisdiction in which its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except where the failure to be so qualified could
not reasonably be expected to have a Company Material Adverse Effect.
Section 3.02 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 200,000,000
shares of Common Stock and 75,000,000 shares of preferred stock, one share of
which is a Special Voting Stock of the Company, 75,000 shares of which are
Series C Participating Preferred Stock, 4,188,587 shares of which are Series D
Preferred Stock, 68,000,000 shares of which are Series E Preferred Stock,
450,000 shares of which are Series F Preferred Stock and 2,286,412 shares are
undesignated "blank check" preferred stock. From and after the effective date
of the Restated Articles until the Effective Time, the authorized capital stock
of the Company will consist of (A) 500,000,000 shares of Common Stock and (B)
75,000,000 shares of preferred stock, 75,000 shares of which are Series C
Participating Preferred Stock, 4,188,587 shares of which are Series D Preferred
Stock, 68,000,000 shares of which are Series E Preferred Stock and 2,736,413
shares are undesignated "blank check" preferred stock. As of the date hereof,
(i) 37,682,065 shares of Common Stock are issued and outstanding, (ii) no share
of Special Voting Stock is issued and outstanding, (iii) none of the Series C
Participating Preferred Stock are issued and outstanding, (iv) 3,520,537 shares
of Series D Preferred Stock are issued and outstanding, (v) 48,346,820 shares
of Series E Preferred Stock are issued and outstanding, (vi) none of the Series
F Preferred Stock are issued and outstanding, (vii) no shares of Common Stock
are held by the Company as treasury stock, and (viii) no shares of Common Stock
are held by the Company Subsidiaries. As of the date hereof, an aggregate of
24,450,147 shares of Common Stock are authorized for issuance under the Company
Stock Option Plans, and an aggregate of 216,076 restricted shares of Common
Stock and 7,304,661 options to acquire Common Stock are outstanding, all of
which issued and outstanding shares and options have been granted in accordance
with the Company Stock Option Plans as set forth in Section 3.02 of the Company
Disclosure Letter. Section 3.02 of the Company Disclosure Letter sets forth, as
of the date hereof, each plan, program or arrangement that provides for the
grant, award, or payment of Company common stock, stock options, restricted
stock units, restricted stock, stock appreciation rights, or other stock or
stock-based compensation awards (collectively, the "COMPANY STOCK OPTION
PLANS"), the number of options and restricted shares of Common Stock issued and
outstanding thereunder and the applicable exercise prices therefor to the
extent such exercise prices are not greater than the Merger Consideration. All
outstanding shares of the capital stock of the Company are, and all such shares
that may be issued prior to the Effective Time will be when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right under any
provision of the CGCL, the Company Constituent Documents, any material
contractual obligation to which the Company is a party or otherwise. There are
not any bonds, debentures, notes or other Indebtedness of the Company or any of
its Subsidiaries having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which holders of
11
the Common Stock, Series D Preferred Stock, Series E Preferred Stock or holders
of equity securities of any Subsidiary of the Company may vote ("VOTING COMPANY
DEBT").
(b) Except as set forth in Section 3.02 of the Company Disclosure
Letter, there are not any options, warrants, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
restricted stock awards, dividend equivalent awards, stock-based performance
units, commitments, contracts, arrangements or undertakings of any kind
(collectively, "COMPANY DERIVATIVES") to which the Company or any of its
Subsidiaries is a party (i) obligating the Company or any such Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity interests in, or any security
convertible into or exercisable or exchangeable for any capital stock of or
other equity interest in, the Company or of any of its Subsidiaries or any
Voting Company Debt or (ii) obligating the Company or any such Subsidiary to
issue, grant, extend or enter into any such option, warrant, call, right,
security, commitment, contract, arrangement or undertaking. There are not any
outstanding contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any such Subsidiary. At the Effective Time and after giving effect
to the provisions of Section 1.09 of this Agreement, all Company Derivatives
outstanding immediately prior to the Effective Time shall have been canceled or
terminated and shall have no further force or effect.
Section 3.03 AUTHORITY; ENFORCEABILITY.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder, and
subject to receipt of the Company Shareholder Approval, to consummate the
Transactions contemplated hereby. The execution and delivery of this Agreement
by the Company have been duly authorized by all necessary corporate action and
no other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery by the Company of this Agreement. Other
than the Company Shareholder Approval and the filing of the Merger Filings as
required by the CGCL, the consummation by the Company of the Merger and the
other Transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize the consummation by the Company of the
Merger and the other Transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by each other Parties hereto, constitute
valid and binding obligations of the Company, enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws
in effect which affect the enforcement of creditors' rights generally and by
general equitable principles.
(b) The Special Committee, at a meeting duly called and held, has by
unanimous vote of all its members approved and declared this Agreement and the
Transactions contemplated hereby advisable and has determined that the Merger
12
and the other Transactions are fair to, and in the best interests of, the
shareholders of the Company (other than the Rollover Shareholders). The Board
of Directors of the Company, based on the unanimous recommendation of the
Special Committee, has (i) determined that the Merger and the other
Transactions, upon the terms and subject to the conditions set forth herein,
are fair to, and in the best interests of, the shareholders of the Company
(other than the Rollover Shareholders), (ii) approved and adopted this
Agreement and the Transactions, and declared their advisability, (iii)
recommended the adoption of this Agreement by the shareholders of the Company,
subject to the terms and conditions set forth herein, and (iv) approved and
adopted this Agreement, the Merger and the other Transactions contemplated
hereby and thereby.
(c) Under applicable Law (including, without limitation, the CGCL) and
the Company Articles of Incorporation, the only votes of the Company's
shareholders required to adopt and approve:
(i) this Agreement and the Merger are the (A) affirmative vote
of a majority of the outstanding shares of Common Stock, voting as a separate
class, and (B) affirmative vote of the holders of a majority of the voting
power of the outstanding shares of Common Stock, Series D Preferred Stock and
Series E Preferred Stock, voting together as a single class, with each share of
Common Stock outstanding being entitled to one vote and each share of Series D
Preferred Stock and Series E Preferred Stock being entitled to that number of
votes determined in accordance with applicable Law and the Company Articles of
Incorporation and By-laws (the "VOTE OF OUTSTANDING SHARES"); and
(ii) the Restated Articles are the (A) affirmative vote of a
majority of the outstanding shares of Common Stock, voting as a separate class,
(B) affirmative vote of a majority of the outstanding shares of Series D
Preferred Stock, voting as a separate class, (C) affirmative vote of a majority
of the outstanding shares of Series E Preferred Stock, voting as a separate
class, and (D) Vote of Outstanding Shares.
The votes of the Company's shareholders described in (i) and (ii) of this
Section 3.03(c) are hereinafter referred to collectively as the "COMPANY
SHAREHOLDER APPROVAL."
Section 3.04 NO CONFLICT: REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company do not,
and upon receipt of the Company Shareholder Approval and the filing of the
Merger Filing as required by CGCL, the performance of this Agreement and the
consummation of the transactions contemplated hereby will not, (i) conflict
with or violate the Constituent Documents of the Company or any of its
Subsidiaries, (ii) assuming the receipt of the approvals referred to in Section
3.04(b), conflict with or violate, in any material respect, any federal, state
or local statute, law, rule, regulation, ordinance, code, order, judgment,
decree or any other requirement of Law applicable to the Company or any of the
Company Subsidiaries or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
13
would become a default) under, result in the loss of a material benefit under
or give to others any right of termination, amendment, acceleration, payment or
cancellation of, or result in the creation of a lien or other encumbrance on
any property or under any contract, agreement, lease, license, permit,
franchise or other instrument or obligation (including, without limitation, the
Company Derivatives) to which the Company or any of the Company Subsidiaries is
a party or by which the Company or any of the Company Subsidiaries or any of
their properties or assets is bound or affected, except for such breach or
default that could not reasonably be expected to result in a Company Material
Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby by the Company will not, require any
material consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign
(each a "GOVERNMENTAL AUTHORITY"), except for (i) any applicable requirements
of the Exchange Act or the Securities Act, (ii) the filing of the Merger Filing
and other appropriate documents as required by the CGCL in connection with the
Merger and the transactions contemplated hereby, and (iii) the approvals from
other regulatory agencies set forth in Section 3.04(b) of the Company
Disclosure Letter (the "GOVERNMENTAL APPROVALS").
Section 3.05 SEC FILINGS AND FINANCIAL STATEMENTS.
(a) As of the respective dates of their filing with the SEC, all
reports, registration statements and other filings, together with any
amendments thereto, filed by the Company with the SEC since January 1, 2004
(the "SEC REPORTS"), complied in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations of the SEC promulgated thereunder, except as disclosed in the SEC
Reports. The SEC Reports did not at the time they were filed with the SEC, or
will not at the time they are filed with the SEC, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading.
(b) The consolidated financial statements of the Company and its
Subsidiaries (together, in the case of year-end statements, with reports
thereon by the independent auditors of the Company, including in each case a
consolidated balance sheet, a consolidated statement of income, a consolidated
statement of shareholders' equity and a consolidated statement of cash flows,
and accompanying schedules and notes) contained in or incorporated by reference
in the SEC Reports and any such reports, registration statements and other
filings to be filed by the Company with the SEC prior to the Effective Time
(the "FINANCIAL STATEMENTS"), (i) have been or will be prepared in accordance
with the published rules and regulations of the SEC and GAAP consistently
applied during the periods involved (except as may be indicated in the notes
thereto) and (ii) fairly present or will fairly present in all material
respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof and the consolidated results of
operations, statements of shareholders' equity and cash flows for the periods
indicated, except that any unaudited interim financial statements were or will
14
be subject to normal and recurring year end adjustments and may omit footnote
disclosure as permitted by regulations of the SEC.
Section 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Section 3.06 of the Company Disclosure Letter, since December 31, 2006, (a)
there has not been any occurrence, event, change, effect or circumstance that
could reasonably be expected to result in a Company Material Adverse Effect,
(b) neither the Company nor any of its Subsidiaries has participated in any
transaction material to the Company and its Subsidiaries, taken as a whole,
including, without limitation, declaring or paying any dividend or declaring or
making any distribution to shareholders except out of the earnings of the
Company or its Subsidiary, as the case may be, (c) neither the Company nor any
of its Subsidiaries has entered into any material contractual obligations,
other than in the ordinary course of business and (d) there has not occurred a
material change in the accounting principles or practice of the Company or any
of its Subsidiaries except as required by reason of a change in GAAP.
Section 3.07 PROXY STATEMENT. None of the information contained in the
Proxy Statement (other than any such information supplied or to be supplied by
Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement) will at the time of the mailing of the Proxy Statement to the
shareholders of the Company, at the time of the Company Shareholders Meeting,
and at the time of any amendments thereof or supplements thereto, and none of
the information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Schedule 13E-3 to be filed with the SEC
concurrently with the filing of the Proxy Statement, will, at the time of its
filing with the SEC, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
Section 3.08 LITIGATION. Except as set forth on Section 3.08 of the
Company Disclosure Letter, there are no actions, suits, proceedings, claims,
complaints, disputes, arbitrations or investigations (collectively, "CLAIMS")
pending or, to the knowledge of the Company, threatened, at law, in equity, in
arbitration or before any Governmental Authority against the Company or any of
its Subsidiaries that seeks in excess of $100,000 in damages nor is the Company
aware that there is any basis for any of the foregoing. The foregoing includes,
without limitation, Claims pending or, to the knowledge of the Company,
threatened involving the prior employment of any employee of the Company or any
of its Subsidiaries, their use in connection with the business of the Company
or any of its Subsidiaries of any information or techniques allegedly
proprietary to any of their former employers or their obligations under any
agreements with prior employers. No Order has been issued by any Governmental
Authority against the Company or any of its Subsidiaries purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or the
consummation of any of the Transactions.
