Exhibit 2.1
______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
VERTICALNET, INC.
(a Pennsylvania corporation),
VERT ACQUISITION CORP.
(a Delaware corporation),
TRADEUM, INC.
(a Delaware corporation),
and
XXX XXXXXXXXX
(an individual)
dated as of March 8, 2000
_____________________________________________________________________________
TABLE OF CONTENTS
Page
1. THE MERGER; CLOSING......................................................................2
1.1 The Merger...................................................................2
1.2 Effective Time...............................................................2
1.3 Effects of the Merger........................................................2
1.4 Certificate of Incorporation and By-laws.....................................2
1.5 Directors and Officers.......................................................2
1.6 Location, Date...............................................................2
1.7 Deliveries...................................................................2
2. MERGER CONSIDERATION; ADJUSTMENTS........................................................3
2.1 Conversion of Capital Stock; Merger Consideration............................3
2.2 No Fractional Shares.........................................................4
2.3 Exchange Procedures..........................................................4
2.4 No Further Ownership Rights in Company Stock.................................6
2.5 Lost, Stolen or Destroyed Certificates.......................................6
2.6 Taking of Necessary Action; Further Action...................................6
2.7 Dissenting Shares............................................................6
3. ESCROW...................................................................................7
3.1 Creation of Indemnity Escrow.................................................7
3.2 Terms of Indemnity Escrow...................................................7
3.3 Voting and Investment regarding Escrow Shares................................7
3.4 Tax Escrow...................................................................7
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.................................8
4.1 Corporate Existence..........................................................8
4.2 Corporate Power; Authorization; Enforceable Obligations......................8
4.3 Validity of Contemplated Transactions........................................8
4.4 Capitalization of the Company................................................9
4.5 Transactions in Capital Stock................................................9
4.6 Subsidiaries, etc............................................................9
4.7 Predecessor Status, etc.....................................................10
4.8 Consents and Approvals......................................................10
4.9 Third-Party Options, Warrants, etc..........................................10
4.10 Financial Statements........................................................10
4.11 Liabilities and Obligations.................................................11
4.12 Permits.....................................................................11
4.13 Real and Personal Property..................................................11
4.14 Contracts and Commitments...................................................12
4.15 Government Contracts........................................................14
4.16 Title to Real Property......................................................14
4.17 Insurance...................................................................14
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TABLE OF CONTENTS
(continued)
Page
4.18 Employees...................................................................15
4.19 Employee Benefit Plans and Arrangements.....................................15
4.20 Compliance with Law; Authorizations.........................................19
4.21 Transactions With Affiliates................................................19
4.22 Litigation..................................................................19
4.23 Taxes.......................................................................19
4.24 Intellectual Property Matters...............................................21
4.25 Completeness; No Violations.................................................22
4.26 Absence of Changes..........................................................23
4.27 Deposit Accounts; Powers of Attorney........................................24
4.28 Books of Account............................................................24
4.29 Environmental Matters.......................................................25
4.30 No Illegal Payments.........................................................26
4.31 Corporate Records...........................................................26
4.32 Brokers.....................................................................26
4.33 Stockholder Approval by Written Consent.....................................26
4.34 Real Property Holding Company...............................................26
4.35 Knowledge of Principal Stockholder..........................................26
5. REPRESENTATIONS OF THE PARENT AND NEWCO.................................................27
5.1 Corporate Existence.........................................................27
5.2 Corporate Power and Authorization...........................................27
5.3 Consents and Approvals......................................................27
5.4 Parent Common Stock.........................................................27
5.5 SEC Documents; Parent Financial Statements..................................28
5.6 No Conflicts................................................................28
5.7 Absence of Changes..........................................................28
5.8 Litigation..................................................................29
5.9 Interim Operations of Newco.................................................29
5.10 Brokers.....................................................................29
5.11 Tax Matters.................................................................29
6. COVENANTS OF THE COMPANY................................................................29
6.1 Conduct of Business.........................................................29
6.2 Compliance with Laws, etc...................................................33
6.3 Exclusivity.................................................................33
6.4 Third-Party Approvals.......................................................33
6.5 Non-Competition Agreements..................................................33
6.6 Lock-Up Agreements..........................................................33
6.7 Employment Agreements.......................................................34
6.8 Affiliate's Agreements......................................................34
7. ADDITIONAL AGREEMENTS...................................................................34
7.1 Waiver by Series A Preferred Stockholders...................................34
7.2 Access to Information.......................................................34
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TABLE OF CONTENTS
(continued)
Page
7.3 Expenses....................................................................34
7.4 Public Disclosure...........................................................35
7.5 Approvals...................................................................35
7.6 Additional Documents and Further Assurances.................................35
7.7 Takeover Statutes...........................................................36
7.8 Notification of Certain Matters.............................................36
7.9 Company Options, Warrants, etc..............................................36
7.10 Tax Matters.................................................................36
7.11 Reservation of Shares.......................................................36
7.12 Form S-8....................................................................36
7.13 Stockholder Approval and Investment Representation Letters..................36
7.14 FIRPTA Compliance...........................................................37
8. CONDITIONS TO THE MERGER................................................................37
8.1 Conditions to Obligations of Each Party to Effect the Merger................37
8.2 Additional Conditions to Obligations of the Company.........................37
8.3 Additional Conditions to the Obligations of Parent and Newco................38
9. INDEMNIFICATION; SURVIVAL...............................................................39
9.1 General Indemnification by the Company and the Stockholders.................39
9.2 Indemnification by the Parent and Newco.....................................40
9.3 Third-Party Claims..........................................................41
9.4 Limitations on Indemnification..............................................42
9.5 Survival of Representations and Warranties..................................42
9.6 Limitation on Indemnity Obligations.........................................43
10. TERMINATION, AMENDMENT AND WAIVER.......................................................43
10.1 Termination.................................................................43
10.2 Effect of Termination.......................................................44
10.3 Amendment...................................................................44
10.4 Extension; Waiver...........................................................44
10.5 Procedure for Termination, Amendment, Extension or Waiver...................44
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................44
11.1 The Parent..................................................................44
11.2 Damages.....................................................................45
12. GENERAL.................................................................................45
12.1 Cooperation.................................................................45
12.2 Successors and Assigns......................................................45
12.3 Entire Agreement............................................................45
12.4 Counterparts................................................................45
12.5 Brokers and Agents..........................................................46
12.6 Notices.....................................................................46
12.7 Governing Law...............................................................47
12.8 Exercise of Rights and Remedies.............................................47
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(continued)
Page
12.9 Time........................................................................47
12.10 Severability................................................................47
12.11 Remedies Cumulative.........................................................47
12.12 Captions....................................................................47
DEFINITIONS....................................................................................47
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of March 8,
2000, by and among VERTICALNET, INC., a Pennsylvania corporation ("Parent"),
VERT ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Newco"), TRADEUM, INC., a Delaware corporation (the "Company") and XXX
XXXXXXXXX, an individual ("Principal Stockholder"). Certain other terms are
used herein as defined below in Article 13 or elsewhere in this Agreement.
RECITALS
--------
A. This Agreement sets forth the terms and conditions under which Newco
will merge with and into the Company (the "Merger") in accordance with this
Agreement. The parties intend that (a) upon completion of the Merger, the
Company will be a wholly-owned subsidiary of Parent and (b) for federal income
tax purposes, the Merger will constitute a reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). For purposes of
this Agreement, Parent, Newco and the Company are sometimes referred to herein
as the "Constituent Corporations."
B. The Board of Directors of each of the Constituent Corporations believes
it is in the best interests of such Constituent Corporation and their respective
stockholders that the Parent complete a business combination through the merger
of Newco with and into the Company and, in furtherance thereof, have approved
the Merger.
C. The Boards of Directors of each of the Constituent Corporations have
approved the Merger, this Agreement and the transactions contemplated hereby.
D. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company shall be converted into the right to receive the
Merger Consideration, subject to the terms and conditions hereinafter provided.
E. The Company, the Principal Stockholder, Parent and Newco desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger.
F. A portion of the Merger Consideration issued to the Stockholders of the
Company in connection with the Merger shall be placed in escrow by Parent in
accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:
AGREEMENT
---------
1. THE MERGER; CLOSING
1.1 The Merger. At the Effective Time and upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the
Delaware Code, Newco shall be merged with and into the Company. Following the
Merger, the Company shall continue as the surviving corporation (the "Surviving
Corporation") and a wholly-owned subsidiary of the Parent, and the separate
corporate existence of Newco shall cease.
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant to
Section 10, as soon as practicable, but in any event within five Business Days
after the satisfaction or waiver of all conditions to the Merger, the Company
and Newco shall file with the Secretary of State of the State of Delaware, a
certificate of merger and such other appropriate documents executed in
accordance with the Delaware Code. The Merger shall become effective upon such
filing or at such later time as may be specified in such filing (the "Effective
Time").
1.3 Effects of the Merger. The Merger shall have the effects set forth in
the Delaware Code.
1.4 Certificate of Incorporation and By-laws. The Certificate of
Incorporation of Newco shall be the Certificate of Incorporation of the
Surviving Corporation from and after the Effective Time until thereafter amended
in accordance with the provisions therein and as provided in the Delaware Code.
The by-laws of Newco shall be the by-laws of the Surviving Corporation from and
after the Effective Time, continuing until thereafter amended in accordance with
its terms, the Certificate of Incorporation of the Surviving Corporation and as
provided by the Delaware Code.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Newco immediately prior to the Effective
Time and the initial officers of the Surviving Corporation shall be those
individuals specified on Schedule 1.5 hereto, until their successors are duly
elected and qualified. Such persons shall hold such positions as directors and
officers until their successors are elected or appointed in accordance with the
Certificate of Incorporation and the by-laws of the Surviving Corporation.
1.6 Location, Date. The closing (the "Closing") for the Merger and
transactions contemplated thereby (the "Transactions") shall be held at the
offices of Xxxxxx, Xxxxx & Bockius LLP in Philadelphia, Pennsylvania, at 10:00
a.m. (local time) as promptly as practicable (and in any event within five
Business Days) after satisfaction or waiver of the conditions to the
consummation of the Transactions set forth in Section 8 hereof, unless the
parties hereto agree in writing to another date or place. The date on which the
Closing occurs is referred to herein as the "Closing Date."
1.7 Deliveries. At the Closing, subject to the terms and conditions
contained herein:
(a) Newco and the Company shall deliver to the Secretary of State of the
State of Delaware all such documents as required under the Delaware Code and the
parties shall take
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all such other and further actions as may be required by the Delaware Code and
any other applicable Law to make the Merger effective upon the terms and subject
to the conditions hereof;
(b) the Parent shall deliver the Merger Consideration in accordance with
the terms of Section 2.3; and
(c) the parties shall also deliver to each other the respective
agreements, legal opinions and other documents and instruments specified with
respect to them in Section 8.
2. MERGER CONSIDERATION; ADJUSTMENTS
2.1 Conversion of Capital Stock; Merger Consideration.
(a) Subject to the terms of Article 9 hereof, at the Effective Time,
each issued and outstanding share of Common Stock and Preferred Stock of the
Company (other than shares to be canceled in accordance with Section 2.1(c)
below) (collectively, "Company Stock") shall, by virtue of the Merger and
without any action on the part of the holder thereof but subject to the
effectiveness of the Merger, automatically be converted into the right to
receive, without interest, such number of shares of Parent Common Stock equal to
the quotient of two million (2,000,000) shares of Parent Common Stock (the
"Merger Consideration"), divided by the total number of shares of Company Stock
outstanding immediately prior to the Effective Time on a fully-diluted basis
(assuming for such purpose the exercise of all then outstanding options,
warrants, conversion rights, commitments or other rights to acquire shares of
the Company's capital stock, whether vested or unvested) (such fraction, the
"Conversion Number").
(b) At the Effective Time, each share of capital stock of Newco issued
and outstanding immediately prior to the effectiveness of the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
automatically be converted into one fully paid and non-assessable share of
common stock of the Surviving Corporation, all of which converted common stock
shall constitute all of the outstanding shares of capital stock of the Surviving
Corporation immediately after the effectiveness of the Merger.
(c) Each share of Company capital stock owned by the Company immediately
prior to the Effective Time shall be automatically canceled and extinguished
without any conversion thereof and without any further action on the part of the
Parent, Newco or the Company.