15
Section 3.09 COMPLIANCE WITH LAWS.
(a) Each of the Company and its Subsidiaries is in compliance in all
material respects with all applicable Laws and has not been given notice of any
material violation of any Law.
(b) Except as permitted by the Exchange Act, including Sections
13(k)(2) and (3), since the enactment of the Xxxxxxxx-Xxxxx Act of 2002
(together with the rules and regulations promulgated thereunder, the "SARBANES
OXLEY ACT"), neither the Company nor any of its Affiliates has directly or
indirectly extended or maintained credit, arranged for the extension of credit,
renewed an extension of credit or materially modified an extension of credit in
the form of personal loans to any executive officer or director (or equivalent
thereof) of the Company or any of its Subsidiaries.
(c) The Company has (i) implemented disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material
information relating to the Company is made known to the management of the
Company by others within those entities, and (ii) has disclosed, based on its
most recent evaluation, to the Company's outside auditors and the audit
committee of the Board of Directors of the Company (A) all significant
deficiencies and material weaknesses in the design or operation of internal
controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange
Act) that are reasonably likely to adversely affect the Company's ability to
record, process, summarize and report financial data and (B) any fraud, whether
or not material, that involves management or other employees who have a
significant role in the Company's internal controls over financial reporting.
(d) The Company has made available to Parent copies of any written
notifications it has received since January 1, 2006, of a (i) "reportable
condition" or (ii) "material weakness" in the Company's internal controls. For
purposes of this Agreement, the terms "reportable condition" and "material
weakness" shall have the meanings assigned to them in the Statements of
Auditing Standards No. 60, as in effect on the date hereof.
Section 3.10 TAXES. The Company and each of its Subsidiaries has paid all
Taxes which have come due and are required to be paid by it through the date
hereof, and all deficiencies or other additions to Tax, interest and penalties
owed by it in connection with any such Taxes, other than Taxes being disputed
by the Company in good faith for which adequate reserves have been made in
accordance with GAAP; (b) the Company and each of its Subsidiaries has timely
filed or caused to be filed all returns for Taxes that it is required to file
on and through the date hereof (including all applicable extensions), and all
such Tax returns are accurate and complete in all material respects; (c) with
respect to all Tax returns of the Company and each of its Subsidiaries, (i)
there is no unassessed Tax deficiency proposed or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries and (ii) no
audit is in progress with respect to any return for Taxes, no extension of time
is in force with respect to any date on which any return for Taxes was or is to
be filed and no waiver or agreement is in force for the extension of time for
the assessment or payment of any Tax; (d) all provisions for Tax liabilities of
16
the Company and each of its Subsidiaries have been disclosed in the Financial
Statements and made in accordance with GAAP consistently applied, and all
liabilities for Taxes of the Company and each of its Subsidiaries attributable
to periods prior to or ending on the date hereof, have been adequately
disclosed in the Financial Statements; and (e) there are no Liens for Taxes on
the assets of the Company or any of its Subsidiaries, other than Permitted
Liens.
Section 3.11 REAL ESTATE; ASSETS. The Company and each of its Subsidiaries
has good and marketable title in fee simple to, or holds interests as lessee
under leases in full force and effect in, all real property used in connection
with its business or otherwise owned or leased by it. The Company and each of
its Subsidiaries owns and has good, valid and marketable title to all of its
properties and assets used in its business or reflected as owned on the
Financial Statements, in each case free and clear of all Liens, except for
Permitted Liens, or that would required to be described in the notes to the
Financial Statements.
Section 3.12 EMPLOYEE BENEFIT PLANS AND RELATED MATTERS; ERISA.
(a) The SEC Reports list or describe each Plan that the Company or any
of its Subsidiaries maintains or to which the Company or any of its
Subsidiaries contributes (the "COMPANY PLANS"). Neither the Company nor any of
its Subsidiaries has any liability under any Plans other than the Company
Plans. Except as described in or incorporated by reference in the SEC Reports,
neither the Company nor any Commonly Controlled Entity maintains or contributes
to, or has within the preceding six years maintained or contributed to, or may
have any liability with respect to any Plan subject to Title IV of ERISA or
Section 412 of the Code or any "multiple employer plan" within the meaning of
the Code or ERISA. Each Company Plan (and related trust, insurance contract or
fund) has been established and administered in accordance with its terms, and
complies in form and in operation with the applicable requirements of ERISA and
the Code and other applicable Requirements of Law. All contributions (including
all employer contributions and employee salary reduction contributions) which
are due have been paid to each Company Plan.
(b) No Claim with respect to the administration or the investment of
the assets of any Company Plan (other than routine claims for benefits) is
pending.
(c) Except as could not reasonably be expected to have a Company
Material Adverse Effect, each Company Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified
during the period since its adoption; each trust created under any such Plan is
exempt from tax under Section 501(a) of the Code and has been so exempt since
its creation.
(d) No Company Plan is a Retiree Welfare Plan.
(e) Neither the consummation of the Transactions contemplated by this
Agreement nor any termination of employment following such Transactions will
accelerate the time of the payment or vesting of, or increase the amount of,
17
compensation due to any employee or former employee whether or not such payment
would constitute an "excess parachute payment" under Section 280G of the Code.
(f) There are no unfunded obligations under any Company Plan which are
not fully reflected in the Financial Statements.
(g) Except as could not reasonably be expected to have a Company
Material Adverse Effect, the Company has no liability, whether absolute or
contingent, including any obligations under any Company Plan, with respect to
any misclassification of any person as an independent contractor rather than as
an employee.
(h) The Company has the necessary and requisite authority to take the
actions contemplated in Sections 1.09(a) and (b) pursuant to the terms of the
applicable Company Stock Option Plans and agreements evidencing the grant of
Company Restricted Shares and Company Options and no consent is required of
holders of Company Options or Company Restricted Shares to effect such actions.
Section 3.13 EMPLOYEES, LABOR MATTERS. Except as could not reasonably be
expected to have a Company Material Adverse Effect: (a) neither the Company nor
any of its Subsidiaries is engaged in any unfair labor practice; (b) there is
no strike, labor dispute, slowdown or stoppage pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries; (c)
neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or contract; and (d) no union organizing activities are
taking place. To the knowledge of the Company, no officer or key employee, or
any group of key employees, intends to terminate their employment with the
Company or any of its Subsidiaries as a result of the Merger or the
Transactions contemplated hereby.
Section 3.14 INTELLECTUAL PROPERTY RIGHTS.
(a) (i) The Company and each of its Subsidiaries is the owner of
all, or has the license or right to use, sell and license all of, the material
Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Software and
other proprietary rights (collectively, "INTELLECTUAL PROPERTY") that are used
in connection with its business as presently conducted, free and clear of all
Liens, other than Permitted Liens.
(ii) None of the Intellectual Property owned by the Company or
any of its Subsidiaries is subject to any outstanding Order, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand is
pending or, to the knowledge of the Company, threatened, which challenges the
validity, enforceability, use or ownership of the item. To the knowledge of the
Company, none of the Intellectual Property not owned by the Company or any of
its Subsidiaries but in which the Company or any of its Subsidiaries has a
license or other right to use, sell or license, is subject to any outstanding
Order, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of the Company,
threatened, which challenges the validity, enforceability, use or ownership of
the item.
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(iii) The Company and each of its Subsidiaries has substantially
performed all obligations imposed upon it under all material Intellectual
Property licenses, sublicenses, distributor agreements and other agreements
under which the Company or any of its Subsidiaries is either a licensor,
licensee or distributor, except such licenses, sublicenses and other agreements
relating to off-the-shelf software which is commercially available on a retail
basis and used solely on the computers of the Company or its Subsidiaries
(collectively, the "IP AGREEMENTS"). The Company and each of its Subsidiaries
is not, nor to the knowledge of the Company is any other party thereto, in
breach of or default thereunder in any material respect, nor is there any event
which with notice or lapse of time or both would constitute a material default
thereunder. All of the IP Agreements are valid, enforceable and in full force
and effect, and will continue to be so on identical terms immediately following
the Closing, as the case may be, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
(iv) To the Company's knowledge, none of the Intellectual
Property that is currently sold or licensed by the Company or any of its
Subsidiaries to any Person or that is used by or licensed to the Company or any
of its Subsidiaries by any Person infringes upon or otherwise violates any
Intellectual Property rights of others, except as could not reasonably be
expected to have a Company Material Adverse Effect.
(b) No litigation is pending and no Claim has been made against the
Company or any of its Subsidiaries or, to the knowledge of the Company, is
threatened, contesting the right of the Company or any of its Subsidiaries to
sell or license to any Person or, to the knowledge of the Company, use the
Intellectual Property presently sold or licensed to such Person or used by the
Company or any of its Subsidiaries. To the knowledge of the Company, no Person
is infringing upon or otherwise violating the Intellectual Property rights of
the Company or any of its Subsidiaries.
(c) No former employer of any employee of the Company or any of its
Subsidiaries has made a claim against the Company or any of its Subsidiaries
or, to the knowledge of the Company, against any other Person, that such
employee is utilizing Intellectual Property of such former employer.
(d) To the actual knowledge of the Company, none of the Trade Secrets,
wherever located, has been disclosed to any Person other than employees,
representatives and agents of the Company or any of its Subsidiaries, except as
required pursuant to the filing of a patent application by the Company or any
of its Subsidiaries. The Company has implemented policies and procedures
reasonably designed to establish and preserve the ownership of the Trade
Secrets of the Company and its Subsidiaries.
(e) It is not necessary for the business of the Company or any of its
Subsidiaries to use any Intellectual Property owned by any director, officer,
employee or consultant of the Company or any of its Subsidiaries (or persons
the Company or any of its Subsidiaries presently intends to hire). To the
Company's knowledge, at no time during the conception or reduction to practice
19
of any of the Intellectual Property of the Company or any of its Subsidiaries
was any developer, inventor or other contributor to such Intellectual Property
operating under any grants from any Governmental Authority or subject to any
employment agreement, invention assignment, nondisclosure agreement or other
contractual obligation with any Person that could materially adversely affect
the rights of the Company or any of its Subsidiaries to its Intellectual
Property.
Section 3.15 PRIVACY OF CUSTOMER INFORMATION. Neither the Company nor any
of its Subsidiaries use any of the customer information it receives through its
website or otherwise in an unlawful manner, or in a manner violative of the
privacy policy of the Company or its Subsidiary, as the case may be, or the
privacy rights of its customers. Neither the Company nor any of its
Subsidiaries has collected any customer information through its website in an
unlawful manner or in violation of its privacy policy.
Section 3.16 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on
Section 3.16 of the Company Disclosure Letter, (a) no officer or director, to
the knowledge of the Company, no spouse of any such officer or director, and,
to the knowledge of the Company, no Affiliate of any of the foregoing owns,
directly or indirectly, any interest in (excepting less than one percent (1%)
stock holdings for investment purposes in securities of publicly held and
traded companies), or is an officer, director, employee or consultant of, any
Person which is, or is engaged in business as, a competitor, lessor, lessee,
supplier, distributor, or customer of, or investor to or borrower from, the
Company or any of its Subsidiaries; (b) no officer, director or shareholder
beneficially owning more than five percent (5%) of the outstanding shares of
Common Stock, and, to the actual knowledge of the Company, no Affiliate of any
of the foregoing, owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Company or any of its Subsidiaries
use, in the conduct of business; and (c) no officer, director or shareholder
beneficially owning more than five percent (5%) of the outstanding shares of
Common Stock, and, to the actual knowledge of the Company, no Affiliate of any
of the foregoing, has any cause of action or other claim whatsoever against, or
owes or has advanced any amount to, the Company or any of its Subsidiaries,
except for claims in the ordinary course of business such as for expense
reimbursement in the ordinary course of business in accordance with the
policies of the Company, accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date hereof.
Notwithstanding the foregoing, no representation or warranty stated in this
Section 3.16 shall be deemed to extend to or include any of the GA
Shareholders, CK Shareholders or their respective members, shareholders,
investors, officers, directors, employees or Affiliates.
Section 3.17 MATERIAL CONTRACTS.
(a) All contracts and agreements to which the Company or any Company
Subsidiary is a party or to which any of their respective properties or assets
is subject that are required pursuant to Item 601 of Regulation S-K under the
Exchange Act to be filed as an exhibit to any SEC Reports have been filed as an
exhibit to such SEC Reports (such filed contracts and agreements, the "COMPANY
CONTRACTS"). All the Company Contracts are valid and in full force and effect
20
except to the extent they have previously expired, been performed in full or
terminated in accordance with their terms. None of the Company or any of its
Subsidiaries is in material violation of or material default under, and none of
the Company, any of its Subsidiaries or, to the knowledge of the Company, any
other party thereto is in material default or breach under the terms of, or has
provided any notice of intention to terminate, any of the Company Contracts and
no event or circumstance has occurred or will occur by reason of this Agreement
or the consummation of any of the Transactions contemplated hereby, that with
notice or lapse of time or both, would constitute any event of material default
thereunder or would result in a termination thereof.
(b) True, correct and complete copies of each such Company Contract
(including all modifications and amendments thereto and waivers thereunder)
have been made available to Parent.
Section 3.18 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) The Company and each of its Subsidiaries has complied and is in
compliance with all applicable Environmental Laws in all material respects and
has obtained and is in compliance in all material respects with all
Environmental Permits.
(b) No material notice of violation, notification of liability, demand,
request for information, citation, summons or order has been received by the
Company or any of its Subsidiary, no material complaint has been filed, no
material penalty or fine has been assessed, and no material investigation,
action, claim, suit or proceeding is pending or, to the knowledge of the
Company, threatened by any Person involving the Company or any of its
Subsidiaries relating to or arising out of any Environmental Law.
(c) No Hazardous Substances are located and no disposal or Releases of
Hazardous Substances have occurred at, on, above, under or from any properties
currently or formerly owned, leased, operated or used by the Company, any of
its Subsidiaries or any predecessors in interest that has resulted in or would
reasonably be expected to result in any material cost, liability, investigation
or remediation obligation of the Company or any of its Subsidiaries under any
Environmental Law.
Section 3.19 INSURANCE COVERAGE. All insurance policies carried by or
covering the Company and its Subsidiaries with respect to their business,
assets and properties are in full force and effect, and, as of the date of this
Agreement, no notice of cancellation has been received by the Company or any of
its Subsidiaries with respect to any such policies which has not been cured by
the payment of premiums that are due. All premiums due under such policies have
been paid in a timely manner and the Company and its Subsidiaries have complied
in all material respects with the terms and provisions thereof.
Section 3.20 RELATED PARTY TRANSACTIONS. Except as set forth in Section
3.20 of the Company Disclosure Letter, since January 1, 2007, neither the
Company nor any of its Subsidiaries has sold, leased or otherwise transferred
any property or assets to, or purchased, leased or otherwise acquired any
21
property or assets from, or otherwise engaged in any other transactions with,
any of its Affiliates, except in (a) transactions that are at prices and on
terms and conditions not less favorable to the Company or such Subsidiary than
could be obtained on an arm's length basis from unrelated third parties, (b)
transactions exclusively between the Company and one or more if its
Subsidiaries, or between two or more Subsidiaries of the Company, and which do
not involve any other Affiliate and (c) transactions under the agreements
listed on Section 3.20 of the Company Disclosure Letter.
Section 3.21 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor
any of its Subsidiaries has any direct or indirect obligation or liability (the
"LIABILITIES") which is not fully reflected or reserved against in the
Financial Statements, other than (a) Liabilities that, individually or in the
aggregate, could not reasonably be expected to have a Company Material Adverse
Effect and (b) Liabilities not exceeding $1,000,000 in the aggregate incurred
since the date of the most recent Financial Statements in the ordinary course
of business.
Section 3.22 OPINION OF FINANCIAL ADVISOR. The Special Committee has
received the written opinion of Xxxxxxxxxxx & Co. Inc., financial advisor to
the Special Committee, dated the date hereof, to the effect that, as of such
date and subject to the qualifications and limitations stated therein, the
Merger Consideration to be received by the holders of the Common Stock (other
than the Rollover Shareholders) in the Merger provided herein is fair from a
financial point of view, signed copies of which have been made available to
Parent, and such opinion has not been withdrawn, revoked or modified.
Section 3.23 BROKERS. No broker, finder or investment banker (other than
Xxxxxxxxxxx & Co. Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with this Agreement, the Merger and the other
transactions contemplated hereby based upon arrangements made by or on behalf
of the Company. There are no agreements, contracts or arrangements pursuant to
which Xxxxxxxxxxx & Co. Inc. is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement, the Merger and the other
transactions contemplated hereby other than that certain engagement letter,
dated as of September 27, 2007, between the Company and Xxxxxxxxxxx & Co. Inc.
Section 3.24 RIGHTS AGREEMENT. The Company has delivered or made available
to Parent a correct and complete copy of the Company's shareholders' rights
agreement, dated as of March 19, 2001, as amended (the "RIGHTS PLAN"),
including all exhibits thereto. The Company has taken all necessary action so
that neither the execution and delivery of this Agreement nor the consummation
of the Merger or the other transactions contemplated hereby will (i) cause the
rights granted under the Rights Plan to become exercisable, (ii) cause Parent
or Merger Sub, or any Affiliate of Parent or Merger Sub, to become an
"Acquiring Person" (as defined in the Rights Plan) or (iii) give rise to a
"Distribution Date" (as defined in the Rights Plan) or other triggering event
under the Rights Plan.
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Section 3.25 NO OTHER REPRESENTATIONS. The Company acknowledges that,
other than as set forth in this Agreement, neither Parent or Merger Sub, nor
any of their respective directors, officers, employees, agents or other
representatives makes any representations or warranties either expressed or
implied, as to the accuracy or completeness of any information provided or made
available to the Company, its Subsidiaries or any of their respective
directors, officers, members, shareholders, employees, agents or other
representatives in connection with this Agreement or the Transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows:
Section 4.01 ORGANIZATION. Parent (a) is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite limited liability
company power and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged; and (c) is duly qualified as a foreign entity, licensed and
in good standing under the laws of each jurisdiction in which its ownership,
lease or operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a Parent Material Adverse Effect. Merger Sub (a) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power and authority to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently
engaged; and (c) is duly qualified as a foreign corporation, licensed and in
good standing under the laws of each jurisdiction in which its ownership, lease
or operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a Parent Material Adverse Effect.
Section 4.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Parent and Merger Sub
have all necessary limited liability company or corporate power and authority,
as the case may be, to execute and deliver this Agreement, to perform their
respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
Conversion and Contribution Agreement and the Voting Agreement by Parent and
the consummation by it of the transactions contemplated hereby and thereby have
been duly and validly authorized by the Board of Managers of Parent, and in the
case of this Agreement, the members of Parent, and no other limited liability
company proceedings on the part of Parent are necessary to authorize the
execution, delivery and performance of this Agreement, the Conversion and
Contribution Agreement and the Voting Agreement by Parent or the consummation
by Parent of the transactions contemplated hereby or thereby (other than the
filing of the Merger Filings as required by the CGCL). This Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and, assuming
23
the due authorization, execution and delivery by the Company hereto, constitute
valid and binding obligations of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with their terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar Laws in effect which affect the enforcement of
creditors' rights generally and by general equitable principles.
Section 4.03 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement, the Conversion and
Contribution Agreement and the Voting Agreement by Parent and Merger Sub, as
applicable, do not, and the performance of this Agreement and the consummation
of the transactions contemplated hereby and thereby will not, (i) conflict with
or violate the Constituent Documents of Parent and Merger Sub, (ii) conflict
with or violate, in any material respects, any federal, state or local statute,
Law, rule, regulation, ordinance, code, order, judgment, decree or any other
requirement of Law applicable to Parent or Merger Sub or by which any of their
respective properties or assets are bound or affected, or (iii) result in any
material breach of or constitute a material default (or an event which, with
notice, lapse of time or both, would become a default) under, result in the
loss of a material benefit under or give to others any right of termination,
amendment, acceleration, payment or cancellation of, or result in the creation
of a material Lien or other material encumbrance on any property or under any
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or Merger Sub is a party or by which Parent or
Merger Sub or any of their respective properties or assets is bound or
affected.
(b) The execution and delivery of this Agreement, the Conversion and
Contribution Agreement and the Voting Agreement by Parent and Merger Sub, as
applicable, do not, and the performance of this Agreement, the Conversion and
Contribution Agreement and the Voting Agreement and the consummation of the
transactions contemplated hereby and thereby by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for (A) any applicable
requirements, if any, of the Exchange Act or the Securities Act, (B) the filing
of the Merger Filings and other appropriate documents as required by the CGCL
in connection with the Merger and the other transactions contemplated hereby,
and (C) the Governmental Approvals.
Section 4.04 PROXY STATEMENT. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement will, at the time of the mailing of the Proxy Statement to the
shareholders of the Company, at the time of the Company Shareholders Meeting,
and at the time of any amendments thereof or supplements thereto, and none of
the information contained in the Schedule 13E-3 (other than information
incorporated by reference therein based on information supplied by the Company)
to be filed with the SEC concurrently with the filing of the Proxy Statement,
will, at the time of its filing with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Schedule 13E-3
24
will comply as to form in all material respects with the Exchange Act, except
that no representation is made by Parent with respect to statements made or
incorporated by reference therein based on information supplied by the Company.
Section 4.05 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with this
Agreement, the Merger and the other transactions contemplated hereby based upon
arrangements made by or on behalf of Parent or Merger Sub.