(d) Treatment of Options, Warrants, etc. At the Effective Time, any
option, warrant, commitment or other right to acquire shares of the Company's
capital stock (collectively, the "Options"), whether vested or unvested, which
is outstanding immediately prior to the Effective Time shall be assumed by
Parent and converted into an option to purchase shares of Parent Common Stock
(collectively, "Assumed Options") in such amount and at such exercise price as
provided below and shall otherwise have the same terms and conditions as are in
effect immediately prior to the Effective Time (except to the extent that such
terms, conditions and restrictions may be altered in accordance with their terms
as a result of the transactions contemplated hereby):
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(i) The number of shares of Parent Common Stock to be subject to the
Assumed Options shall be equal to the product of (x) the number of shares of
capital stock of the Company issuable upon the exercise of the Option
immediately prior to the Effective Time (assuming all conditions to the vesting
of the non-vested portion of such Option had then been met), and (y) the
Conversion Number; provided, however, that, in the case of any Options to which
Section 421 of the Code applies by reason of its qualification under any of
Sections 422-424 of the Code ("Qualified Company Options"), the option price,
the number of shares purchasable pursuant to such Qualified Company Option which
is converted into an Assumed Option and the terms and conditions of such option
shall be determined in order to comply with Section 424(a) of the Code.
(ii) The exercise price per share of Parent Common Stock under each
Assumed Option shall be equal to (x) the exercise price per share of the capital
stock of the Company applicable to the Option immediately prior to the Effective
Time, divided by (y) the Conversion Number; and
(iii) Upon each exercise of options by the holder thereof, the
aggregate number of shares of Parent Common Stock deliverable upon such exercise
shall be rounded down, if necessary, to the nearest whole shares and the
aggregate exercise price shall be rounded up, if necessary, to the nearest cent.
2.2 No Fractional Shares. Notwithstanding any other provision of this
Article 2, no fractional shares of the Parent Common Stock will be issued and
any holder of Company Stock entitled hereunder to receive a fractional share of
the Parent Common Stock but for this Section 2.2 will be entitled hereunder to
receive no such fractional share but a cash payment in lieu thereof in an amount
equal to such fraction multiplied by $237.50.
2.3 Exchange Procedures.
(a) The Parent Common Stock. On the Closing Date, the Parent shall
deposit with the Exchange Agent for exchange in accordance with this Article 2,
the Merger Consideration issuable in exchange for shares of Company Stock;
provided, however, that, on behalf of the holders of Company Stock, the Parent
shall deposit into an escrow account such number of shares of the Parent Common
Stock as set forth in Section 3.1 and Section 3.4, if applicable.
(b) Exchange Procedures. As soon as practicable after the Effective Time
(but in no event more than five (5) Business Days thereafter), the Surviving
Corporation shall cause to be mailed to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
Time represented issued and outstanding shares of Company Stock and which shares
were converted into shares of the Parent Common Stock pursuant to Section 2.1,
(i) a letter of transmittal in customary form (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of the Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to
4
such other agent or agents as may be appointed by the Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor (ii) a certificate representing the number of whole
shares of the Parent Common Stock (less the number of shares of the Parent
Common Stock to be deposited into escrow with the Indemnity Escrow Agent on such
holder's behalf pursuant to Article 3 hereof), to which such holder is entitled
pursuant to Section 2.1, and the Certificate so surrendered shall be canceled.
As soon as practicable after the Effective Time, and subject to and in
accordance with the provisions of Article 3 hereof, the Parent shall cause to be
distributed to the Indemnity Escrow Agent a certificate or certificates (in such
denominations as may be requested by the Indemnity Escrow Agent) representing
that number of shares of the Parent Common Stock equal to the Escrow Shares and
Tax Escrow Shares, if any, which certificate shall be registered in the name of
the Indemnity Escrow Agent. Such shares shall be beneficially owned by the
holders on whose behalf such shares were deposited in the escrow fund and shall
be available to compensate Parent in accordance with Article 3. Until
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Stock will be deemed from and after the Effective
Time, for all corporate purposes, other than the right to payment of dividends
declared by the Parent with a record date on or after the Effective Time (which
is covered in clause (c), below), to evidence the ownership of the portion of
the Merger Consideration into which such shares of the Company Stock shall have
been so converted.
(c) Distributions With Respect to Unexchanged Shares of Company Stock.
No dividends or other distributions with respect to the Parent Common Stock
declared or made after the Effective Time and with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable Law, promptly following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of the Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of the Parent Common Stock.
(d) Transfers of Ownership. If any certificate for shares of the Parent
Common Stock is to be issued pursuant to the Merger in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to the Parent or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of the Parent Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of the Parent or any agent designated by it that such tax has been
paid or is not payable.
(e) Appointment of Stockholders' Representative. The Company hereby
designates and appoints and each Stockholder by acceptance of Merger
Consideration, shall be deemed to have designated and appointed Xxxxxxx
Xxxxxxxxx with full power of substitution (the "Stockholders' Representative")
as the representative of any such Stockholder to perform all such acts as are
required, authorized or contemplated by this Agreement to be performed by the
5
Stockholders and hereby acknowledge that the Stockholders' Representative shall
be the only person authorized to take any action so required, authorized or
contemplated by this Agreement by any Stockholder. Each Stockholder is thereby
deemed to have further acknowledged that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive the
death or incapacity of such Stockholder. Each Stockholder is thereby deemed to
have authorized the other parties hereto to disregard any notice or other action
taken by each Stockholder pursuant to this Agreement except for the
Stockholders' Representative. The other parties hereto are and will be entitled
to rely on any action so taken or any notice given by the Stockholders'
Representative and are and will be entitled and authorized to give notices only
to the Stockholders' Representative for any notice contemplated by this
Agreement to be given to any such Stockholder.
2.4 No Further Ownership Rights in Company Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of shares of Company Stock
in accordance with the terms hereof (including any cash paid in respect thereof)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Stock, and there shall be no further
registration of transfers on the records of the Company of shares of Company
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article 2.
2.5 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of Company Stock shall have been lost, stolen or destroyed,
the Exchange Agent shall issue certificates representing such shares of Parent
Common Stock in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof; provided,
however, that Parent or the Exchange Agent may, in its sole and absolute
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to provide an indemnity or
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against the Parent or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
2.6 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of the Surviving
Corporation are fully authorized to take, and will take, all such lawful and
necessary action.
2.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
each outstanding share of Company Stock the holder of which has not voted in
favor of the Merger has perfected such holder's right to an appraisal of such
holder's shares in accordance with the applicable provisions of the Delaware
Code and has not effectively withdrawn or lost such right to appraisal (a
"Dissenting Share"), shall not be converted into or represent a right to receive
shares of Parent Common Stock pursuant to Section 2.1, but the holder thereof
shall be entitled only to such rights as are granted by the applicable
provisions of the Delaware Code; provided,
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however, that any Dissenting Share held by a Person at the Effective Time who
shall, after the Effective Time, withdraw the demand for appraisal or lose the
right of appraisal, in either case pursuant to the Delaware Code, shall be
deemed to be converted into, as of the Effective Time, the right to receive
shares of Parent Common Stock pursuant to Section 2.1.
(b) The Company shall give Parent (x) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to the applicable provisions of the Delaware Code
relating to the appraisal process received by the Company, and (y) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Delaware Code. The Company will not voluntarily make any
payment with respect to any demands for appraisal and will not, except with the
prior written consent of Parent, settle or offer to settle any such demands.
3. ESCROW
3.1 Creation of Indemnity Escrow.
(a) At the Closing, as collateral security for any indemnification
obligations of the Company pursuant to Section 9.1 hereof, such number of shares
of Parent Common Stock equal to 10% of the product of the number of shares of
Company Stock outstanding immediately prior to the Effective Time multiplied by
the Conversion Number (such product, the "Aggregate Parent Stock Consideration")
which shall be contributed by the Stockholders on a pro rata basis (based upon
such Stockholder's proportionate share of outstanding Company Stock owned by
such Stockholder immediately prior to the Effective Time) rounded up to the
nearest whole share (the "Escrow Shares"), shall be delivered to an escrow agent
designated by the Parent and reasonably acceptable to the Company (the
"Indemnity Escrow Agent").
(b) The Escrow Shares shall include all dividends and other property at
any time received or otherwise distributed in respect of or in exchange for any
or all of the Escrow Shares, all securities hereafter issued in substitution for
any of the foregoing, all certificates and instruments representing or
evidencing such securities, all cash and non-cash proceeds of all of the
foregoing property except as provided in Section 3.3 and all rights, titles,
interests, privileges and preferences appertaining or incident to the foregoing
property.
3.2 Terms of Indemnity Escrow. The Escrow Shares shall be held and
disbursed by the Indemnity Escrow Agent in accordance with the terms of an
Indemnity Escrow Agreement substantially in the form attached hereto as Exhibit
A.
3.3 Voting and Investment regarding Escrow Shares. The Stockholders shall
be entitled to exercise all voting powers incident to the Escrow Shares held by
the Indemnity Escrow Agent as their nominee, but shall not be entitled to
exercise any investment or dispositive powers over such Escrow Shares, except as
provided in the Indemnity Escrow Agreement.
3.4 Tax Escrow. If prior to the Effective Time, the Company has not
obtained Representation and Warranty Insurance, then at the Closing, as
collateral for any indemnification obligations of the Company pursuant to
Section 9.1 hereof relating to IP Tax Liabilities, such number of shares of
Parent Common Stock equal to 3% of the Aggregate Parent Stock Consideration
shall be contributed by the Stockholders on a pro rata basis (based upon such
7
Stockholder's proportionate share of outstanding Company Stock owned by such
Stockholder immediately prior to the Effective Time) rounded up to the nearest
whole share (the "Tax Escrow Shares") shall be delivered to the Indemnity Escrow
Agent. The Tax Escrow Shares shall be held and disbursed by the Indemnity Escrow
Agent in accordance with the terms of a Tax Escrow Agreement substantially in
the form of the Indemnity Escrow Agreement, except that the Tax Escrow shall
relate only to indemnification obligations relating to IP Tax Liabilities and
shall survive until the expiration of all applicable statutes of limitations
relating to the IP Tax Liabilities, provided that the Tax Escrow Shares shall
earlier be released to the Stockholders at such time, if any, (i) when the
Company has obtained Representation and Warranty Insurance or (ii) there has
been issued a written final unconditional ruling of the Israeli Tax Authorities
that all IP Tax Liabilities have been fully satisfied.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
As of the date hereof and as of the Effective Time, the Company represents,
warrants and covenants to the Parent and Newco, as follows:
4.1 Corporate Existence. Each of the Company and the subsidiaries of the
Company listed on Schedule 4.6 (each, a "Subsidiary") is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or formation. Except as set forth on Schedule
4.1, each of the Company and the Subsidiaries is duly qualified to do business
and is in good standing as a foreign entity in each jurisdiction where the
conduct of its business requires it to be so qualified, except for such failures
to be so duly qualified, licensed or admitted and in good standing that would
not reasonably be expected to have a Material Adverse Effect. All of the
jurisdictions in which the Company and the Subsidiaries are duly qualified to do
business are listed on Schedule 4.1.
4.2 Corporate Power; Authorization; Enforceable Obligations. The Company
has the corporate power, authority and legal right to execute and deliver this
Agreement and the other agreements, documents and instruments required to be
delivered by the Company in accordance with the provisions hereof and thereof
(the "Other Company Agreements," and collectively with this Agreement, the
"Company Documents") and to perform the transactions contemplated hereby and
thereby. The execution, delivery and performance of the Company Documents by the
Company have been duly authorized by its Board of Directors and by the
Stockholders, and no further corporate or Stockholder action on the part of the
Company is necessary to authorize the Company Documents and the performance of
the transactions contemplated hereby and thereby and the Other Agreements will
be duly executed and delivered on behalf of the Company by duly authorized
officers of the Company. This Agreement constitutes, and the Other Agreements,
when executed and delivered, will constitute, the legal, valid and binding
obligations of the Company, enforceable against it in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
4.3 Validity of Contemplated Transactions. Subject to obtaining the Company
Required Consents as specified in Section 4.8, the execution, delivery and
performance of the Company Documents by the Company does not and will not
violate, conflict with or result in the
8
breach of any term, condition or provision of, or require the consent of any
other Person under (a) any existing Law to which the Company or its Subsidiaries
are subject, (b) any judgment, order, writ, injunction, decree or award of any
Governmental Entity which is applicable to the Company or its Subsidiaries, (c)
the Charter Documents of the Company and its Subsidiaries or any securities
issued by the Company or its Subsidiaries, or (d) any mortgage, indenture,
agreement, contract, commitment, lease, plan, Authorization, or other
instrument, document or understanding, oral or written, to which the Company or
any Subsidiary is a party, by which the Company or any Subsidiary may have
rights or by which any of the properties or assets of the Company or any
Subsidiary may be bound or affected, or give any party with rights thereunder
the right to terminate, modify, accelerate or otherwise change the existing
rights or obligations of the Company or any Subsidiary hereunder.
4.4 Capitalization of the Company.
(a) As of the date of the execution of this Agreement and the Closing
Date, the authorized capital stock of the Company consists of: (1) 40,000,000
shares of Common Stock, of which 4,714,137 shares are currently issued and
outstanding, and (2) 20,000,000 shares of Preferred Stock (4,002,389 of which
are designated Series A Preferred Stock), of which 4,002,389 are currently
issued and outstanding. Annex I hereto sets forth a true, accurate and complete
list of the issued and outstanding shares, setting the number and class of the
Company Stock owned by each of the Stockholders (together with each
Stockholder's address as reflected in the books and records of the Company) as
of the date hereof and as of the Closing Date. To the knowledge of the Company,
all of the issued and outstanding shares of the Company Stock are free and clear
of all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind, except for restrictions imposed by
applicable securities laws.
(b) All of the issued and outstanding shares of Company Stock currently
outstanding and to be outstanding as of the Closing Date are and will have been
duly authorized and validly issued, fully paid and nonassessable, are and will
be owned of record by the Stockholders and in the amounts set forth in Annex I,
and are and will have been offered, issued, sold and delivered by the Company in
compliance with all applicable Laws concerning the offering, sale or issuance of
securities. None of such shares are or will have been, and none of the shares
from which they will have derived were issued in violation of the preemptive
rights of any past or present Stockholder, whether contractual or statutory.
4.5 Transactions in Capital Stock. Neither the Company nor any Subsidiary
has acquired any treasury stock since its respective date of formation. The
Company and its Subsidiaries have no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of their equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof.
4.6 Subsidiaries, etc. Schedule 4.6 sets forth the name of each Subsidiary
and the jurisdiction of its formation. Each Subsidiary is wholly-owned by the
Company. Except as set forth on Schedule 4.6, none of the Company or the
Subsidiaries own, of record or beneficially, or control, directly or indirectly,
any capital stock, any securities convertible into capital stock or
9
any other equity interest in any corporation, association or other business
entity, nor is, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
4.7 Predecessor Status, etc. Schedule 4.7 lists all names of all
predecessor companies of the Company and each Subsidiary, including the names of
all entities from whom the Company or any Subsidiary previously acquired
substantially all of the assets of that entity. Except as set forth on Schedule
4.7, none of the Company nor any Subsidiary has been a subsidiary or division of
another corporation or business entity or been a part of an acquisition which
was later rescinded. Except as set forth on Schedule 4.7, neither the Company
nor any of its Subsidiaries is liable for any of the liabilities or obligations
of Tradeum Technologies Ltd. All approvals and consents in connection with the
transfer of assets (including cash) from Tradeum Technologies Ltd. to the
Company or its Subsidiaries (the "November 1999 Transfer") were duly obtained,
including all approvals and consents of Governmental Entities and third Persons.
The transactions in connection with the November 1999 Transfer are valid and
binding on the parties thereto.
4.8 Consents and Approvals. Except for consents specified on Schedule 4.8
(including, without limitation, filings that may be required to effect the
Merger under the Laws of the State of Delaware, and any consents and approvals
required under the Laws of Israel) (collectively, the "Company Required
Consents"), neither the execution and delivery by the Company of the Agreement,
nor the performance of the transactions contemplated hereby, require any filing
with or consent or approval of any Governmental Entity or any other third Person
nor constitute a default or cause any payment obligation to arise under (a) any
Law or court order to which the Company or its Subsidiaries are subject, (b) the
Charter Documents of the Company and its Subsidiaries or (c) any Contract,
Governmental Permit or other document to which the Company or its Subsidiaries
are a party or by which the properties or other assets the Company or its
Subsidiaries may be subject.
4.9 Third-Party Options, Warrants, etc. Except as set forth on Schedule
4.9, there are no existing agreements, options, warrants, conversion rights,
convertible notes, commitments or any other rights of any kind with, of or to
any Person which obligate the Company or a Subsidiary to issue any of its
respective capital stock or which confers upon any Person any right to acquire
any of the properties, assets or rights of the Company, its Subsidiaries or any
interest therein (the "Convertible Securities"). Schedule 4.9 sets forth the
names of the holders of the Convertible Securities, the dates of grant or
issuance, the exercise prices, vesting schedules and all applicable acceleration
provisions. All offers, grants and issuances of Convertible Securities have been
made in compliance with all applicable Securities Laws.
4.10 Financial Statements. Attached hereto as Schedule 4.10 are true,
accurate and correct copies of the unaudited consolidated balance sheets of the
Company and its Subsidiaries at December 31, 1999 (the "Balance Sheet Date"),
and the related statements of income, cash flows and changes in stockholders'
equity for the fiscal year then ended (the "Unaudited Financial Statements").
The Unaudited Financial Statements (1) fairly and accurately present the
financial position of the Company and its Subsidiaries at the date indicated,
and (2) such statements of income, cash flows and changes in stockholders'
equity fairly present the results of operations, cash flows and changes in
stockholders' equity for the periods indicated, except for
10
normal recurring year-end adjustments which are not expected to be material in
amount and except for the addition of required footnotes thereto.
The Company covenants that prior to the Closing Date, it shall deliver to the
Parent true, accurate and correct copies of the audited, consolidated balance
sheets of the Company and its Subsidiaries at December 31, 1999, and the related
statements of income and cash flows for the fiscal year then ended (the "Audited
Financial Statements," and together with the Unaudited Financial Statements, the
"Financial Statements"), certified by Ernst & Young, the Company's independent
public accountants, together with the report of such independent public
accountants thereon.
The Unaudited Financial Statements have been and the Audited Financial
Statements shall be prepared in accordance with GAAP consistently applied
throughout the periods involved. The Audited Financial Statements, including
the related notes, when delivered, shall fairly present the financial position,
assets and liabilities (whether accrued, absolute, contingent or otherwise) of
the Company and its Subsidiaries at the date indicated and such statements of
income, cash flows and changes in stockholders' equity, when delivered, shall
fairly present the results of operations, cash flows and changes in
stockholders' equity of the Company and its Subsidiaries for the periods
indicated, except for normal recurring year-end adjustments which are not
expected to be material in amount and except for the addition of required
footnotes thereto.
4.11 Liabilities and Obligations. Except as set forth on Schedule 4.11, the
Company and its Subsidiaries are not liable for or subject to any liability
except for : (i) those liabilities and obligations disclosed in the Unaudited
Financial Statements and not heretofore paid or discharged; and (ii) those
liabilities and obligations incurred in the ordinary course of its business and
either not required to be shown in the Unaudited Financial Statements or arising
since the Balance Sheet Date, which liabilities or obligations in the aggregate
are of a character and magnitude consistent with past practice. For purposes of
this Agreement, "liabilities" or "Liabilities" means liabilities of any kind,
character or description, whether accrued or unaccrued, absolute, secured and
unsecured, contingent or otherwise.
4.12 Permits. The Company and its Subsidiaries hold all Permits necessary
for the operation of their respective businesses. Each Permit, together with the
name of the Governmental Entity issuing such Permit is set forth on Schedule
4.12. Such Permits are valid and in full force and effect and none of such
Permits will be terminated or impaired or become terminable as a result of the
transactions contemplated by this Agreement. Upon consummation of such
transactions, the Surviving Corporation will have all of the Company's and,
beneficially, its Subsidiaries' right, title and interest in the Permits.
4.13 Real and Personal Property. Attached hereto as Schedule 4.13 is an
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the real and personal property (which in the case of personal
property had an original cost in excess of $50,000) owned or leased by the
Company or its Subsidiaries where the Company or its Subsidiaries are lessee or
sublessee, including true and correct copies of leases for equipment and
properties on which are situated buildings, warehouses and other structures used
in the operation of the businesses of the Company and its Subsidiaries and
including an indication as to which assets were formerly owned by any
Stockholder or affiliate (which term, as used herein,
11
shall have the meaning ascribed thereto in Rule 144(a)(1) promulgated under the
Securities Act of 1933, as amended (the "Securities Act")) of the Company or its
Subsidiaries. Except as set forth on Schedule 4.13, all of the buildings,
leasehold improvements, structures, facilities, equipment and other material
items of tangible property and assets owned or leased by the Company and its
Subsidiaries are in good operating condition and repair, subject to normal wear
and maintenance, are usable in the regular and ordinary course of business and
conform to all applicable Laws and Authorizations relating to their
construction, use and operation. All leases set forth on Schedule 4.13 have been
duly authorized, executed and delivered and constitute the legal, valid and
binding obligations of the Company or its Subsidiaries and, to the knowledge of
the Company or its Subsidiaries, no other Person party to any such lease is in
default thereunder and such leases constitute the legal, valid and binding
obligations of such other parties. All fixed assets used by the Company and its
Subsidiaries in the operation of their respective businesses are either owned by
the Company or its Subsidiaries or leased under an agreement set forth on
Schedule 4.13. The Company has indicated on Schedule 4.13 a summary description
of all plans or projects involving the opening of new operations, expansion of
any existing operations or the acquisition of any real property or existing
business to which management of the Company and its Subsidiaries have devoted
any significant effort or expenditure in the one-year period prior to the date
of this Agreement which, if pursued by the Company and its Subsidiaries would
require additional expenditures of significant efforts or capital.
4.14 Contracts and Commitments. Schedule 4.14 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company and its Subsidiaries (the "Contracts"),
except for Minor Contracts, to which the Company or its Subsidiaries is a party
or are bound, or by which any of their respective assets are bound, and which
involve any:
(a) agreement, contract, commitment, arrangement or understanding with
any present or former director, officer, employee or consultant with respect to
the employment, engagement, severance or termination of any such person;
(b) agreement, contract, commitment, arrangement or understanding for
the future purchase of, or payment for, supplies or products, or for the
performance of services by a third party involving in any one case $100,000 or
more;
(c) agreement, contract, commitment, arrangement or understanding to
sell or supply products or to perform services involving in any one case
$100,000 or more;
(d) agreement, contract, commitment, arrangement or understanding not
otherwise listed on Schedule 4.14 and continuing over a period of more than six
months from the date hereof or exceeding $100,000 in value;
(e) distribution, dealer, representative or sales agency agreement,
contract, commitment, arrangement or understanding;
12
(f) agreement, contract, commitment, arrangement or understanding
containing a provision to indemnify any person or entity or assume any Tax,
environmental or other liability;
(g) agreement, contract, commitment, arrangement or understanding with
federal, state, local, regulatory or other governmental entities;
(h) note, debenture, bond, equipment trust agreement, letter of credit
agreement, loan agreement or other contract or commitment for the borrowing or
lending of money or agreement or arrangement for a line of credit or guarantee,
pledge or undertaking of the indebtedness of any other person;
(i) agreement, contract, commitment, arrangement or understanding for
any charitable or political contribution;
(j) agreement, contract, commitment, arrangement or understanding for
any capital expenditure or leasehold improvement in excess of $75,000;
(k) agreement, contract, commitment, arrangement or understanding
limiting or restraining the Company or its Subsidiaries, or any successor
thereto, or to the knowledge of the Company or its Subsidiaries, any employee of
the Company or its Subsidiaries, or any successor thereto, from engaging or
competing in any manner or in any business;
(l) license, franchise, distributorship or other agreement which relates
in whole or in part to any software, patent, trademark, trade name, service xxxx
or copyright or to any ideas, technical assistance or other know-how of or used
by the Company or its Subsidiaries;
(m) agreement, contract, commitment, arrangement or understanding to
which the Company or its Subsidiaries, on the one hand, and any affiliate,
officer, director. employee or Stockholder of the Company or its Subsidiaries,
on the other hand, are parties;
(n) any agreement, contract, commitment, arrangement or understanding
involving change in control provisions; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 4.14, or not required to be listed
therein because of the amount thereof or because it is a Minor Contract, is
valid and enforceable in accordance with its terms; each of the Company and its
Subsidiaries is, and to the knowledge of the Company, all other parties thereto
are, in compliance with the provisions thereof. None of the Company or its
Subsidiaries are, and to the knowledge of the Company, no other party thereto
is, in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained therein; and no event has occurred which with or
without the giving of notice or lapse of time, or both, would constitute a
default by the Company or its Subsidiaries thereunder. None of the rights of
the Company and its Subsidiaries under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by the applicable Surviving Corporation after the Effective Time
without the consent or
13
agreement of any other party other than those consents set forth on Schedule
4.8. The Company has delivered accurate and complete copies of each Contract,
other than Minor Contracts to the Parent. Except as set forth on Schedule 4.8,
no Contract, other than Minor Contracts, obligates any party to obtain any
consent in connection with the transactions contemplated hereby.
4.15 Government Contracts. None of the Company nor its Subsidiaries is now
nor ever has been a party to any contract with any Governmental Entity subject
to price redetermination or renegotiation.
4.16 Title to Real Property. The Company and each Subsidiary has good,
marketable and insurable title to all real property owned and used in their
respective businesses, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(a) liens, if any, reflected on Schedule 4.16 as securing specified
liabilities (with respect to which no material default exists);
(b) liens for current taxes and assessments not yet due or in default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions to title
shown of record in the offices of the county clerks in which the properties,
assets and leasehold estates are located which, in the Parent's sole judgment,
do not adversely affect the Parent's intended use of such properties.