Section 4.06 FORMATION. Each of Parent and Merger Sub was formed
specifically for the transactions contemplated by this Agreement and has
conducted no business or operations of any kind or nature and has not entered
into or become subject to any contract, agreement, arrangement or other
understanding (whether written or oral) or otherwise incurred or become subject
to any liability or other obligations other than in connection with the
transactions contemplated by this Agreement.
Section 4.07 NO OTHER REPRESENTATIONS. Each of Parent and Merger Sub
acknowledge that, other than as set forth in this Agreement, neither the
Company nor any of its directors, officers, employees, agents or other
representatives makes any representations or warranties either expressed or
implied, as to the accuracy or completeness of any information provided or made
available to Parent, Merger Sub or any of their respective directors, officers,
members, shareholders, employees, agents or other representatives in connection
with this Agreement or the transactions contemplated hereby.
Section 4.08 SUFFICIENT FUNDS. At the Effective Time, Parent will have
immediately available funds in an amount sufficient to make the required
deposit with the Paying Agent of the Payment Fund as required pursuant to
Section 2.01.
ARTICLE V
COVENANTS AND OTHER AGREEMENTS
Section 5.01 CONDUCT OF BUSINESS OF THE COMPANY. From the date of this
Agreement until the Effective Time or the earlier termination of this
Agreement, unless Parent shall otherwise consent in writing or as otherwise
expressly provided for in this Agreement, the Company shall, and shall cause
each of the Company Subsidiaries to, conduct its business only in the ordinary
course of business consistent with past practice and shall use its commercially
reasonable efforts to preserve intact its business organization and goodwill
and relationships with customers, suppliers and others having business dealings
with it and to keep available the services of its current officers and key
employees on terms and conditions substantially comparable to those currently
in effect, in each case, in the ordinary course consistent with past practice
and to timely file all reports required to be filed with the SEC. In addition
to and without limiting the generality of the foregoing, except as otherwise
expressly provided for in this Agreement or the Conversion and Contribution
Agreement, from the date hereof until the Effective Time, without the prior
written consent of Parent (which shall not be unreasonably withheld,
25
conditioned or delayed, except with respect to any Proceedings described in
clause (m) of this Section 5.01 that relate to this Agreement, the Merger or
any other transactions contemplated herein, in which case such consent may be
withheld, conditioned or delayed in Parent's absolute discretion), the Company
shall not and shall not permit any of its Subsidiaries to:
(a) adopt or propose any change in its Constituent Documents in effect
as of the date hereof, except the Restated Articles contemplated herein;
(b) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property) in respect of any of its
capital stock (other than dividends or distributions declared, set aside, made
or paid by any Company Subsidiary wholly-owned by the Company or another
Company Subsidiary to the Company), (ii) split, combine or reclassify any of
its capital stock or issue or propose or authorize the issuance of any other
securities (including options, warrants or any similar security exercisable
for, or convertible into, such other security) in respect of, in lieu of, or in
substitution for, shares of its capital stock, or (iii) repurchase, redeem or
otherwise acquire any shares of the capital stock of the Company or any Company
Subsidiary, or any other equity interests or any rights, warrants or options to
acquire any such shares or interests;
(c) issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock or other securities (including any options, warrants or any
similar security exercisable for or convertible into such capital stock or
similar security) other than (i) pursuant to the exercise of any Company
Options outstanding on the date hereof under the Company Stock Option Plans or
any Company Warrants outstanding on the date hereof, in each case in accordance
with their respective terms in effect on the date hereof, (ii) issuances by a
wholly-owned Company Subsidiary of capital stock to such Company Subsidiary's
parent or another wholly-owned Company Subsidiary, (iii) delivery of capital
stock upon the vesting of any Company Restricted Shares or (iv) issuances of
shares of Common Stock issuable upon conversion of any shares of Series D
Preferred Stock or Series E Preferred Stock outstanding on the date of this
Agreement in accordance with the terms of the Company Articles of Incorporation
in effect on the date hereof;
(d) merge or consolidate with any other Person or acquire an amount of
assets or equity of any other Person in excess of $50,000 individually or in
the aggregate;
(e) sell, lease, license, subject to a Lien (other than a Permitted
Lien), encumber or otherwise surrender, relinquish or dispose of any assets,
property or rights (including capital stock of a Company Subsidiary) except (i)
as set forth on Section 5.01(e) of the Company Disclosure Letter, or (ii) in
the ordinary course of business consistent with past practice;
(f) make any loans, advances or capital contributions to, or
investments in, any other Person other than (i) from any wholly-owned
Subsidiaries of the Company to the Company or (ii) advances to employees in the
26
ordinary course of business consistent with past practice not to exceed $10,000
in each individual case;
(g) create, incur, guarantee or assume any Indebtedness, issuances of
debt securities, guarantees, loans or advances, other than any of the foregoing
created, incurred, guaranteed or assumed in the ordinary course of business
consistent with past practice for working capital and cash management purposes
under any revolving credit agreement in existence as of the date hereof or
lease obligations incurred in the ordinary course of business consistent with
past practice;
(h) make any capital expenditure other than in accordance with the
budget of the Company and the Company Subsidiaries for the fiscal year ending
December 31, 2007;
(i) materially amend or otherwise materially modify benefits under any
Company Benefit Plan, materially accelerate the payment or vesting of benefits
or amounts payable or to become payable under any Company Benefit Plan as
currently in effect on the date hereof, fail to make any required contribution
to any Company Benefit Plan, merge or transfer any Company Benefit Plan or the
assets or liabilities of any Company Benefit Plan, change the sponsor of any
Company Benefit Plan, or terminate or establish any Company Benefit Plan, in
each case except as required by an existing agreement, plan or applicable Law;
(j) grant any increase in the compensation or benefits of directors,
officers, employees, consultants, representatives or agents of the Company or
any Company Subsidiary other than as required by any Company Benefit Plan in
effect on the date hereof and payments and increases in the ordinary course of
business consistent with past practice;
(k) enter into or amend or modify any change of control, severance,
consulting, retention or employment agreement with any officer or employee, or
any change of control, severance, consulting, retention or employment plan,
program or arrangement;
(l) hire or terminate the employment or contractual relationship of any
officer or employee of the Company or any Company Subsidiary, as the case may
be, other than hirings or terminations in the ordinary course of business
consistent with past practice or that, individually and in the aggregate, would
not result in (i) a material increase in the number of persons providing
services to the Company and the Company Subsidiaries in all such capacities,
(ii) in the case of hirings, a material increase in the aggregate payroll and
other benefits costs to the Company or such Company Subsidiary, and (iii) in
the case of terminations, material liability to the Company or any Company
Subsidiaries in excess of the costs savings, if any, directly derived from such
terminations;
(m) settle or compromise any action, suit, claim, litigation,
proceeding, arbitration, investigation, audit or controversy involving claims,
liabilities or obligations (each, a "PROCEEDING"), or enter into any consent,
27
decree, injunction or similar restraint or form of equitable relief in
settlement of any Proceeding;
(n) make or rescind any material election relating to Taxes, settle or
compromise any Proceeding relating to Taxes, make a request for a written
ruling of a Taxing Authority relating to Taxes, enter into a material written
and legally binding agreement with a Taxing Authority relating to Taxes, or
change any of its material methods of reporting income or deductions for
federal income Tax purposes (other than as required by applicable Law) from
those employed in the preparation of its federal income Tax returns for the
taxable year ending December 31, 2006;
(o) modify, amend, fail to renew or terminate any Company Contract,
enter into any successor agreement to an expiring Company Contract that changes
the terms of the expiring Company Contract in a way that is materially adverse
to the Company or any Company Subsidiary, or modify, amend or enter into any
new agreement that would have been considered a Company Contract if it were
entered into at or prior to the date hereof;
(p) enter into or renew or extend any agreements or arrangements that
limit or otherwise restrict the Company or any of the Company Subsidiaries or
any of their respective Affiliates or any successor thereto, or that could
reasonably be expected to, after the Effective Time, limit or restrict the
Surviving Corporation or any of its Affiliates or any successor thereto, from
engaging or competing in any line of business or in any geographic area;
(q) change any method of accounting or accounting principles or
practices by the Company or any Company Subsidiary, except for any such change
required by a change in GAAP;
(r) terminate, cancel, amend or modify any material insurance policies
maintained by it covering the Company or the Company Subsidiaries or their
respective properties which is not replaced by a comparable amount of insurance
coverage;
(s) adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of the Company or any
of the Company Subsidiaries;
(t) take any actions or omit to take any actions that would or would be
reasonably likely to (i) result in any of the representations and warranties of
the Company and the Company Subsidiaries set forth in this Agreement being or
becoming untrue or incorrect in any material respect; (ii) result in any of the
conditions to the consummation of the Merger and the other Transactions set
forth in Sections 6.01 and 6.02 not being satisfied or (iii) materially impair
the ability of the Company or Parent to consummate the Merger and the other
Transactions in accordance with the terms hereof or materially delay such
consummation; or
(u) agree or commit to do any of the foregoing.
28
Section 5.02 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
the occurrence, or failure to occur, of any event the occurrence or failure of
which to occur would cause (a) any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect, or (b) any
material failure of the Company, on the one hand, or Parent or Merger Sub, on
the other hand, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; PROVIDED, HOWEVER, that no such notification shall be deemed to
amend, modify or otherwise affect the representations or warranties of the
Parties as set forth herein, the conditions to the performance by the Parties
hereunder or the remedies available hereunder to the Party or Parties receiving
such notice.
Section 5.03 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) The Surviving Corporation and the Company agree that all rights to
indemnification and advancement of expenses and all limitations on liability
existing in favor of any individual who was on or at any time prior to the
Effective Time, a director, officer or employee of the Company or any Company
Subsidiary (each, an "INDEMNIFIED PERSON") in respect of acts or omissions of
such Indemnified Person on or prior to the Effective Time, as provided in the
Company Articles of Incorporation or the Bylaws of the Company or any agreement
between an Indemnified Person and the Company in effect as of the date of this
Agreement, shall survive the Merger and shall be observed by the Surviving
Corporation to the fullest extent available under applicable Law for a period
of six years from the Effective Time. Without limiting the foregoing, until the
sixth anniversary of the Effective Date, the articles of incorporation and
bylaws of the Surviving Corporation and the certificate or articles of
incorporation, bylaws or similar documents of its Subsidiaries shall, with
respect to matters occurring prior to the Effective Time, contain provisions no
less favorable with respect to indemnification, advancement of expenses and
exculpation of each Indemnified Person than are set forth in the Constituent
Documents of the Company and such Company Subsidiaries in effect as of the date
of execution of this Agreement, and such provisions shall not be amended,
repealed or otherwise modified prior to the sixth anniversary of the Effective
Time in any manner that would materially adversely affect the rights of the
Indemnified Persons thereunder as of the Effective Time with respect to matters
occurring prior to the Effective Time.
(b) The Surviving Corporation shall obtain and maintain directors and
officers liability insurance policies for the Indemnified Persons with respect
to matters occurring prior to the Effective Time for a period of six years from
the Effective Time on terms with respect to coverage and amount no less
favorable than those of the applicable policies in effect on the date hereof;
PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be
obligated to expend in order to obtain or maintain insurance coverage pursuant
to this Section 5.03(b) any amount per annum in excess of $350,000 (the "CAP");
and PROVIDED FURTHER, that if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of the Cap, the Surviving
Company shall only be required to obtain as much coverage as can be obtained by
paying an annual premium equal to the Cap.
29
(c) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 5.03.
(d) The provisions of this Section 5.03 are intended to be for the
benefit of, and will be enforceable by, each Indemnified Person and his or her
heirs and representatives and are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise.
Section 5.04 ACCESS AND INFORMATION. The Company shall afford to Parent
and its Representatives such access during normal business hours throughout the
period prior to the Effective Time to the Company's books, records (including,
without limitation, tax returns and work papers of the Company's independent
auditors (subject, in the case of such work papers, to execution by Parent of a
reasonable and customary release and indemnity agreement with such auditors if
requested)), facilities, personnel, management reports and to such other
information as Parent shall reasonably request, subject to any existing
confidentiality obligations of the Company. Each of Parent and Merger Sub
agrees that it shall, and shall direct its Affiliates to, hold in confidence
all nonpublic information (other than information that (i) is in the public
domain through no act of the receiving party in breach of this Section 5.04,
(ii) was in the possession of the receiving party prior to its disclosure or
transfer hereunder, (iii) is independently developed by the receiving party or
(iv) is received from another source without any restriction on use or
disclosure through no act of the receiving party in breach of this Section
5.04) obtained by it pursuant hereto, except for disclosures (i) to its
directors, officers, employees, consultants, agents and representatives who
need to know such nonpublic information in connection with the transactions
contemplated hereby and who have agreed to maintain such information in
confidence and (ii) required pursuant to applicable Law or applicable
requirements of any exchange, market or quotation system (including by
interrogatories, requests for information or other documents in legal
proceedings, subpoena, civil investigative demand or any other similar
process).
Section 5.05 PUBLICITY. Parent and the Special Committee have agreed upon
the text of a press release to be issued with respect to this Agreement and the
transactions contemplated hereby. Except as may be required to comply with
applicable Law or the requirements of any exchange, market or quotation system,
none of the Parties shall issue or cause the publication of any other press
release or other public announcement with respect to this Agreement, the Merger
or the other transactions contemplated hereby without prior consultation with
the other Parties.
Section 5.06 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions hereof, each of the Parties hereto agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the Merger and the other transactions
contemplated hereby, and to cooperate with each other in connection with the
30
foregoing, including using commercially reasonable efforts to (a) obtain all
necessary waivers, consents and approvals from other parties to material
agreements, leases and other contracts, (b) obtain all necessary consents,
approvals and authorizations as are required to be obtained under any federal,
state or foreign Law or regulation, (c) effect any necessary registrations and
filings and submissions of information requested by Governmental Authorities,
and (e) fulfill all conditions to this Agreement. In furtherance of and not in
limitation of the foregoing, the Company shall permit Parent, at its sole
expense, to reasonably participate in the defense and settlement of any claim,
suit or cause of action relating to any Takeover Proposal, the Merger, this
Agreement or the other Transactions contemplated hereby, and the Company shall
not settle or compromise any such claim, suit or cause of action without
Parent's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed. Notwithstanding the foregoing in this Section
5.06 or anything contained in this Agreement to the contrary, in no event shall
Parent or Merger Sub be required to, or the Company be permitted to, (i) agree
to any divestiture of any businesses, assets or product lines of the Company,
Parent or any of their respective Subsidiaries or Affiliates, (ii) commence or
file any action, suit, claim, litigation or other proceeding, (iii) agree to
the imposition of any conditions or any amendments to any contracts or
agreements (other than as expressly provided for in this Agreement) or (iv)
make any payments or provide any economic benefits to third parties, in each
case in order to obtain any approval or consent that is necessary to consummate
the Merger or any other transaction contemplated by this Agreement.
Section 5.07 COMPANY SHAREHOLDERS MEETING; PROXY MATERIAL.
(a) As promptly as practicable following the date of this Agreement,
the Company shall prepare a proxy statement relating to the approval of the
Merger and the other Transactions by the Company's shareholders (as amended or
supplemented, the "PROXY STATEMENT"), and the Parties shall prepare a Schedule
13E-3 filing (as amended or supplemented, the "SCHEDULE 13E-3"). Parent and the
Company shall cooperate with each other in connection with the preparation of
the foregoing documents. Both Parent and the Company will cause the Schedule
13E-3 to comply as to form in all material respects with the applicable
provisions of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"). The Company will cause the Proxy Statement to comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
CGCL. Both Parent and the Company will furnish to each other all information
concerning the Company, Merger Sub or Parent each may reasonably request in
connection with such actions and the preparation of the Schedule 13E-3 and the
Proxy Statement. The Company will use commercially reasonable efforts to
promptly respond to any requests or comments from the SEC with respect to the
Proxy Statement, and the Parties will use commercially reasonable efforts to
promptly respond to any requests or comments from the SEC with respect to the
Schedule 13E-3.
(b) The Company will use commercially reasonable efforts to cause the
Proxy Statement to be mailed to the Company's shareholders as promptly as
practicable after the compliance with SEC filing requirements and satisfactory
resolution of all SEC comments thereon, if any. The Company shall as promptly
as practicable notify Parent of the receipt of any oral or written comments
31
from the SEC relating to the Proxy Statement. The Company shall cooperate and
provide Parent with a reasonable opportunity to review and comment on the draft
of the Proxy Statement (including each amendment or supplement thereto), and
the Parties hereto shall cooperate and provide one another with a reasonable
opportunity to review and comment on the draft Schedule 13E-3 (including each
amendment or supplement thereto) and all responses to requests for additional
information by and replies to comments of the SEC prior to filing such with or
sending such to the SEC, and the Parties hereto will provide one another with
copies of all such filings made and correspondence with the SEC. If at any time
prior to the Effective Time, any information should be discovered by any Party
which should be set forth in an amendment or supplement to the Proxy Statement
or the Schedule 13E-3 so that the Proxy Statement or the Schedule 13E-3 would
not include any misstatement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, the
Party which discovers such information shall promptly notify the other Parties
hereto and, to the extent required by applicable Law, an appropriate amendment
or supplement describing such information shall be promptly filed by the
Company with the SEC and disseminated by the Company to the shareholders of the
Company.
(c) The Company shall (i) duly take all lawful action to call, give
notice of, convene and hold a meeting of its shareholders on a date as soon as
practicable after the compliance with SEC filing requirements with respect to
the Proxy Statement and satisfactory resolution of all SEC comments thereon, if
any (the "COMPANY SHAREHOLDERS MEETING") for the purpose of obtaining the
Company Shareholder Approval with respect to the adoption of this Agreement and
(ii) shall use commercially reasonable efforts to solicit the adoption of this
Agreement by the Company Shareholder Approval. The Board of Directors shall
recommend adoption of this Agreement by the shareholders of the Company to the
effect as set forth in Section 3.03(b) (the "COMPANY RECOMMENDATION"), and
shall not withdraw, modify or qualify (or propose to withdraw, modify or
qualify) in any manner adverse to Parent such recommendation or take any action
or make any statement in connection with the Company Shareholder Meeting
inconsistent with such recommendation including, without limitation, approving
or recommending or proposing to approve or recommend a third party Takeover
Proposal with respect to the Company or failing to recommend the adoption of
this Agreement (collectively, a "CHANGE IN THE COMPANY RECOMMENDATION");
PROVIDED that the Board of Directors and/or the Special Committee may make a
Change in the Company Recommendation pursuant to Section 5.08(b) hereof.
Section 5.08 TAKEOVER PROPOSAL AND RELATED MATTERS.
(a) As promptly as practicable after the receipt by the Company of any
Takeover Proposal or any inquiry with respect to, or that could reasonably be
expected to lead to, any Takeover Proposal, and in any case within one Business
Day after the receipt thereof, the Company shall provide written notice to
Parent of (i) such Takeover Proposal or inquiry, (ii) the identity of the
Person making any such Takeover Proposal or inquiry, and (iii) the material
terms and conditions of any such Takeover Proposal or inquiry (including any
32
amendments or modifications thereto). The Company shall keep Parent informed on
a current basis of the status of any such Takeover Proposal, including, without
limitation, any changes to the price or other material terms and conditions
thereof, and promptly provide Parent with copies of all written or e-mail
correspondence or other communications and other written materials sent or
provided to or by the Company and its Representatives in connection with any
Takeover Proposal that relate to the price or other material terms and
conditions thereof.
(b) Neither the Board of Directors of the Company nor any committee
thereof (including the Special Committee) shall, directly or indirectly, (i)
effect a Change in the Company Recommendation or (ii) approve any letter of
intent, memorandum of understanding, merger agreement or other agreement,
arrangement or understanding relating to, or that may reasonably be expected to
lead to, any Takeover Proposal. Notwithstanding the foregoing, at any time
prior to the Company Shareholder Approval, the Board of Directors of the
Company and/or the Special Committee may in response to a Superior Proposal
effect a Change in the Company Recommendation, PROVIDED that the Special
Committee determines in good faith, by resolution duly adopted after
consultation with its outside legal counsel and an independent financial
advisor of nationally recognized reputation, that the failure to do so would be
inconsistent with its fiduciary duties under applicable Law, and PROVIDED,
FURTHER, that the Board of Directors and/or the Special Committee may not
effect such a Change in the Company Recommendation unless the Special Committee
shall have first provided prior written notice to Parent that it is prepared to
effect a Change in the Company Recommendation in response to a Superior
Proposal, which notice shall attach the most current version of any written
agreement relating to the transaction that constitutes such Superior Proposal.
(c) Nothing contained in this Section 5.08 shall prohibit the Company
from complying with the Exchange Act in respect of any Takeover Proposal or
making any disclosure to the shareholders of the Company if the Special
Committee or Board of Directors determines in good faith, by resolution duly
adopted after consultation with its outside counsel, that the failure to make
such disclosure would be inconsistent with its fiduciary duties under
applicable Law, PROVIDED, HOWEVER that neither the Board of Directors of the
Company nor any committee thereof (including the Special Committee) shall,
except as expressly permitted by Section 5.08(b), effect a Change in the
Company Recommendation or approve or recommend, or publicly propose to approve
or recommend, a Takeover Proposal.
(d) For purposes of this Agreement:
"TAKEOVER PROPOSAL" means any proposal or offer in respect of (i) a tender
or exchange offer, merger, consolidation, business combination, share exchange,
reorganization, recapitalization, liquidation, dissolution, or similar
transaction involving the Company or any of the Company Subsidiaries (any of
the foregoing, a "BUSINESS COMBINATION TRANSACTION") with any Person other than
Parent or any Affiliate thereof (a "THIRD PARTY") pursuant to which such Third
Party would acquire more than 20% of the outstanding capital stock of the
Company, (ii) the Company's acquisition of any Third Party in a Business
Combination Transaction in which the shareholders of the Third Party
33
immediately prior to consummation of such Business Combination Transaction will
own more than 20% of the Company's outstanding capital stock immediately
following such Business Combination Transaction, including the issuance by the
Company of more than 20% of its outstanding capital stock as consideration for
assets or securities of a Third Party, or (iii) any direct or indirect
acquisition by any Third Party of 20% or more of the outstanding capital stock
of the Company or of 20% or more of the consolidated assets of the Company and
the Company Subsidiaries, in a single transaction or a series of related
transactions.