4.17 Insurance. The assets, properties and operations of the Company and
each Subsidiary are insured under various policies of general liability and
other forms of insurance, all of which are described on Schedule 4.17, which
discloses for each policy, the insurer, the type of insurance, the policy
number, the risks insured against, coverage limits, deductible amounts, the
expiration date, all outstanding claims thereunder, and whether the terms of
such policy provide for retrospective premium adjustments. All such policies are
in full force and effect in accordance with their terms, no notice of
cancellation has been received, and there is no existing default or event which,
with the giving of notice or lapse of time or both, would constitute a default
thereunder. Such policies are in amounts which are adequate in relation to the
business and assets of the respective company and all premiums to date have been
paid in full. There is no default with respect to any such policy or binder, nor
has there been any failure to give any notice or present any claim under any
such policy or binder in a timely fashion or in the manner or detail required by
the policy or binder. There is no notice of nonrenewal or cancellation with
respect to, or disallowance of any claim under, any such policy or binder that
has been received by the Company or any Subsidiary. Neither the Company nor any
Subsidiary has been refused any insurance, nor has the Company's or any
Subsidiary's coverage been limited, by any insurance carrier to which it has
applied for insurance or with which it has carried insurance during the past
three years. Schedule 4.17 also contains a true and complete description of all
outstanding bonds and other surety arrangements issued or entered into in
connection with the business, assets and liabilities of the Company and its
Subsidiaries.
14
4.18 Employees. Schedule 4.18 contains the following with respect to the
Company and each Subsidiary:
(a) a list of all employees of the Company and its Subsidiaries
(including name, title and position);
(b) each such employee's date of hire and length of service; and
(c) the compensation (including terms of payment, bonuses, commissions,
severance arrangements and deferred compensation, as well as any benefits) of
each such employee.
Except as disclosed on Schedule 4.18: (i) there have not been in the past five
years and, to the knowledge of the Company and its Subsidiaries, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved material violations of any Laws of any Governmental Entity
respecting the employment of any employees; (iii) there is no unfair labor
practice, charge or complaint pending, unresolved or, to the knowledge of the
Company or the Subsidiaries, threatened before the National Labor Relations
Board or similar body in any foreign country; (iv) there is no employment
handbook, personnel policy manual, or similar document that creates prospective
employment rights or obligations; (v) the employees of the Company and its
Subsidiaries are not covered by any collective bargaining agreement; (vi) the
Company and its Subsidiaries have provided or will timely provide prior to
Closing all notices required by Law to be given prior to Closing to all
foreign, local, state, federal or national labor, wage-payment, equal employment
opportunity, unemployment insurance and related agencies; (vii) the Company and
its Subsidiaries have paid or properly accrued in the ordinary course of
business all wages and compensation due to employees, including all vacations or
vacation pay, holidays or holiday pay, sick days or sick pay, and bonuses;
(viii) the transactions contemplated by this Agreement will not create liability
under any Laws of any Governmental Entity respecting reductions in force or the
impact on employees on plant closing or sales of businesses and (ix) the
Company, its Subsidiaries and their respective predecessors have complied with
all applicable employment and labor laws and all applicable collective
bargaining agreements. All employees of the Company and its Subsidiaries
presently working in the United States or otherwise are legally able to work in
the United States or in the country in which such employee is employed.
4.19 Employee Benefit Plans and Arrangements. Schedule 4.19 sets forth a
complete and accurate list of each Benefit Plan covering any present or former
officers, employees, directors, agents, or independent contractors of the
Company or any Subsidiary that is maintained or sponsored by the Company or any
Subsidiary or to which the Company or any Subsidiary contributes or for which
the Company or any Subsidiary otherwise have or may have any liability,
contingent or otherwise. "Benefit Plan" means each "employee pension benefit
plan" (as defined in Section 3(2) of ERISA, hereinafter a "Pension Plan"),
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA,
hereinafter a "Welfare Plan") and each other plan, arrangement, obligation, or
practice (written or oral), formal or informal, and whether or not legally
enforceable, to provide benefits, other than salary, as compensation for
services rendered, including, without limitation, employment agreements,
deferred compensation, bonus,
15
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, any plans subject to Section 125 of the Code, any plans
providing benefits or payments in the event of a change of control, incentive,
insurance, welfare or similar plan, program, policy or arrangement, in each case
maintained or contributed to, or required to be maintained or contributed to, by
the Company, any Subsidiary or its affiliates or any other person or entity
that, together with the Company or any Subsidiary, is treated as a single
employer under Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of
ERISA and any general partnership of which the Company or its Subsidiaries is or
has been a general partner ("ERISA Affiliate," and for purposes of this Section
4.19, the terms "Company" and "Subsidiary" shall also include an ERISA
Affiliate) for the benefit of any present or former officer, employee, director,
agent or independent contractor. The Company and its Subsidiaries have no intent
or commitment to create any additional Benefit Plan or amend any Benefit Plan so
as to increase benefits thereunder. The Company and its Subsidiaries have not
created any Benefit Plan or declared or paid any bonus compensation in
contemplation of the transactions contemplated by this Agreement. A current,
accurate and complete copy of each Benefit Plan and all relevant materials have
been provided to the Parent. The following representations and warranties,
except as provided in Section 4.19(r) of this Agreement, apply to Benefit Plans
that are subject to United States Laws. Except as disclosed on Schedule 4.19:
(a) each Benefit Plan is in compliance and has always been in compliance
with all reporting, disclosure notice and other requirements of ERISA, the Code
and all Laws applicable to such Benefit Plan;
(b) each Pension Plan which is intended to be qualified under Section
401(a) of the Code and exempt from tax under Section 501(a) of the Code, has
been determined by the Internal Revenue Service to be so qualified, such
qualification remains in effect and has not been revoked, and, to the knowledge
of the Company, no condition exists that would adversely affect any such
determination and nothing has occurred with respect to the design or operation
of each Pension Plan that would result in the imposition of any liability, lien,
penalty or tax under ERISA or the Code, and the Pension Plan has been timely
amended to comply with current Law;
(c) neither the Company, nor any Subsidiary, nor any trustee or agent
has been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which could subject the Company, any Subsidiary, with respect to any
Benefit Plan, any Stockholder, officer, director of employee to the tax or
penalty imposed by Section 4975 of the Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be deemed a
"reportable event" (within the meaning of Section 4043 of ERISA) with respect to
which the thirty-day notice requirement has not been waived; to the knowledge of
the Company and its Subsidiaries, no condition exists which could subject the
Company or any Subsidiary to a penalty under Section 4071 of ERISA;
(e) neither the Company nor any Subsidiary is or has ever been party to
any "multi-employer plan," as that term is defined in Section 3(37) of ERISA,
and the Company and any Subsidiary do not contribute to, or have any liability
with respect to, a multi-employer plan;
16
(f) neither the Company nor any Subsidiary, sponsors, maintains,
contributes to, and has never sponsored, maintained, or contributed to, or had
any liability with respect to, any employee benefit plan that is a defined
benefit plan or is subject to Section 302 of ERISA, Section 412 of the Code, or
Title IV of ERISA;
(g) true and correct copies of the most recent annual report on Form
5500 and any attached schedules for each Benefit Plan (if any such report was
required by applicable Law) and a true and correct copy of the most recent
determination letter issued by the Internal Revenue Service for each Pension
Plan have been provided to the Parent;
(h) with respect to each Benefit Plan, there are no actions, suits or
claims (other than routine claims for benefits in the ordinary course) pending
or, to the knowledge of the Company or its Subsidiaries, threatened against any
Benefit Plan, the Company, any Subsidiary, or any trustee or agent of any
Benefit Plan; and
(i) with respect to each Benefit Plan to which the Company or any
Subsidiary is a party which constitutes a group health plan subject to Section
4980B of the Code, each such Benefit Plan substantially complies, and in each
case has substantially complied, with all applicable requirements of Section
4980B of the Code.
(j) full payment has been made of all amounts which the Company or any
Subsidiary was required to have paid as a contribution to any Benefit Plan as of
the last day of the most recent fiscal year of each of the Benefit Plans ended
prior to the date of this Agreement; all benefits accrued under any funded or
unfunded Benefit Plan will have been paid, accrued or otherwise adequately
reserved in accordance with GAAP as of the Balance Sheet Date; all monies
withheld from employee paychecks with respect to the Benefit Plans have been
transferred to the appropriate Plan in a timely manner as required by applicable
Law.
(k) there are no outstanding liabilities of any Benefit Plan other than
liabilities for benefits to be paid to participants in the Benefit Plans and
their beneficiaries in accordance with the terms of the Benefit Plans.
(l) each Benefit Plan may be amended or modified by the Company or any
Subsidiary at any time without liability; no plan or commitment, whether or not
legally binding, to create any additional Benefit Plan or to modify or change
any existing Benefit Plan has been made nor has any statement, oral or written,
been made that was not in accordance with a Benefit Plan and that could have an
adverse economic consequence to the Company or any Subsidiary.
(m) no Benefit Plan other than a Pension Plan or a health plan providing
continuation coverage as required by Section 4980B of the Code provides benefits
to any individual after termination of employment.
(n) the consummation of the transactions contemplated by this Agreement
will not (in and of itself): (A) entitle any employee of the Company or any
Subsidiary to severance pay, unemployment compensation or any other payment; (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (C) result in any liability under Title
IV of ERISA; (D) result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is not available; or
17
(E) result (either alone or in conjunction with any other event) in the payment
or series of payments by the Company, any Subsidiary or any of its affiliates to
any person of an "excess parachute payment" within the meaning of Section 280G
of the Code.
(o) with respect to each Benefit Plan that is funded wholly or partially
through an insurance policy, all premiums required to have been paid to date
under the insurance policy have been paid, all premiums required to be paid
under the insurance policy through the Effective Time will have been paid on or
before the Effective Time and, as of the Effective Time, there will be no
liability of the Company or any Subsidiary under any insurance policy or
ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Effective Time.
(p) (i) each Benefit Plan that constitutes a Welfare Plan, and for which
contributions are claimed by the Company or any Subsidiary as deductions under
any provision of the Code, is in compliance with all applicable requirements
pertaining to such deduction;
(ii) with respect to any welfare benefit fund (within the meaning of
Section 419 of the Code) related to a welfare benefit plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a Tax under Section 4976(a) of the Code;
(iii) all welfare benefit funds intended to be exempt from tax under
Section 501(a) of the Code have been determined by the Internal Revenue Service
to be so exempt and no event or condition exists which would adversely affect
any such determination; and
(iv) each Welfare Plan that is a group health plan (within the meaning
of Section 4980(B)(g)(2) of the Code) complies, and in each and every case has
complied, with all of the requirements of Section 4980B of the Code, ERISA,
Title XXII of the Public Health Service Act, the applicable provisions of the
Social Security Act, the Health Insurance Portability and Accountability Act of
1996, and all other applicable Laws.
(q) All persons classified by the Company or any Subsidiary as
independent contractors satisfy and have at all times satisfied the requirements
of applicable Law to be so classified; the Company and its Subsidiaries have
fully and accurately reported their compensation on IRS Forms 1099 when required
to do so; and the Company and its Subsidiaries have no obligations to provide
benefits with respect to such persons under the Benefit Plans or otherwise. The
Company and its Subsidiaries do not employ and have not employed any "leased
employees" as defined in Section 414(n) of the Code.
(r) All Benefit Plans outside of the United States, if any (the "Foreign
Plans"), are in compliance with all applicable Laws and have been operated in
accordance with the Plans' respective terms. There are no unfunded liabilities
under or in respect of the Foreign Plans, and all contributions or other
payments required to be made to or in respect of the Foreign Plans prior to the
Effective Time have been made or will be made prior to the Effective Time.
18
4.20 Compliance with Law; Authorizations. Each of the Company and the
Subsidiaries has complied with each, and is not in violation of Law to which the
Company's and its Subsidiaries' respective business, operations, assets or
properties is subject. Each of the Company and its Subsidiaries owns, holds,
possesses or lawfully uses in the operation of its respective businesses all
franchises, licenses, permits, easements, rights, applications, filings,
registrations and other authorizations ("Authorizations") which are in any
manner necessary for it to conduct its respective businesses as now or
previously conducted or for the ownership and use of the assets owned or used by
it in the conduct of its respective businesses, free and clear of all liens,
charges, restrictions and encumbrances and in compliance with all Laws. All such
Authorizations are listed and described on Schedule 4.20. Neither the Company
nor any Subsidiary is in default, nor has the Company nor any Subsidiary
received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No Stockholder and no director, officer,
employee or former employee of the Company, any Subsidiary or any affiliates of
the Company or any Subsidiary, or any other person, firm or corporation, owns or
has any proprietary, financial or other interest (direct or indirect) in any
Authorization which the Company or any Subsidiary owns, possesses or uses in the
operation of its respective business as now or previously conducted.