"SUPERIOR PROPOSAL" means any bona fide written proposal or offer made by
a Third Party in respect of a Business Combination Transaction involving, or
any purchase or acquisition of, (i) all of the Company's outstanding capital
stock or (ii) all or substantially all of the consolidated assets of the
Company and the Company Subsidiaries, which the Special Committee determines in
good faith, by resolution duly adopted after consultation with its outside
counsel and an independent financial advisor of nationally recognized
reputation, would result in a transaction that if consummated would be superior
from a financial point of view to the holders of each class of the Company's
capital stock than the Merger, taking into account all of the terms and
conditions it deems relevant to such proposal and to this Agreement (including
whether, in the good faith judgment of the Board of Directors of the Company,
such Third Party is able to finance the transaction and obtain all required
regulatory approvals).
Section 5.09 THIRD PARTY CONSENTS. Between the date hereof and the
Effective Time, the Company shall use all reasonable best efforts to obtain the
third party consents set forth in Section 6.02(j) of the Company Disclosure
Letter.
Section 5.10 SHAREHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate, at its sole expense, in the defense or settlement
of any shareholder litigation against the Company and/or its directors or
executive officers relating to the transactions contemplated by this Agreement,
whether commenced prior to or after the execution and delivery of this
Agreement. The Company agrees that it shall not settle or offer to settle any
litigation commenced prior to or after the date hereof against the Company or
any of its directors or executive officers by any shareholder of the Company
relating to this Agreement, the Merger, any other Transaction contemplated
hereby or otherwise, without the prior written consent of Parent.
Section 5.11 STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or may become applicable to the Merger and the other transactions
contemplated by this Agreement, the Company, the Special Committee and the
Board of Directors shall each take such actions as are necessary so that the
Merger and the other transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any such statute or regulation on the
Merger and the other transactions contemplated hereby.
34
ARTICLE VI
CONDITIONS
Section 6.01 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of Parent and the Company to consummate the Merger
and the other Transactions are subject to the satisfaction or waiver (by mutual
written consent of the Company and Parent) on or prior to the Closing Date of
each of the following conditions:
(a) SHAREHOLDER APPROVAL. The Company shall have obtained the Company
Shareholder Approval.
(b) REGULATORY APPROVAL. All requisite approvals from Governmental
Authorities shall have been received and any waiting period (and any extension
thereof) applicable to the Merger and the other Transactions under applicable
Law shall have been terminated or shall have expired.
(c) NO ORDER. No court of competent jurisdiction or any other
Governmental Authority shall have issued, enacted, promulgated, enforced or
entered any law, rule, regulation, decree, ruling or order or taken any other
action restraining, enjoining or otherwise prohibiting the consummation of the
Merger or the other transactions contemplated by this Agreement.
Section 6.02 CONDITIONS TO OBLIGATION OF PARENT AND MERGER SUB. The
obligation of Parent and Merger Sub to effect the Merger and the other
Transactions is subject to the satisfaction or waiver by Parent, in its sole
discretion, on or prior to the Closing Date of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES.
(i) Except as set forth in, and subject to, Sections 6.02(a)(ii)
and 6.02(a)(iii), the representations and warranties of the Company contained
in this Agreement shall be true and correct in all respects as of the Closing
Date, as if made on the Closing Date (except for such representations and
warranties which are made as of a certain date, which shall be true and correct
as of such date), except where the failure of such representations and
warranties in the aggregate to be so true and correct would not result in a
Company Material Adverse Effect.
(ii) Notwithstanding anything to the contrary set forth in
Section 6.02(a)(i), the representations and warranties of the Company set forth
in Sections 3.03(b), 3.03(c), 3.22, 3.23 and 3.24 shall be true and correct in
all respects when made and as of the Effective Time as if made at the Effective
Time.
(iii) Notwithstanding anything to the contrary set forth in
Section 6.02(a)(i), the representations and warranties set forth in Section
3.02(a) and Section 3.02(b) shall be true and correct in all material respects
as of the Effective Time as though made on and as of such time (except to the
extent that any such representation and warranty expressly speaks as of an
35
earlier date, in which case such representation and warranty shall be true and
correct in all material respects as of such earlier date); it being understood
that, in any event, the condition set forth in this Section 6.02(a)(iii) shall
be deemed not to have been satisfied if any breach of the representations and
warranties set forth in Section 3.02(a) and Section 3.02(b) shall have occurred
that would reasonably be expected to result in the sum of (x) the aggregate
Merger Consideration (including amounts payable pursuant to cancellation of any
Company Restricted Shares) and (y) the aggregate consideration payable pursuant
to any repurchase or cancellation of any Company Options, Company Warrants,
Company Derivatives or other equity securities of the Company, in each case
pursuant to this Agreement, but excluding, for the avoidance of doubt, the
Series E Distributions, to be more than $4,723,000.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior to
the Closing Date and Parent shall have received a certificate signed by a duly
authorized officer of the Company certifying that the conditions set forth in
6.02(a), 6.02(b) and 6.02(c) shall have been satisfied.
(c) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have occurred any event, change or development that, individually or
in the aggregate, constituted or could reasonably be expected to constitute a
Company Material Adverse Effect.
(d) NO LITIGATION. There shall not be pending any suit, action or
proceeding brought by any Governmental Authority or any Person, (i) challenging
the acquisition by Parent of any capital stock of the Company, seeking to
restrain, enjoin or prohibit the consummation of the Merger or any other
Transaction contemplated hereby or seeking to obtain from the Company, Parent
or any members of Parent any damages, (ii) seeking to prohibit or limit the
ownership or operation by the Company, Parent or any of their respective
Subsidiaries or the members of Parent of any material portion of the business
or assets of the Company or the Company Subsidiaries or (iii) which otherwise
is likely to constitute a Company Material Adverse Effect.
(e) DIRECTORS. The Company shall have received, and delivered copies to
Parent of the resignations of those directors of the Company identified by
Parent in writing prior to the Effective Time, which shall be valid and
effective immediately prior to the Effective Time. The Board of Directors of
the Company, as it is constituted immediately prior to the Company Shareholders
Meeting, subject to any death or resignation, shall have elected to the Board
of Directors of the Company the Persons designated in writing by Parent prior
to the Effective Time, such election to take effect as of immediately after the
Effective Time.
(f) TAX CERTIFICATION. Parent shall have received a certification from
the Company in the form prescribed by Treasury regulations under Section 1445
of the Code to the effect that the Company is not (and was not at any time
36
during the five-year period ending on the Closing date) a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
(g) AMENDED AND RESTATED ARTICLES OF INCORPORATION. The Company's Board
of Directors and shareholders shall have adopted and approved the Second
Amended and Restated Articles of Incorporation of the Company in substantially
the form attached hereto as EXHIBIT D (the "RESTATED ARTICLES"), which Restated
Articles shall supersede and replace the Amended and Restated Articles of
Incorporation of the Company and any related Certificates of Determination
related thereto in effect as of the date hereof, and such Restated Articles
shall have been duly filed with the Secretary of State of the State of
California.
(h) DISSENTING SHARES. The total number of Dissenting Shares shall not
exceed five percent (5%) of the issued and outstanding shares of Common Stock
(on a fully diluted and as-if converted basis) as of the Closing Date.
(i) SERIES E PREFERRED STOCK. The total number of fractional shares of
Series E Preferred Stock to receive the Series E Distribution pursuant to
Section 1.07(d) shall constitute less than 10% of the total outstanding shares
of Series E Preferred Stock immediately after the Reverse Split.
(j) THIRD PARTY CONSENTS. The third party consents set forth in Section
6.02(j) of the Company Disclosure Letter shall have been obtained by the
Company in form and substance reasonably satisfactory to Parent, which consents
shall not have been revoked or modified.
(k) RIGHTS PLAN. The Company shall have caused the Rights Plan to be
terminated upon the Effective Time, without payment or distribution of any
amounts or securities to any holders thereunder.
(l) SEC FILINGS.
(i) The Company shall have filed all reports required by Section
13(a) of the Exchange Act (without regard to Rule 12b-25 under the Exchange
Act) since January 1, 2005 and through immediately prior to the Effective Time
and there shall not have been any amendment or restatement to any such report
(or any event that could reasonably be expected to require such amendment or
restatement) that the Company is required to file under Section 15(d) of the
Exchange Act.
(ii) No registration statement relating to the Common Stock, the
Series E Preferred Stock or any other class of securities of the Company shall
have become effective under the Securities Act in the fiscal year during which
the Effective Time occurs and the Company shall have otherwise met the
requirements for availability of Rule 12h-3 under the Exchange Act set forth in
Rule 12h-3(c) under the Exchange Act.
(iii) The Company shall have terminated, prior to the filing by
the Company of the Annual Report on Form 10-K of the Company for the fiscal
37
period ended December 31, 2007, any then effective registration statement filed
by the Company under the Securities Act.
(iv) Assuming the consummation of the Merger and the
effectiveness of the Reverse Split, the Company shall have met all the
requirements under the Exchange Act for the immediate suspension of duty to
file reports under Section 15(d) of the Exchange Act for the Common Stock and
the Series E Preferred Stock upon the filing with the Commission of a
certification on Form 15.