4.21 Transactions With Affiliates. Except as set forth on Schedule 4.21, no
Stockholder and no director, officer or employee of the Company or any
Subsidiary, or any member of his or her immediate family or any other of its,
his or her affiliates, owns or has a 5% or more ownership interest in any
corporation or other entity that is or was during the last three years a party
to, or in any property which is or was during the last three years the subject
of, any contract, agreement or understanding, business arrangement or
relationship with the Company or any Subsidiary.
4.22 Litigation. No litigation, including any arbitration, investigation or
other proceeding of or before any Governmental Entity, arbitrator or mediator is
pending or, to the knowledge of the Company and its Subsidiaries, threatened
against the Company or any Subsidiary which relates to the transactions
contemplated by this Agreement.
(a) Except as set forth on Schedule 4.22, no litigation, including any
arbitration, investigation or other proceeding of or before any court,
arbitrator or governmental or regulatory official, body or authority is pending
or, to the knowledge of the Company or its Subsidiaries, threatened against the
Company or any Subsidiary or which relates to the Company or any Subsidiary.
(b) Except as set forth on Schedule 4.22, neither the Company nor any
Subsidiary is a party to or subject to the provisions of any judgment, order,
writ, injunction, decree or award of any Governmental Entity, arbitrator or
mediator.
4.23 Taxes. All material federal, state, local and foreign tax returns,
reports, statements and other similar filings required to be filed by the
Company and its Subsidiaries (the "Tax Returns") with respect to any material
federal, state, local or foreign taxes, assessments,
19
interest, penalties, deficiencies, fees and other governmental charges or
impositions (including without limitation all income tax, unemployment
compensation, social security, payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school and any other tax or similar
governmental charge or imposition under Laws of the United States or any state
or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (singly, a "Tax", and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Company and its Subsidiaries
for Taxes for the periods, property or events covered thereby. All Taxes,
including without limitation those which are called for by the Tax Returns,
required to be paid, withheld or accrued by the Company or any Subsidiary and
any deficiency assessments, penalties and interest have been timely paid,
withheld or accrued if the failure to so pay, withhold or accrue such Taxes
would have a Material Adverse Effect on the Company's Unaudited Financial
Statements. The accruals for Taxes contained in the Unaudited Financial
Statements are adequate to cover the Tax liabilities of the Company and its
Subsidiaries as of that date and include adequate provision for all deferred
Taxes, and nothing has occurred subsequent to that date to make any of such
accruals inadequate. Each of the Company's and its Subsidiaries' Tax basis in
its assets for purposes of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected on the Company's Tax
books and records. Except as set forth on Schedule 4.23, neither the Company nor
any Subsidiary has received any notice of assessment or proposed assessment in
connection with any Tax Returns and there are not pending Tax examinations of or
Tax claims asserted against the Company, any Subsidiary or any of their assets
or properties, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received. Neither the Company nor any
Subsidiary has extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are now (and as of immediately following the Closing there will be)
no material Liens (other than any Lien for current Taxes not yet due and
payable) on any of the assets or properties of the Company or any Subsidiary
relating to or attributable to Taxes. To the knowledge of the Company, there is
no basis for the assertion of any claim relating to or attributable to Taxes
which, if adversely determined, would result in any material Lien on the assets
of the Company or any Subsidiary or otherwise result in a Material Adverse
Effect. The Company and its Subsidiaries have no knowledge of any basis for any
additional assessment of any Taxes. All Tax payments related to employees,
consultants, independent contractors, creditors of the Company or its
Subsidiaries, including, without limitation, income Tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the Company and
its Subsidiaries have been fully and properly paid, withheld, accrued or
recorded. The Company and its Subsidiaries currently have no liability, and
there are no circumstances under which the Company or its Subsidiaries will be
liable in the future, for any Tax or insurance contribution imposed on any
employee, including any common law employee or any person later deemed to be an
employee by any governmental authority, of the Company or any Subsidiary, or for
any Tax or insurance contribution imposed on the Company or any Subsidiary, in
connection with any remuneration of any type paid to any employee, including any
common law employee or any person later deemed to be an employee by any
governmental authority, of the Company or any Subsidiary. There are no
contracts, agreements, plans or arrangements, including but not limited to the
provisions of this Agreement, covering any current or former officer, director,
employee, consultant or independent contractor of the Company or
20
any Subsidiary that, individually or collectively, could give rise to or entail
any payment (or portion thereof) that would not be deductible pursuant to
Sections 280G, 404 or 162 of the Code. The Company and its Subsidiaries have not
filed a consent under Section 341(f) of the Code. The Company and its
Subsidiaries are not and have not been a United States real property holding
company within the meaning of Section 897(c) of the Code during the period
specified in Section 897(c)(1)(A)(ii) of the Code. Neither the Company nor any
Subsidiary is or has been at any time, a party to a Tax sharing, Tax indemnity
or Tax allocation agreement, and neither the Company nor any Subsidiary has (A)
has been a member of an affiliate group filing a consolidated federal Tax Return
(other than a group the common parent of which was the Company, or (B) has any
liability for the Taxes of any Person (other than any of the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law), as a transferee or successor or
assumed the Tax liability of any other Person under contract. Correct and
complete copies of (a) all Tax examinations, (b) all extensions of statutory
limitations and (c) all federal, state and local income Tax Returns and
franchise Tax Returns of the Company (including, if filed separately, its
Subsidiaries) for the last five fiscal years, or such shorter period of time as
any of them shall have existed, have heretofore been delivered by the Company to
the Parent. Neither the Company nor any of its Subsidiaries is or will be
required to pay any Taxes with respect to, as a result of, or arising in
connection with, the November 1999 Transfer.
4.24 Intellectual Property Matters.
(a) The Company and its Subsidiaries have used or currently use or in
the case of "intent to use" trademark applications, intend to use, only such
Intellectual Property which is owned by the Company or its Subsidiary free and
clear of any liens, claims, charges or encumbrances, or is licensed by the
Company or its Subsidiaries or is in the public domain. The Intellectual
Property listed on Schedule 4.24 constitutes all such assets, properties and
rights which are used or held for use in, and are necessary for, the conduct of
the business of the Company and its Subsidiaries, as such business is now
conducted and in the case of "intent to use" trademark applications, intended to
be conducted.
(b) Except as set forth on Schedule 4.24, there are no royalty,
commission, options, or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Intellectual Property or products or
services of the Company or any Subsidiary.
(c) The Company and its Subsidiaries have not infringed upon,
misappropriated or otherwise unlawfully or wrongfully used any Intellectual
Property owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Company or the
Subsidiaries, threatened relating to any Intellectual Property formerly or
currently used by the Company or any Subsidiary. None of the Intellectual
Property is subject to any outstanding order, decree or judgment. Neither the
Company nor any Subsidiary has agreed to indemnify any person or entity for or
against any infringement of or by the Intellectual Property.
(d) Except as set forth on Schedule 4.24, no present or former employee
or Stockholder of the Company or any Subsidiary and no other Person owns or has
any proprietary, financial or other interest, direct or indirect, in whole or in
part, in any patent, trademark, trade
21
name, service xxxx, domain name or copyright, or in any application therefor, or
in any trade secret, which the Company or its Subsidiaries own, possess or use
in their operations as now or heretofore conducted. Schedule 4.24 lists all
confidentiality or non-disclosure agreements currently in force and effect to
which the Company, its Subsidiaries or any of their employees is a party.
(e) Schedule 4.24 sets forth a complete and accurate list of all items
of Intellectual Property duly filed in, registered in or issued by the United
States Copyright Office or the United States Patent and Trademark Office, any
offices in the various states of the United States and any offices in any other
jurisdictions.
(f) All rights of the Company in the Intellectual Property shall vest in
the applicable Surviving Corporation pursuant to the transactions contemplated
hereby without any consent or other approval.
(g) Except as described in Schedule 4.24, all technology owned,
developed, licensed, or used in connection with the Company, any of its
Subsidiaries, or, to the Company's best knowledge, the Company's suppliers and
vendors, (including, but not limited to, information systems and technology,
commercial and noncommercial hardware and software, firmware, mechanical or
electrical products, embedded systems, or any other electro-mechanical or
processor-based system, whether as part of a desktop system, office system,
building system or otherwise) (collectively, the "Technology"), is Year 2000
Compliant (as defined below).
"Year 2000 Compliant" means that the Technology does not and will not, without
requiring any modifications, experience any malfunctions, premature cancellation
or expiration of contractual rights or deletion of data, or any other problems
in connection with (i) the year 2000 (and all subsequent years) as distinct from
1900's years, (ii) the date February 29, 2000, and all subsequent leap years,
(iii) the date September 9, 1999, or (iv) any other date before, on, or after
January 1, 2000.
4.25 Completeness; No Violations. The certified copies of the Charter
Documents, as amended to date, of the Company and the Subsidiaries, and the
copies of all leases, instruments, agreements, licenses, permits, certificates
or other documents which are included on schedules attached hereto or which have
been delivered or which have been made available to the Parent in connection
with the transactions contemplated hereby, are complete and correct; neither the
Company (including its Subsidiaries) nor, to the knowledge of the Principal
Stockholder, any other party to any of the foregoing is in default thereunder;
and, except as set forth in the schedules and documents attached to this
Agreement, the rights and benefits of the Company (including its Subsidiaries)
thereunder will not be adversely affected by the transactions contemplated
hereby, and the execution of this Agreement and the performance of the
obligations hereunder will not result in a violation or breach or constitute a
default under any of the terms or provisions thereof. Except as set forth on
Schedule 4.25, none of such leases, instruments, agreements, contracts,
licenses, permits, certificates or other documents requires notice to, or the
consent or approval of, any Governmental Entity or other third party to any of
the transactions contemplated hereby to remain in full force and effect. The
consummation of the transactions contemplated hereby will not give rise to any
right of termination, cancellation or acceleration or result in the loss of any
right or benefit thereunder.
22
4.26 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 4.26 neither the Company nor any Subsidiary has:
(a) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice, or discharged or
satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any damage or risk of loss to it or any of its assets or
properties;
(b) sold, encumbered, assigned or transferred any assets, properties or
rights or any interest therein, except for the sales in the ordinary course of
business consistent with past practice, or made any agreement or commitment or
granted any option or right with, of or to any person to acquire any assets,
properties or rights of the Company, any Subsidiary or any interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected any of its assets to any mortgage,
lien, pledge, security interest, conditional sales contract or other encumbrance
of any nature whatsoever, except in the ordinary course of business consistent
with past practice;
(d) made or suffered any amendment or termination of any agreement,
contract, commitment, lease or plan to which it is a party or by which it is
bound, or canceled, modified or waived any substantial debts or claims held by
it or waived any rights of substantial value, whether or not in the ordinary
course of business;
(e) declared, set aside or paid any dividend or made or agreed to make
any other distribution or payment in respect of its capital shares or redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or acquire any of
its shares of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not covered by
insurance, (i) resulting in a Material Adverse Effect, or (ii) of any item or
items carried on its books of account individually or in the aggregate at more
than $500,000, or suffered any repeated, recurring or prolonged shortage,
cessation or interruption of supplies or utility or other services required to
conduct its business and operations;
(g) suffered any change in its business, operations, assets, properties,
prospects or condition (financial or otherwise) resulting in a Material Adverse
Effect, except for such changes, events or effects which are directly the result
of (i) the entering into or the public announcement of this Agreement or the
transactions contemplated hereby, (ii) changes in the electronic commerce
industry generally or (iii) changes in general economic (excluding changes in
the capital markets), regulatory or political conditions in the United States;
except, in the case of each of (ii) and (iii), if the impact on the Company is
more than insignificantly disproportionate to the more general impact of the
change, event or effect;
23
(h) received notice or had knowledge of any actual or threatened labor
trouble, strike or other occurrence, event or condition of any similar character
which has had or might have an adverse effect on its business, operations,
assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or capital
additions or betterments exceeding in the aggregate $100,000, except such as may
be involved in ordinary repair, maintenance or replacement of its assets;
(j) except in the ordinary course of business consistent with past
practice of the Company and its Subsidiaries, increased the salaries or other
compensation of, or made any advance (excluding advances for ordinary and
necessary business expenses) or loan to, any of its employees, or their
respective family members, or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or the
methods of applying such principles;
(l) entered into any transaction other than in the ordinary course of
business consistent with past practice;
(m) changed its authorized capital or its securities outstanding or
otherwise changed its ownership interests, or granted any options, warrants,
calls, conversion rights or commitments with respect to any of its capital stock
or other ownership interests; or
(n) agreed to take any of the actions referred to above.
4.27 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule 4.27
is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company
(including its Subsidiaries) has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding a
general or special power of attorney from the Company or any Subsidiary and a
description of the terms of such power.
4.28 Books of Account. The books, records and accounts of each of the
Company and its Subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of such company. Neither
the Company nor any Subsidiary has engaged in any transaction, maintained any
bank account or used any of the funds of the Company or any
24
Subsidiary except for transactions, bank accounts and funds which have been and
are reflected in the normally maintained books and records of the business.