Section 6.03 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is subject to the satisfaction or waiver by
the Company, in its sole discretion, on or prior to the Closing Date of the
following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Parent and Merger Sub contained in this Agreement shall be true and
correct in all respects as of the Closing Date, as if made on the Closing Date
(except for such representations and warranties which are made as of a certain
date, which shall be true and correct as of such date), except where the
failure of such representations and warranties in the aggregate to be so true
and correct would not result in a Parent Material Adverse Effect. The Company
shall have received a certificate of a duly authorized officer of Parent to
such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB. Parent and
Merger Sub shall have performed or complied in all material respects with all
agreements and covenants required to be performed by it under this Agreement at
or prior to the Closing Date and the Company shall have received a certificate
of a duly authorized officer of Parent to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 TERMINATION. This Agreement may be terminated and the Merger
and other transactions contemplated hereby may be abandoned at any time prior
to the Effective Time, whether prior to or after receipt of the Company
Shareholder Approval:
(a) by mutual written consent of Parent and, acting at the direction of
the Special Committee, the Company;
(b) by either Parent or the Company, if:
(i) the Merger shall not have been consummated by April 30, 2008
(such date, the "TERMINATION DATE"), PROVIDED, that the right to terminate the
Agreement pursuant to this Section 7.01(b)(i) shall not be available to any
Party whose failure to perform any of its obligations under this Agreement has
been the primary cause of the failure of the Merger to be consummated by such
time;
38
(ii) any Governmental Authority of competent jurisdiction issues
an order, judgment, decision, opinion, decree or ruling or takes any other
action permanently restraining, enjoining or otherwise prohibiting the Merger
or any other Transactions contemplated herein and such order, judgment,
decision, opinion, decree or ruling or other action shall have become final and
non-appealable; or
(iii) the Company Shareholder Approval shall not have been
obtained at the Company Shareholders Meeting or any adjournment or postponement
thereof; PROVIDED that the right to terminate the Agreement pursuant to this
Section 7.01(b)(iii) shall not be available to the Company if it has breached
its obligations under Section 5.08 or to Parent if Parent or any of the
Rollover Shareholders shall have breached their obligations under the Voting
Agreement and such breach has proximately caused the Company Shareholder
Approval not to have been obtained;
(c) by Parent, if:
(i) neither Parent nor Merger Sub is in material breach of their
respective obligations under this Agreement and the Company shall have breached
or failed to perform any of its representations, warranties or covenants
contained in this Agreement such that the conditions stated in Section 6.02(a)
and/or Section 6.02(b) would not be satisfied, which breach or failure to
39
perform is not reasonably capable of being cured by the Company prior to the
Termination Date or is not cured by the Company within ten (10) Business Days
of receipt of notice by the Company of such breach or failure to perform;
(ii) a Change in the Company Recommendation shall have occurred;
(iii) there is pending any suit, action or proceeding brought by
any Governmental Authority or any Person, (x) challenging the acquisition by
Parent of any capital stock of the Company, seeking to restrain, enjoin or
prohibit the consummation of the Merger or any other Transaction contemplated
hereby or seeking to obtain from the Company, Parent or any members of Parent
any damages, (y) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of their respective Subsidiaries or the members of
Parent of any material portion of the business or assets of the Company or the
Company Subsidiaries or (z) which otherwise is likely to constitute a Company
Material Adverse Effect; or
(iv) after the date hereof, there shall have occurred any event,
change or development that, individually or in the aggregate, constituted or
could reasonably be expected to constitute a Company Material Adverse Effect.
(d) by the Company if:
(i) the Company is not in material breach of its obligations
under this Agreement and Parent shall have breached or failed to perform any of
its representations, warranties or covenants contained in this Agreement such
that the conditions stated in Section 6.03(a) and/or Section 6.03(b) would not
be satisfied, which breach or failure to perform is not reasonably capable of
39
being cured by Parent prior to the Termination Date or is not cured by Parent
within ten (10) Business Days of receipt of notice by Parent of such breach or
failure to perform; or
(ii) prior to approval of the Merger by the Company's
shareholders as contemplated by Section 6.1(a) and as a result of a Superior
Proposal, the Special Committee determines in good faith, by resolution duly
adopted after consultation with its outside legal counsel and an independent
financial advisor of nationally recognized reputation, that the failure to
terminate this Agreement and accept such Superior Proposal would be
inconsistent with its fiduciary duties under applicable Law, and PROVIDED, that
with its notice to terminate this Agreement pursuant to this Section
7.01(d)(ii), the Company must include the most current version of any written
agreement relating to the transaction that constitutes such Superior Proposal.
Section 7.02 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided in Section 7.01, this Agreement shall forthwith
become void and have no effect, and there shall be no liability on the part of
Parent or the Company, except for the provisions of this Section 7.02, Section
7.03 and Article VIII, which shall survive any such termination and remain in
full force and effect, and except that no Party shall be relieved or released
from any liability or damages arising from a willful or intentional breach of
any provision of this Agreement.
Section 7.03 FEES AND EXPENSES.
(a) If this Agreement is terminated pursuant to Section 7.01(b)(iii),
Section 7.01(c)(i), Section 7.01(c)(ii) or Section 7.01(d)(ii), then within
five (5) Business Days of such termination, Parent shall deliver a written
notice to the Company setting forth the aggregate amount of all actual and
documented attorneys' fees and expenses incurred by Parent as of the date of
such termination in connection with this Agreement and the ancillary agreements
and the Transactions (the "EXPENSE AMOUNT"). Within (x) five (5) Business Days
of the receipt by the Company of such written notice in the event of a
termination pursuant to Section 7.01(b)(iii) or Section 7.01(c)(i) and (y) 30
Business Days of the receipt by the Company of such written notice in the event
of a termination pursuant to Section 7.01(c)(ii) or Section 7.01(d)(ii), the
Company shall pay to Parent, by wire transfer of immediately available funds to
an account designated by Parent, an amount equal to the Expense Amount;
PROVIDED that the Company shall not be obligated to pay to Parent more than an
aggregate of $750,000 pursuant to this Section 7.03(a).
(b) The Parties each agree that the agreements contained in this
Section 7.03 are an integral part of the transaction contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay the Expense Amount
due under this Section 7.03 and, in order to obtain such payment, Parent
commences a suit that results in a judgment against the Company for such
amounts, the Company shall pay interest on such amounts from the date payment
of such amounts were due to the date of actual payment at the prime rate of
Citibank, N.A. in effect on the date such payment was due, together with the
40
costs and expenses of Parent (including reasonable legal fees and expenses) in
connection with such suit.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant to this Agreement by any Person shall terminate
at the Effective Time or the termination of this Agreement pursuant to Section
7.01 hereof, as the case may be, except that the agreements set forth in
Section 7.02, 7.03 and Article VIII hereof shall survive termination and this
Section 8.01 shall not limit any covenant or agreement of the Parties hereto
which by its terms contemplates performance after the Effective Time. For the
avoidance of doubt and notwithstanding anything to the contrary contained in
the foregoing sentence, all representations, warranties and agreements in this
Agreement and in any certificate delivered pursuant to this Agreement by Parent
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 7.01, as the case may be.
Section 8.02 FEES AND EXPENSES. Except as set forth in Section 7.03, if
the Merger is not consummated and this Agreement is terminated, all Expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such Expenses. As used in this
Agreement, "EXPENSES" includes all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its Affiliates) incurred by a
Party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
Transactions contemplated hereby, including the preparation, printing, filing
and mailing, as the case may be, of the Proxy Statement and Schedule 13E-3 and
any amendments or supplements thereto, and the solicitation of shareholder
approvals and all other matters related to the transactions contemplated
hereby.
Section 8.03 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by telecopy or telex, overnight courier service or by
registered or certified mail (postage prepaid, return receipt requested), to
the respective Parties at the following addresses or at such addresses as shall
be specified by the Parties by like notice:
(a) If to Parent:
CP Holdco, LLC
c/o General Atlantic Service Company, LLC
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
41
with a copy (which shall not constitute notice) to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
Xxxxxxx Xxxxx, Esq.
(b) If to the Company:
Critical Path, Inc.
0 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Special Committee of the Board of Directors
of Critical Path, Inc.
Critical Path, Inc.
0 Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Chief Executive Officer
and a copy (which shall not constitute notice) to:
Paul, Hastings, Xxxxxxxx & Xxxxxx, LLP
00 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Section 8.04 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be governed by and construed in accordance with the Laws of the State of
Delaware without regard to any conflict of laws rules thereof that might
42
indicate the application of the Laws of any other jurisdiction. Each of the
Parties hereto irrevocably submit to the exclusive jurisdiction of any state or
federal court sitting in Delaware, over any suit, action or proceeding arising
out of or relating to this Agreement or the agreements delivered in connection
herewith or the transactions contemplated hereby or thereby or for recognition
or enforcement of any judgment relating thereto. To the fullest extent they may
effectively do so under applicable Law, the Parties hereto irrevocably waive
and agree not to assert, by way of motion, as a defense or otherwise, any claim
that they are not subject to the jurisdiction of any such court, any objection
that they may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in
an inconvenient forum. Each of the Parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
Law.
Section 8.05 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (together with
the exhibits and annexes hereto and the Company Disclosure Letter) contain the
entire agreement among Parent, Merger Sub and the Company with respect to the
Merger and the other transactions contemplated hereby and supersedes all prior
agreements and undertakings, both written and oral, among the Parties, or any
of them, with respect to these matters. Each Party hereto has participated in
the drafting of this Agreement, which each Party acknowledges is the result of
extensive negotiations between the Parties. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
Parties, in whole or in part (whether by operation of law or otherwise),
without the prior written consent of the other Party, and any attempt to make
any such assignment without such consent shall be null and void, except that
Parent may assign, in its sole discretion, any or all of its rights, interests
and obligations under this Agreement to any direct wholly owned Subsidiary of
Parent without the consent of the Company, but no such assignment shall relieve
Parent of any of its obligations under this Agreement. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
Section 8.06 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any terms or
provisions of this Agreement in any other jurisdiction so long as the economic
or legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the Parties as closely as possible in an acceptable
43
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
Section 8.07 HEADINGS. Headings are used for reference purposes only and
do not affect the meaning or interpretation of this Agreement.
Section 8.08 PARTIES IN INTEREST; LIMITATION OF LIABILITIES.
(a) This Agreement shall be binding upon and inure solely to the
benefit of each Party hereto and their respective successors, legal
representatives and permitted assigns, and, except for the provisions of
Section 5.03 hereof, which shall be enforceable by the beneficiaries
contemplated thereby, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
(b) The Company hereby acknowledges and agrees that neither the
Company, its Subsidiaries, nor any of their respective Affiliates, shall have
any right of recovery against, and no personal liability shall attach to, any
members, officers, directors or employees of Parent or Merger Sub or any of
their respective former, current or future stockholders, controlling persons,
directors, officers, employees, agents, Affiliates, members, managers, general
or limited partners, assignees, successors or assigns (each a "PARENT
AFFILIATE"), through the Parent, Merger Sub or otherwise, whether by or through
attempted piercing of the corporate veil, by or through a claim by or on behalf
of the Parent or Merger Sub against any Parent Affiliate, by the enforcement of
any assessment or by any legal or equitable proceeding, by virtue of any
statute, regulation or applicable Law, or otherwise; PROVIDED, that the
foregoing shall not affect in any respect any liability or obligations of
Parent or Merger Sub under this Agreement or any of the Company's rights or
remedies hereunder with respect to Parent and Merger Sub.
Section 8.09 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 8.10 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS AND
HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER
44
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS CONTAINED IN THIS SECTION
8.10.
Section 8.11 DEFINITIONS. As used in this Agreement:
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act.
"BUSINESS DAY" means any day on which banks are not required or authorized
to close in the City of New York.
"CK SHAREHOLDERS" means, collectively, Cenwell Limited, Campina
Enterprises Limited, Dragonfield Limited and Lion Cosmos Limited.
"COMPANY ARTICLES OF INCORPORATION" means the Amended and Restated
Articles of Incorporation of the Company, as amended from time to time.
"COMPANY DISCLOSURE LETTER" means the Company Disclosure Letter delivered
by the Company to Parent and Merger Sub on the date hereof, setting forth items
the disclosure of which is necessary in response to an express disclosure
requirement or as an exception to one or more of the Company's representations
or warranties contained in this Agreement. Each disclosure set forth in the
Company Disclosure Letter is identified by reference to, or has been grouped
under a heading referring to, a specific individual section of this Agreement
and shall only be deemed a qualification or exception to such section and to
any other sections of this Agreement if the relation of such disclosure to such
other section is reasonably apparent.