4.29 Environmental Matters. The Company has secured, and is in compliance
with, all Environmental Permits, with respect to any premises on which its
business is operated, all of which Environmental Permits shall vest in the
applicable Surviving Corporation upon consummation of the transactions
contemplated hereby. Each of the Subsidiaries has secured, and is in compliance
with, all Environmental Permits, with respect to any premises on which its
business is operated. Each of the Company and its Subsidiaries is in compliance
with all Environmental Laws.
(a) Neither the Company nor any Subsidiary has received any
communication from any Governmental Entity that alleges that the Company or any
Subsidiary is not in compliance with any Environmental Laws or Environmental
Permits.
(b) Neither the Company nor any Subsidiary has entered into or agreed to
any court decree or order, and neither the Company nor any Subsidiary is subject
to any judgment, decree or order, relating to compliance with any Environmental
Law or to investigation or cleanup of a Hazardous Substance under any
Environmental Law.
(c) No lien, charge, interest or encumbrance has been attached,
asserted, or to the knowledge of the Company or the Subsidiaries, threatened to
or against any assets or properties of the Company or any Subsidiary pursuant to
any Environmental Law.
(d) There has been no treatment, storage, disposal or release of any
Hazardous Substance on any property owned, operated or leased by the Company or
any Subsidiary other than common household and office products in de minimis
quantities.
(e) Neither the Company nor any Subsidiary has received a CERCLA 104(e)
information request nor has the Company been named a potentially responsible
party for any National Priorities List site under CERCLA or any site under
analogous state law or received an analogous notice or request from any non-U.S.
Governmental Entity, which notice, request or any resulting inquiry or
litigation has not been fully and finally resolved without possibility of
reopening.
(f) There are no aboveground tanks or underground storage tanks on,
under or about any property owned, operated or leased by the Company or any
Subsidiary and any former aboveground or underground tanks on any property
owned, operated or leased by the Company or any Subsidiary have been removed in
accordance with all Environmental Laws and no residual contamination, if any,
remains at such sites in excess of applicable standards.
(g) There are no Hazardous Substances in the soil, surface water or
groundwater of any property owned, leased, operated, occupied or used at any
time by the Company or its Subsidiaries, nor are there any articles, containers
or equipment on, under or about any property owned, leased, operated, occupied
or used by the Company or the Subsidiaries which contain any such Hazardous
Substances. There is no asbestos containing material in a condition or location
currently constituting a violation of any Environmental Law
25
at, on, under or within any property owned, operated or leased by the Company or
its Subsidiaries.
(h) The Company and the Subsidiaries have provided to the Parent true
and complete copies of, or access to, all written environmental assessment
materials and reports in their possession that have been prepared by or on
behalf of the Company or any Subsidiary during the past five years.
4.30 No Illegal Payments. Neither the Company nor any Subsidiary nor, to
the knowledge of the Company or the Subsidiaries, any affiliate, officer, agent
or employee thereof, directly or indirectly, has, on behalf of or with respect
to the Company, any Subsidiary or any affiliate thereof, (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which the Company, any
Subsidiary or any affiliate thereof or any such officer, agent or employee
should have known were not legal for the payee or the recipient of such services
to receive, (c) received any payment or any services which were not legal for
the payer or the provider of such services to make or provide, (d) made any
payment to any person or entity, or agent or employee thereof, in connection
with any Lease (as hereinafter defined) to induce such person or entity to enter
into a Lease transaction, (e) had any transactions or payments related to the
Company or any Subsidiary which are not recorded in their accounting books and
records or (f) had any off-book bank or cash accounts or "slush funds" related
to the Company or any Subsidiary.
4.31 Corporate Records. The minute books of the Company and the
Subsidiaries contain complete, correct and current copies of its respective
Charter Documents and the records of all minutes of meetings, resolutions and
other proceedings of its Board of Directors and Stockholders set forth in such
minute books are accurate. The stock record books of the Company and its
Subsidiaries are complete, correct and current.
4.32 Brokers. Except as described in Schedule 4.32, neither of the Company
nor any of its Subsidiaries, or any of their respective officers, directors or
employees have employed any broker, financial advisor or finder or incurred any
liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement.
4.33 Stockholder Approval by Written Consent. This Agreement, the Merger
and the transactions contemplated hereby have been approved by written consent
duly signed by the holders of the requisite percentage of the issued and
outstanding shares of Common Stock and Preferred Stock, in accordance with the
Delaware Code, which duly signed written consents are attached hereto as
Schedule 4.33.
4.34 Real Property Holding Company. Neither the Company or any Subsidiary
is a real property holding company within the meaning of Section 897 of the
Code.
4.35 Knowledge of Principal Stockholder. To the knowledge of the Principal
Stockholder each of the representations and warranties set forth in this Article
4 are true and correct in all material respects.
26
5. REPRESENTATIONS OF THE PARENT AND NEWCO
As of the date hereof and as of each of the Closing Date and the Effective
Time, the Parent and Newco represent and warrant to the Company as follows:
5.1 Corporate Existence. The Parent is a corporation duly incorporated,
validly existing and in good standing under the Laws of the Commonwealth of
Pennsylvania and Newco is a corporation duly incorporated, validly existing and
in good standing under the Laws of the State of Delaware. Each of the Parent and
Newco is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the conduct of its business requires it
to be so qualified, except for such failures to be so duly qualified, licensed
or admitted and in good standing that would not reasonably be expected to have a
material adverse effect on the business or condition of the Parent.
5.2 Corporate Power and Authorization. Each of the Parent and Newco has the
corporate power, authority and legal right to execute and deliver this Agreement
and the other agreements, documents and instruments required to be delivered by
the Parent and/or Newco in accordance with the provisions hereof and thereof
(the "Other Parent Agreements," and collectively with this Agreement, the
"Parent Documents") and to perform the transactions contemplated hereby and
thereby. The execution, delivery and performance of the Parent Documents by the
Parent and Newco, as applicable, have been duly authorized by the Board of
Directors of the Parent and Newco, and no further corporate or Stockholder
action on the part of the Parent or Newco is necessary to authorize the Parent
Documents and the performance of the transactions contemplated hereby and
thereby and the Other Parent Agreements will be duly executed and delivered on
behalf of the Parent and Newco, as applicable, by duly authorized officers of
the Parent and Newco. This Agreement constitutes, and the Other Parent
Agreements, when executed and delivered, will constitute, the legal, valid and
binding obligations of each of the Company or Newco, as applicable, enforceable
against it in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
5.3 Consents and Approvals. Except for filings that may be required to
effect the Merger under the Laws of the State of Delaware, and any consents
specified in Schedule 5.3 (collectively the "Parent Required Consents"), neither
the execution and delivery by the Parent and Newco of this Agreement, nor the
performance of the transactions contemplated hereby, require any filing, consent
or approval, constitute a default or cause any payment obligation to arise under
(a) any Law or court order to which the Parent or Newco is subject, (b) the
Charter Documents of the Parent or Newco, or (c) any contract, Governmental
Permit or other document to which any the Parent or Newco is a party or by which
the properties or other assets of the Parent or Newco may be subject.
5.4 Parent Common Stock. The shares of Parent Common Stock to be issued
pursuant to the Merger, when issued, will be duly authorized, validly issued,
fully paid and non-assessable.
27
5.5 SEC Documents; Parent Financial Statements. As of their respective
filing dates, all SEC documents filed by the Parent since February 11, 1999, and
all SEC documents filed after the date hereof but before the Closing complied or
will comply in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC thereunder, as the
case may be, and to the knowledge of the Parent, none of the SEC documents
contained or will contain any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent such SEC documents have been corrected,
updated or superseded by a document subsequently filed with the SEC. The
financial statements of the Parent, including the notes thereto, included in the
SEC documents (the "Parent Financial Statements") comply as to form in all
materials respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto) and present fairly the
consolidated financial position of the Parent at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments). There has been no change in the Parent's accounting policies
except as described in the Parent Financial Statements. Except as reflected or
reserved against in the Parent Financial Statements, the Parent has no material
liabilities or other obligations, except for liabilities and obligations (i)
incurred in the ordinary course of business or (ii) that would not be required
to be reflected or reserved against in the balance sheet of the Parent prepared
in accordance with GAAP.
5.6 No Conflicts. The execution and delivery by the Parent and Newco of
this Agreement does not, and the performance by the Parent and Newco of its
respective obligations under this Agreement and the consummation of the
transactions contemplated hereby do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Charter Documents of the Parent or Newco;
or
(b) conflict with or result in a violation or breach of any Law or order
applicable to the Parent or Newco or their respective assets or properties,
except as would not be reasonably expected to have material adverse effect on
the business or condition of the Company or Newco.
5.7 Absence of Changes. Since the Balance Sheet Date, there has not been a
material adverse effect, or any event or development which, individually or
together with other such events, would reasonably be expected to result in a
material adverse effect, on the business or condition of the Parent, except for
such changes, events or effects which are directly the result of (i) the
entering into or the public announcement of this Agreement or the transactions
contemplated hereby, (ii) changes in the electronic commerce industry generally
or (iii) changes in general economic (excluding changes in the capital markets),
regulatory or political conditions in the United States; except, in the case of
each of (ii) and (iii), if the impact on the Parent is more than insignificantly
disproportionate to the more general impact of the change, event or effect, and
provided further that any decrease in the price per share of Parent Common Stock
as reported on the Nasdaq National Market shall not constitute a material
adverse effect for purposes of this Section 5.7.
28
5.8 Litigation. There is no action, suit or proceeding, claim, arbitration
or investigation against Parent or Newco pending or as to which Parent or Newco
has received any written notice of assertion which materially threatens the
ability of Parent and Newco to consummate the transactions contemplated hereby.
5.9 Interim Operations of Newco. Newco was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
by this Agreement.
5.10 Brokers. Except as set forth on Schedule 5.10, neither the Parent or
Newco or any of their respective officers, directors or employees have employed
any broker, financial advisor or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement.
5.11 Tax Matters.
(a) Neither Parent nor, to the knowledge of Parent, any of its
Affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that could reasonably be expected to prevent the
Merger from constituting a "reorganization" under Section 368 of the Code.
Neither Parent nor, to the knowledge of Parent, any of its Affiliates is aware
of any agreement or plan to which Parent or any of its Affiliates is a party or
other circumstances relating to Parent or any of its Affiliates that could
reasonably be expected to prevent the Merger from so qualifying as a
reorganization under Section 368 of the Code.
(b) Neither Parent nor any Person related to Parent within the meaning
of Treasury Regulation Section 1.368-1(e)(3) has a plan or intention to
reacquire any Parent Common Stock issued in the Merger.
(c) Parent has no plan or intention to liquidate the Company or to cause
the Company to merge into another corporation.
(d) Parent has no plan or intention to cause the Company to sell,
transfer or otherwise dispose of any of the Company's assets, except for
dispositions made in the ordinary course of business and transfers described in
Section 368(a)(2)(C) of the Code and the Treasury Regulations issued thereunder.
(e) Parent has no plan or intention to sell or otherwise dispose of any
of the Company Stock.
6. COVENANTS OF THE COMPANY
6.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of (a) the termination of this
Agreement, or (b) the Effective Time, the Company and its Subsidiaries shall,
and the Principal Stockholder shall cause the Company and its Subsidiaries to,
(unless Parent shall give its prior consent in writing which consent will not be
unreasonably withheld or delayed) carry on its business in the usual, regular
and ordinary course consistent with past practice, to pay its Liabilities and
Taxes consistent with the Company's and its Subsidiaries' past practices, to pay
or perform other obligations when due
29
consistent with the Company's and its Subsidiaries' past practices, subject to
any good faith disputes over such Liabilities, Taxes and other obligations and,
to the extent consistent with such business, to use commercially reasonable
efforts and institute all policies to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, independent contractors and other Persons
having business dealings with it, all with the express purpose and intent of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
Without limiting the foregoing, except as expressly contemplated by this
Agreement, the Company and its Subsidiaries shall not, without the prior written
consent of the Parent:
(a) enter into any Contract, commitment or transaction or incur any
Liabilities in excess of $100,000 in the aggregate outside of the ordinary
course of business consistent with past practice;
(b) enter into any Contract in connection with any transaction involving
a Business Combination;
(c) alter, or enter into any Contract or other commitment to alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which the Company directly or indirectly holds any interest on the
date hereof;
(d) enter into any strategic alliance, joint development or joint
marketing Contract;
(e) materially amend or otherwise modify (or agree to do so), except in
the ordinary course of business consistent with past practice, or violate the
terms of, any of the Contracts set forth in Schedule 4.14;
(f) enter into any transaction with any officer, director, Stockholder
or Affiliate of the Company, other than (i) compensation consistent with
existing policies (except for the granting of severance or termination pay) or
as otherwise permitted by this Agreement or (ii) reimbursement of business
expenses and similar matters in the ordinary course of business;
(g) enter into or amend any Contract pursuant to which any other Person
is granted manufacturing, marketing, distribution, licensing or similar rights
of any type or scope with respect to any products of the Company and the
Intellectual Property;
(h) commence any Action or Proceeding;
(i) except for (x) the issuance of shares of Company capital stock upon
exercise or conversion of presently outstanding Company options, Company
warrants or convertible securities listed on Schedule 4.6 and (y) the grant to
new Company employees hired after the date hereof but before the Closing Date of
options to purchase Company common stock in a manner consistent with the stock
option policies and practices of the Parent, which option grants shall have
exercise prices at fair market value, and which new option grants shall provide
for vesting over a four (4) year period, and shall not accelerate vesting upon a
change of control, the Company will not (A) declare, set aside or pay any
dividends on or make any other
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distributions (whether in cash, stock or property) in respect of any Company
capital stock, or split, combine or reclassify any Company capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Company capital stock, or repurchase, redeem
or otherwise acquire, directly or indirectly, any shares of Company capital
stock; (B) issue, grant, deliver, sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any shares
of Company capital stock or options, warrants or other instruments convertible,
exchangeable or exercisable therefor, or modify or amend the rights of any
holder of any outstanding shares of Company capital stock (including to reduce
or alter the consideration to be paid to the Company upon the exercise of any
outstanding Company options, Company warrants or other convertible securities),
or (C) enter into any agreements, arrangements, plans or understandings with
respect to any such modification or amendment, nor shall the Company take any
action to affect the number of shares of Company capital stock for which any
shares of Company capital stock, Company options, Company warrants or other
securities are convertible or exchangeable into, nor shall the Company issue any
shares of Company capital stock which exchange or convert into shares of Company
capital stock at a ratio other than one-for-one;
(j) take any action that would change the corporate governance of the
Company or its Subsidiaries, including (i) cause or permit any amendments to
their respective Charter Documents, or (ii) change the number of directors or
the Persons serving as directors of the Company;
(k) dispose of or sell, waive any right to license or lease, or incur
any lien on, any assets and properties of the Company, other than acquisitions
or dispositions of inventory, other than licenses incidental to the sale of the
Company's products in the ordinary course of business, or as the result of the
payment for goods and services in the ordinary course or as otherwise permitted
by this Agreement;
(l) purchase any assets and properties of any Person other than
acquisitions of inventory (including office supplies) or licenses of products in
the ordinary course of business of the Company consistent with past practice;
(m) except to comply with GAAP, write-off or write-down or make any
determination to write off or write-down, or revalue, any of the assets and
properties of the Company, or make changes in any reserves or liabilities
associated therewith, individually or in the aggregate in an amount exceeding
$100,000;
(n) pay, discharge or satisfy, in an amount in excess of $100,000, in
any one case, or $100,000 in the aggregate, any claim, Liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) owing by
the Company, other than the payment, discharge or satisfaction in the ordinary
course of business of Liabilities reflected or reserved against in the Company
Financial Statements or incurred after the Balance Sheet Date in the ordinary
course of business consistent with this Agreement;
(o) incur any indebtedness or guarantee any such Indebtedness in an
aggregate amount exceeding $100,000 or issue or sell any debt securities of the
Company or guarantee any debt securities of others;
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(p) make any payment of consideration of any nature whatsoever to any
current or former officer, director, Stockholder, employee, independent
contractor or consultant of the Company, other than (i) salary, commissions or
consulting fees and customary benefits paid to any current or former officer,
director, Stockholder, employee or consultant of the Company or (ii)
discretionary or stay bonuses which (x) continue existing employee compensation
arrangements or (y) do not exceed $100,000 individually or $100,000 in the
aggregate;
(q) establish or modify (i) targets, goals, pools or similar provisions
under any employee benefit plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement or (ii) salary ranges, increased guidelines or similar
provisions in respect of any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement;
(r) adopt, enter into, amend, modify or terminate (partial or complete)
any Plan;
(s) make or change any election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, enter into any tax allocation agreement,
tax sharing agreement, tax indemnity agreement or closing agreement, settle or
compromise any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes with any Taxing authority or otherwise;
(t) except as required by GAAP, make any material change in the
accounting policies, principles, methods, practices or procedures of the Company
(including without limitation for bad debts, contingent liabilities or
otherwise, respecting capitalization or expense of research and development
expenditures, depreciation or amortization rates or timing of recognition of
income and expense);
(u) commence, terminate or change any line of business;
(v) cancel, materially amend or fail to renew any insurance policy other
than in the ordinary course of business consistent with past practice, or fail
to use commercially reasonable efforts to give all notices and present all
claims under all such policies in a timely fashion;
(w) fail to undertake any commercially reasonable action, including but
not limited to paying or otherwise satisfying any obligations to procure,
maintain, renew, extend or enforce any Intellectual Property;
(x) take, or agree in writing or otherwise to take, any of the actions
described in Section 4.26 above; and
(y) take, or agree in writing or otherwise to take, any of the actions
described in Sections 6.1(a) through (x) above, or any other action that would
prevent the Company from performing or cause the Company not to perform its
agreements and covenants hereunder.
32
6.2 Compliance with Laws, etc. The Company and its Subsidiaries shall
comply with Laws applicable to the Company and its Subsidiaries or its business,
operations, properties or assets, noncompliance with which is likely to result
in a Material Adverse Effect.
6.3 Exclusivity. Except with respect to this Agreement and the
transactions contemplated hereby, the Company, the Subsidiaries, the Principal
Stockholder or their respective affiliates directly or indirectly through their
respective employees, agents and representatives (including, without limitation,
any investment banking, legal or accounting firm retained by it or them and any
individual member or employee of the foregoing) (each, an "Agent") shall not,
(a) initiate, solicit or seek, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its Stockholders or any of them) with
respect to a merger, acquisition, consolidation, recapitalization, liquidation,
dissolution or similar transaction involving, or any purchase of all or any
portion of the assets or any equity securities of, the Company or any Subsidiary
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"), or (b) engage in any negotiations concerning, or provide any
confidential information or data to, or have any substantive discussions with,
any person relating to an Acquisition Proposal, (c) otherwise cooperate in any
effort or attempt to make, implement or accept an Acquisition Proposal, or (d)
enter into or consummate any agreement or understanding with any person or
entity relating to an Acquisition Proposal, except for the Merger contemplated
hereby. If the Company, its Subsidiaries or Principal Stockholder, or any of
their respective Agents, have provided any Person (other than the Parent) with
any confidential information or data relating to an Acquisition Proposal, then
they shall request the immediate return thereof. The Company, its Subsidiaries
and the Principal Stockholder shall promptly notify the Parent if any inquiries,
proposals or offers related to an Acquisition Proposal are received by, any
confidential information or data is requested from, or any negotiations or
discussions related to an Acquisition Proposal are sought to be initiated or
continued with, it or any individual or entity referred to in the first sentence
of this Section 6.3. The covenant contained in this Section 6.3 shall not
survive any termination of this Agreement pursuant to Article 10.
6.4 Third-Party Approvals. Prior to the Closing Date, the Company shall
satisfy any requirement for notice and approval of the transactions contemplated
by this Agreement under applicable agreements with third parties, including,
without limitation, all Governmental Entities, and shall provide the Parent with
satisfactory evidence of such third-party approvals.
6.5 Non-Competition Agreements. Xxx Xxxxxxxx and Xxx Xxxxxxxxx have
executed and delivered to the Parent, the Non-Competition and Trade Secrets
Agreements, copies of which are attached hereto as Exhibit B-1 and Exhibit B-2,
respectively (the "Non-Competition Agreements"), which Non-Competition
Agreements shall become effective upon the occurrence of the Effective Time.
6.6 Lock-Up Agreements. Xxx Xxxxxxxx and Xxx Xxxxxxxxx have executed and
delivered to the Parent, Lock-Up Agreements, copies of which are attached
hereto as Exhibit C-1 and Exhibit C-2, respectively (the "Lock-Up Agreements"),
which Lock-Up Agreements shall become effective upon the occurrence of the
Effective Time.
33
6.7 Employment Agreements. (a) Parent and Xxx Xxxxxxxx have executed,
and (b) the Company and Xxx Xxxxxxxxx have executed, Employment Agreements,
copies of which are attached hereto as Exhibits D-1 and D-2 (the "Employment
Agreements"), each of which Employment Agreements shall become effective upon
the occurrence of the Effective Time.
6.8 Affiliate's Agreements. The Company shall cause each of the
individuals identified on Exhibit E-1 hereto to execute and deliver to the
Parent, prior to the Effective Time, Affiliate's Agreements substantially in the
form attached hereto as Exhibit E-2 (the "Affiliate's Agreements"), each of
which Affiliate's Agreements shall become effective upon the occurrence of the
Effective Time.
7. ADDITIONAL AGREEMENTS
7.1 Waiver by Series A Preferred Stockholders. The Company represents and
warrants that all necessary action has been taken by the holders of the issued
and outstanding shares of Series A Preferred Stock of the Company to waive all
rights under Article Fourth, Section B(2)(c) of the Amended and Restated
Certificate of Incorporation of the Company in connection with the Merger.
7.2 Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company and its Subsidiaries shall (i) give Parent, Newco
and their respective officers, employees, accountants, counsel, financing
sources and other agents and representatives full access (subject to reasonable
supervision and, at the Company's option, logging of information to which access
is provided) to all buildings, offices, and other facilities and to all books
and records of the Company, whether located on the premises of the Company and
its Subsidiaries or at another location; (ii) permit Parent and Newco to make
such inspections as they may reasonably require; (iii) cause its officers to
furnish Parent and Newco such financial, operating, technical and product data
and other information with respect to the business and assets and properties of
the Company and its Subsidiaries as Parent and Newco from time to time may
reasonably request, including without limitation financial statements and
schedules available at any location other than the Company's headquarters and
none of such technical information shall be removed from such headquarters
(whether in written, electronic or other format) without the prior written
consent of the Company; (iv) allow Parent and Newco the opportunity to interview
such employees and other personnel and affiliates of the Company and its
Subsidiaries with the Company's prior written consent, which consent shall not
be unreasonably withheld or delayed; and (v) assist and cooperate with the
Parent and Newco in the development of integration plans for implementation by
the Parent and the Surviving Corporation following the Effective Time; provided,
however, that no investigation pursuant to this Section 7.2 shall affect or be
deemed to modify any representation or warranty made by the Company herein.
Materials furnished to the Parent pursuant to this Section 7.2 may be used by
the Parent for strategic and integration planning purposes relating to
accomplishing the transactions contemplated hereby.
7.3 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("Fees") incurred by Parent and Newco in connection with the negotiation and
effectuation of the terms and conditions of this Agreement
34
and the transactions contemplated hereby shall be the obligation of Parent and
Newco. All Fees (other than Fees in excess of $1,000,000 payable to Chase H&Q)
incurred by the Company in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby shall be borne by the Company (and paid by Surviving Corporation in the
event the Merger is consummated). All Fees payable to Chase H&Q incurred by the
Company in excess of $1,000,000 shall be borne solely by the Stockholders. In
the event that (a) this Agreement is terminated by the Company in connection
with an Acquisition Proposal, other than the Merger contemplated hereby, or (b)
this Agreement is terminated by the Parent for breach by the Company of the
covenants set forth in Sections 6 or 7, or failure by the Company to satisfy the
conditions set forth in Sections 8.1 and 8.3 (other than Section 8.3(g)), the
Company shall pay, or cause to be paid, in same day cash funds to the Parent an
amount equal to $9,000,000 (equal to 3% of the value of the Parent Aggregate
Stock Consideration). In the event that the Parent terminates the Agreement for
any reason other than set forth in subclause (b) above, or fails to satisfy the
conditions set forth in Section 8.1 and 8.2, the Parent shall pay, or cause to
be paid, an amount equal to $9,000,000 (equal to 3% of the value of the Parent
Aggregate Stock Consideration, determined as of the date hereof), payable at the
Parent's option in either cash or shares of Parent common stock, the per share
value of which shall be based upon the average of the closing trading price of
Parent common stock on the Nasdaq National Market for the trailing 20 trading
days preceding the date of termination.
7.4 Public Disclosure. Unless otherwise required by Law (including federal
and state securities laws) or, as to the Parent, by the rules and regulations of
the National Association of Securities Dealers ("NASD"), prior to the Effective
Time, no disclosure (whether or not in response to any inquiry) of the existence
of any subject matter of, or the terms and conditions of, this Agreement shall
be made by any party hereto unless approved by the Parent and the Company prior
to release, provided that such approval shall not be unreasonably withheld or
delayed. The Parent will use its good faith efforts to provide advance notice to
the Company of any disclosure that it intends to make as required by Law or by
the rules and regulations of the NASD. The parties have, prior to the execution
and delivery of this Agreement, agreed upon the text of a joint press release
with respect to the announcement of this Agreement.
7.5 Approvals. The Parent and the Company shall use commercially
reasonable efforts to obtain the approvals from Governmental Entities or under
any of the Contracts or other agreements as may be required in connection with
the Merger so as to preserve all rights of and benefits to the Parent or the
Company (as applicable) thereunder and each party shall provide the other with
such assistance and information as is reasonably required to obtain such
approvals.
7.6 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things (including, but not
limited to, all action reasonably necessary to seek and obtain any and all
consents and approvals of any Government Entity or Person, provided that the
Parent shall not be obligated to consent to any divestitures or operational
limitations or activities in connection therewith and no party shall be
obligated to make a payment of money as a condition to obtaining any such
condition or approval) as may be reasonably necessary or desirable for effecting
completely the consummation of this Agreement and the transactions contemplated
hereby.
35
7.7 Takeover Statutes. If any takeover statute is or may become
applicable to the transactions contemplated hereby, the Board of Directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate the
effects of any takeover statute on any of the transactions contemplated hereby.
7.8 Notification of Certain Matters.
(a) The Company shall give prompt notice to the Parent of (i) the
occurrence or non-occurrence of any event known to the Company the occurrence or
non- occurrence of which would be likely to cause any representation or warranty
contained in Article 4 to be untrue or inaccurate in any material respect at or
prior to the Closing Date or the Effective Time and (ii) any failure of the
Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by the Company hereunder.
(b) The Parent shall give prompt notice to the Company of (i) the
occurrence or non-occurrence of any event known to the Parent or Newco the
occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 5 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Effective Time and
(ii) any material failure of the Parent or Newco to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(c) The delivery of any notice pursuant to this Section 7.8 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, (ii) modify the conditions set forth in Section 8 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
7.9 Company Options, Warrants, etc. As of the Closing Date, all
Options shall be exchanged for Assumed Options in accordance with Section
2.1(d).
7.10 Tax Matters. From and after the date of this Agreement, each party
hereto shall use all reasonable efforts to cause the Merger to qualify, and
shall not knowingly take any actions or cause any actions to be taken which
could reasonably be expected to prevent the Merger from qualifying as a
"reorganization" under Section 368(a) of the Code.
7.11 Reservation of Shares. The Parent shall reserve the requisite number
of shares of Parent Common Stock for issuance upon the exercise of the Assumed
Options.
7.12 Form S-8. As soon as reasonably practicable following the Closing
Date, but in no event later than the date the Parent files a Form S-3
Registration Statement registering the sale of the Parent Common Stock
constituting the Merger Consideration pursuant to the terms of the Registration
Rights Agreement, the Parent shall file a registration statement on Form S-8, or
any successor form, to register the shares of Parent Common Stock issuable upon
the exercise of the Assumed Options.
7.13 Stockholder Approval and Investment Representation Letters. The
Company shall use its reasonable best efforts to obtain unanimous approval of
the Stockholders for this
36
Agreement, the Merger and the transactions contemplated hereby and to obtain
executed investor representation letters in the form attached hereto as Exhibit
I from all Stockholders who are accredited investors.
7.14 FIRPTA Compliance. On or prior to the Closing Date, the Company shall
deliver to the Parent a properly executed statement in a form reasonably
acceptable to the Parent for purposes of satisfying the Parent's obligations
under Treasury Regulation Section 1.1445 2(c)(3).
8. CONDITIONS TO THE MERGER
8.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Governmental Entity Approvals. Approvals from any Governmental
Entity (if any) deemed appropriate or necessary by any party to this Agreement
shall have been timely obtained, including, without limitation, an exemption
from the Israeli Security Authority from any prospectus delivery requirements
with respect to the issuance of the Assumed Options and the consent of
Governmental Entities as set forth on Schedule 4.8.
(b) No Injunctions or Regulatory Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or Governmental Entity or other legal or
regulatory restraint or prohibition preventing the consummation of the Merger
shall be in effect; nor shall there be any action taken, or any Law enacted,
entered, enforced or deemed applicable to the Merger or the other transactions
contemplated by the terms of this Agreement that would prohibit the consummation
of the Merger or which would permit consummation of the Merger only if certain
divestitures were made or if Parent were to agree to limitations on its business
activities or operations (unless such divestitures would be required as a result
of the acquisition of another business entity by Parent after the date hereof).
8.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations and Warranties. Each of the representations and
warranties made by Parent and Newco in this Agreement shall be true and correct
on and as of the Closing Date as though each such representation and warranty
was made on and as of the Closing Date except that each representation and
warranty made as of a specified date shall also remain true and correct as of
such earlier date, in each case, except where the failure of any such
representations and warranties to be true and correct (without regard to any
materiality qualifier contained therein and considered individually or in the
aggregate) would not be reasonably expected to have a material adverse effect on
the business or condition of Parent, and the Company shall have received a
certificate to such effect signed by the Chief Executive Officer of Parent.
37
(b) Performance. Parent and Newco shall have performed and complied with
in all material respects each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Parent or Newco at or
before the Closing, and the Company shall have received a certificate to such
effect signed by the Chief Executive Officer of Parent.
(c) Legal Opinion. The Company shall have received a legal opinion from
Xxxxxx, Xxxxx & Xxxxxxx LLP, counsel to Parent, in form and substance reasonably
satisfactory to the Company.
(d) NNM Listing. The shares of Parent Common Stock issuable to
Stockholders pursuant to this Agreement shall have been authorized for listing
on the NNM upon official notice of issuance.
(e) Registration Rights. The parties shall have entered into a
registration rights agreement (the "Registration Rights Agreement"), in the form
attached hereto as Exhibit F.
8.3 Additional Conditions to the Obligations of Parent and Newco. The
obligations of Parent and Newco to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by Parent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company and the Principal Stockholder in this Agreement
shall be true and correct on and as of the Closing Date as though each such
representation and warranty was made as of the Closing Date except that each
representation and warranty made as of a specified date shall remain true and
correct as of such earlier date, in each case, except where the failure of any
such representations and warranties to be true and correct (without regard to
any materiality qualifier contained therein (other than Section 4.26(g)) and
considered individually or in the aggregate) would not be reasonably expected to
have a Material Adverse Effect on the Company or its Subsidiaries, and Parent
and the Stockholders shall have received a certificate to such effect signed by
the Chief Executive Officer of the Company.
(b) Performance. The Company and the Stockholders shall have performed
and complied with in all material respects each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by the
Company and the Stockholders on or before the Closing Date, and Parent and Newco
shall have received a certificate to such effect signed by the Chief Executive
Officer of the Company.
(c) Legal Opinions. Parent shall have received a legal opinion from
Xxxxxxx, Phleger & Xxxxxxxx LLP and Xxxx Xxxxx, legal counsels to the Company,
in forms attached hereto as Exhibit G-1 and Exhibit G-2.
(d) Third Party Consents. Parent shall have received written evidence
satisfactory to it that the Company has obtained the consents, approvals and
waivers set forth on Schedule 8.3(d), with such consents, approvals or waivers
to be in form and substance satisfactory to Parent.
38
(e) Certain Documents. All of the Non-Competition Agreements, the
Employment Agreements, the Lock-Up Agreements, the Affiliate's Agreements, and
the Other Company Agreements shall have been duly executed and delivered to
Parent.
(f) Repayment of Indebtedness. Prior to and as of the Closing Date, the
Stockholders and the employees of the Company shall have repaid to the Company
in full all amounts owing to the Company by the Stockholders and the employees
of the Company.
(g) Limitation on Dissent. At least 95% of the Stockholders shall have
approved this Agreement, the Merger and the transactions contemplated hereby and
shall not be entitled to exercise appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(h) Investor Representations. The Parent shall have received the
accredited investor representation letters duly signed by each of the
Stockholders who have delivered such letters to the Company, each in form and
substance attached hereto as Exhibit I.
(i) Termination of Agreements. The Parent shall have received
satisfactory written evidence that the agreements, contracts and obligations of
the Company and its Subsidiaries set forth on Exhibit H shall have been
terminated.
(j) Certain Acknowledgements. The Parent shall have received written
acknowledgements and waivers executed by each of the employees listed on
Schedule 8.3(j) hereto, to the effect that the Company stock options held by
such employees are entitled to accelerated vesting of no more than 25% as a
result of the Merger.
(k) Conversion of Fenway Note. The Parent shall have received an
executed agreement between the Company and Fenway Partners, which provides that
the certain promissory note dated February 4, 2000 of the Company in the
principal amount of $5,000,000, payable to Fenway Partners, shall be converted
into Common Stock of the Company immediately prior to the Effective Time.
(l) Audited Financial Statements. The Company shall have delivered to
Parent the Audited Financial Statements
(m) Repayment of Promissory Note, etc. The holders of Series A Preferred
Stock shall have contributed such additional paid in capital to the Company in
an amount sufficient to pay in full that certain promissory note payable to
Tradeum Technologies, Ltd., in the principal amount of $1,000,000 (the "TTL
Note"). The TTL Note shall have been repaid in full.
9. INDEMNIFICATION; SURVIVAL
9.1 General Indemnification by the Company and the Stockholders. Subject
to the limitations contained in Section 9.4 hereof, the Indemnity Escrow
Agreement and the Tax Escrow Agreement, the Company and the Stockholders, by
acceptance of the Merger Consideration, jointly and severally (subject to the
provisions of Section 9.6), covenant and agree that they will indemnify, defend,
protect and hold harmless the Parent, Newco and the Surviving
39
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement until the
Expiration Date (as defined in Section 9.5) from and against all claims,
damages, losses, liabilities, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys fees and expenses of investigation) (collectively,
"Losses") incurred by the Parent, Newco or the Surviving Corporation as a result
of or arising from (a) any breach of the representations and warranties made by
the Company set forth herein or on the schedules or certificates delivered in
connection herewith, (b) any nonfulfillment of any covenant or agreement on the
part of the Company under this Agreement, (c) any IP Tax Liabilities, or (d) any
liability under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or other federal or state Law or regulation, at
common law or otherwise, arising out of or based upon (i) any untrue statement
or alleged untrue statement of a material fact relating to the Company
(including its Subsidiaries) or the Stockholders contained in any preliminary
prospectus, any registration statement filed in connection herewith or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto (including any additional registration statement filed pursuant to Rule
462(b) under the Securities Act), which statement was provided or was based upon
information or documents provided to the Parent or its counsel by the Company
(including its Subsidiaries), or (ii) any omission or alleged omission to state
therein a material fact relating to the Company (including its Subsidiaries)
required to be stated therein or necessary to make the statements therein not
misleading, which information was not provided to the Parent or its counsel by
the Company (including its Subsidiaries); provided, however, that such indemnity
shall not inure to the benefit of the Parent, Newco or the Surviving Corporation
to the extent that such untrue statement (or alleged untrue statement) was made
in, or such omission (or alleged omission) occurred in, any preliminary
prospectus provided, in writing, corrected information to the Parent for
inclusion in the final prospectus, and such information was not so included.
Notwithstanding anything to the contrary contained herein, the Principal
Stockholder shall not be held personally liable for a breach of Section 4.35
hereof.
9.2 Indemnification by the Parent and Newco. Subject to the limitations
contained in Section 9.4 hereof, the Parent and Newco, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
the Company and its successors at all times from and after the date of this
Agreement from and against all Losses incurred by the Company as a result of or
arising from (a) any breach of the representations and warranties made by the
Parent and Newco set forth herein or on the schedules or certificates attached
hereto, (b) any nonfulfillment of any agreement on the part of the Parent under
this Agreement, or (c) any liability under the Securities Act, the Exchange Act
or other federal or state Law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to the Parent contained in any preliminary prospectus,
any registration statement filed in connection herewith or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto
(including any registration statement filed pursuant to Rule 462(b) under the
Securities Act), or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to the Parent required to be
stated therein or necessary to make the statements therein not misleading, which
liability is not the subject of indemnification of the Parent, Newco and the
Surviving Corporation pursuant to Section 9.1(d) above.
40
9.3 Third-Party Claims.
(a) In order for a party hereto eligible to be indemnified hereunder (an
"Indemnified Party") to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving a claim or demand made
by any person or entity against the Indemnified Party (a "Third-Party Claim"),
such Indemnified Party must notify the parties obligated to provide
indemnification pursuant to Section 9.1 or 9.2 hereof (each, an "Indemnifying
Party") in writing, and in reasonable detail, of the Third-Party Claim within 30
Business Days after receipt by such Indemnified Party of written notice of the
Third-Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure. Such notice shall state the nature and the basis of such claim and a
reasonable estimate of the amount thereof. Thereafter, the Indemnified Party
shall deliver to the Indemnifying Party, within five Business Days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third-Party Claim. To the extent the Indemnifying Party has actually paid any
amount to the Indemnified Party in respect of any Loss in connection with such
Third-Party Claim, the Indemnifying Party shall have a right of subrogation with
respect to such Third-Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and settle, at its
own expense and by its own counsel (provided that such counsel is not reasonably
objected to by the Indemnified