"COMPANY MATERIAL ADVERSE EFFECT" means any effect, change, event,
circumstance, condition or development having an effect that individually or in
the aggregate is or would reasonably be expected to be materially adverse to
the business, assets, financial condition or results of operations of the
Company and the Company Subsidiaries, taken as a whole or would materially
impair its ability to perform its obligations under this Agreement; provided,
however, that any effect, change, event, circumstance, condition or development
that results from or arises out of one or more of the following will not be
considered in determining whether a "Company Material Adverse Effect" has
occurred or would reasonably be expected to occur: (i) changes in general
economic conditions nationally or regionally or changes in conditions
(including as a result of changes in laws) affecting the industries in which
the Company and the Company Subsidiaries compete, provided that such changes in
each case do not disproportionately affect the Company and the Company
Subsidiaries, taken as a whole, (ii) actions taken or omitted by the Company or
any of the Company Subsidiaries with the prior written consent of Parent after
the date hereof, (iii) failure by the Company to meet or exceed any published
analyst's revenue or earnings projections or forecasts or any failure by the
Company to meet its internal projections presented to the Board of Directors
(but, in each case, not the underlying cause of such failure or the effects
therefrom), (iv) any facts or circumstances disclosed in the Form 10-K, the
45
Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K filed from
the date of the filing of the Form 10-K and any amendments to any such reports,
in the case of all such reports and amendments through and until not later than
four (4) Business Days prior to the date of this Agreement (excluding any
disclosures set forth in any risk factor section thereof or in any other
disclosures included therein to the extent that they are cautionary, predictive
or forward-looking in nature) or in the Company Disclosure Letter or (v)
changes in the Company's stock price, by itself.
"CONSTITUENT DOCUMENTS" means with respect to any entity, the certificate
or articles of incorporation, certificate of formation, the operating
agreement, the bylaws, or any similar charter or other organizational or
governing documents of such entity.
"CONTRIBUTING SHAREHOLDERS" means, collectively, General Atlantic Partners
74, L.P., GapStar, LLC, GAP Coinvestment Partners II, L.P., Cenwell Limited,
Campina Enterprises Limited, Richmond CP LLC, Xxxxx Xxxxxxx, Richmond I, LLC,
Richmond III, LLC, the Xxxxxxx Foundation, Xxxxxx Xxxxxxx, Trust FBO Xxxxx and
Xxxxxxxxx Xxxxxxx, Xxxxxxxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxxx and Vectis-CP
Holdings, LLC.
"COPYRIGHTS" means any foreign or United States copyright registrations
and applications for registration thereof, and any non-registered copyrights.
"ENVIRONMENTAL LAW" means any foreign, federal, state or local law,
treaty, statute, rule, regulation, order, ordinance, decree, injunction,
judgment, governmental restriction or any other requirement of law (including
common law) regulating or relating to the protection of human health, safety
(as it relates to Releases of Hazardous Substances), natural resources or the
environment, including, without limitation, laws relating to wetlands,
pollution, contamination or the use, generation, management, handling,
transport, treatment, disposal, storage, Release or threatened Release of
Hazardous Substances.
"ENVIRONMENTAL PERMIT" means any permit, license, authorization or consent
required pursuant to applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCLUDED SHARES" means the Treasury Shares and the Parent Held Shares.
"GA SHAREHOLDERS" means, collectively, General Atlantic Partners 74, L.P.,
GapStar, LLC, GAP Coinvestment Partners II, L.P. and GAPCO GmbH & Co. KG.
"GAAP" means United States generally accepted accounting principles in
effect from time to time.
46
"HAZARDOUS SUBSTANCES" means any substance that: (i) is or contains
asbestos, urea formaldehyde insulation, polychlorinated biphenyls, petroleum,
petroleum products or petroleum-derived substances or wastes, radon gas,
microbial or microbiological contamination or related materials, (ii) requires
investigation or remedial action pursuant to any Environmental Law, or is
defined, listed or identified as a "hazardous waste," "hazardous substance,"
"toxic substance" or words of similar import thereunder, or (iii) is regulated
under any Environmental Law.
"INDEBTEDNESS" means, with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, or with respect to deposits
or advances of any kind, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (iii) all obligations of such
Person upon which interest charges are customarily paid (other than trade
payables incurred in the ordinary course of business consistent with past
practices), (iv) all obligations of such Person under conditional sale or other
title retention agreements relating to any property purchased by such Person,
(v) all obligations of such Person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such Person to
creditors for raw materials, inventory, services and supplies incurred in the
ordinary course of business consistent with past practices), (vi) all lease
obligations of such Person capitalized on the books and records of such Person,
(vii) all obligations of others secured by a Lien on property or assets owned
or acquired by such Person, whether or not the obligations secured thereby have
been assumed, (viii) all obligations of such Person under interest rate,
currency or commodity derivatives or hedging transactions, (ix) all letters of
credit or performance bonds issued for the account of such Person and (x) all
guarantees and arrangements having the economic effect of a guarantee of such
Person of any Indebtedness of any other Person.
"INTERNET ASSETS" means any Internet domain names and other computer user
identifiers and any rights in and to sites on the worldwide web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.
"IRS" means the U.S. Internal Revenue Service.
"KNOWN" or "KNOWLEDGE" means, with respect to any party, the knowledge of
such party's executive officers after due inquiry.
"LAW" (and with the correlative meaning "LAWS") means rule, regulation,
statutes, orders, ordinance, guideline, code, or other legally enforceable
requirement, including but not limited to common law, state and federal laws or
securities laws and laws of foreign jurisdictions.
"LEASED REAL PROPERTY" means all interests leased pursuant to the Leases.
"LEASES" means leases, subleases, licenses and occupancy agreements.
47
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or security
interest; or any preference, priority or other agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement, or any capital lease
having substantially the same economic effect as any of the foregoing).
"ORDER" means any charge, order, writ, injunction, judgment, decree,
ruling, determination, directive, award or settlement, whether civil, criminal
or administrative and whether formal or informal, applicable to the Company or
any Company Subsidiary.
"PARENT MATERIAL ADVERSE EFFECT" means any event, change or development
having an effect that would prevent or materially delay the performance by
Parent of any of its obligations under this Agreement.
"PATENTS" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"PERMITTED LIENS" means (i) any liens for Taxes not yet due or which are
being contested in good faith by appropriate proceedings, (ii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other similar liens,
(iii) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation, and (iv)
easements, rights-of-way, restrictions and other similar encumbrances incurred
in the ordinary course of business which, in the aggregate, are not substantial
in amount and which do not in any case materially impair the use in the
business of the property subject thereto consistent with past practice.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
"PLAN" means each "employee benefit plan", as such term is defined in
section 3(3) of ERISA, and each employment, consulting, bonus, incentive or
deferred compensation, severance, termination, retention, change of control,
stock option, stock appreciation, stock purchase, restricted stock, deferred
stock, phantom stock or other equity-based, performance or other employee or
retiree benefit or compensation plan, program, arrangement, agreement or
policy, whether written or unwritten, that provides or may provide benefits or
compensation in respect of any current or former officer, director or employee
of the Company or the beneficiaries or dependents of any such person that is or
has been maintained or established by the Company or any other Related Persons,
or to which the Company or any Related Person contributes or is or has been
obligated or required to contribute.
48
"RELATED PERSON" means any trade or business, whether or not incorporated,
which, together with the Company, is or would have been at any date of
determination occurring within the preceding six years, treated as a single
employer under Section 414 of the Code.
"RELEASE" means any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying,
seeping, dispersal, migration, transporting, placing and the like, including
without limitation, the moving of any materials through, into or upon, any
land, soil, surface water, groundwater or air, or otherwise entering into the
indoor or outdoor environment.
"REPRESENTATIVES" of a Person means the officers, directors, employees,
accountants, counsel, financial advisors, consultants, financing sources and
other advisors or representatives of such Person.
"RETIREE WELFARE PLAN" means any Plan that provides for continued medical,
dental or life insurance benefits or coverage after termination or retirement
from employment, other than as required by COBRA (Section 4980B of the Code) or
any similar state or local Law.
"ROLLOVER SHAREHOLDERS" means, collectively, the Contributing
Shareholders, GAPCO GmbH & Co. KG., Dragonfield Limited and Lion Cosmos
Limited.
"SEC" means the United States Securities and Exchange SEC.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SOFTWARE" means any and all computer software, including application
software, system software and firmware, including all source code and object
code versions thereof, in any and all forms and media, and all related
documentation.
"SUBSIDIARY" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
"TAX" (and with the correlative meaning "TAXES") shall mean all federal,
state, local or foreign net income, franchise, gross income, sales, use, ad
valorem, property, gross receipts, license, capital stock, payroll,
withholding, excise, severance, transfer, employment, alternative or add-on
49
minimum, stamp, occupation, premium, environmental or windfall profits taxes,
and other taxes, charges, fees, levies, imposts, customs, duties, licenses or
other assessments, together with any interest and any penalties, additions to
tax or additional amounts imposed by any Taxing Authority.
"TAX RETURN" means all federal, state, local and foreign tax returns,
estimates, information statements and reports relating to Taxes.
"TAXING AUTHORITY" means, with respect to any Tax, the Governmental
Authority that imposes such Tax, and the agency (if any) charged with the
collection of such Tax for such Governmental Authority.
"TRADE SECRETS" means information, including all inventions (whether or
not patentable), discoveries, processes, procedures, designs, formulae,
know-how, Software, ideas, methods, research and development, data and
databases, that is proprietary or confidential, the value of which is
contingent upon the continued confidentiality of such information.
"TRADEMARKS" means any foreign or United States trademarks, service marks,
trade dress, trade names, brand names, designs and logos, corporate names,
product or service identifiers, whether registered or unregistered, and all
registrations and applications for registration thereof.
Section 8.12 AMENDMENT. This Agreement may not be amended and no waiver,
consent or approval by or on behalf of the Company (or Special Committee, if
applicable) may be granted except pursuant to an instrument in writing signed
by or on behalf of the Company (or Special Committee, if applicable) following
approval of such action by the Special Committee and signed by Parent.
Section 8.13 EXTENSION AND WAIVER. At any time prior to the Effective
Time, whether before or after receipt of the Company Shareholder Approval at
the Company Shareholders Meeting, if applicable:
(a) The Special Committee on behalf of the Company may (i) extend the
time for the performance of any of the obligations or other acts of Parent,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document, certificate or writing delivered by Parent pursuant
hereto, or (iii) waive compliance by Parent with any of the agreements or with
any conditions to the Company's obligations.
(b) Parent may (i) extend the time for the performance of any of the
obligations or other acts of the Company, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document, certificate
or writing delivered by the Company pursuant hereto, or (iii) waive compliance
by the Company with any of the agreements or with any conditions to Parent's
obligations.
50
(c) Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party by a duly authorized officer.
[Signatures on the following page]
51
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
CP HOLDCO, LLC
By: /s/ Xxx X. Xxxxxxx
-------------------------------
Name: Xxx X. Xxxxxxx
Title: President
CP MERGER CO.
By: /s/ Xxx X. Xxxxxxx
-------------------------------
Name: Xxx X. Xxxxxxx
Title: President
CRITICAL PATH, INC.
By: /s/ Xxxx Xxxxxxx
-------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
SIGNATURE PAGE TO MERGER AGREEMENT
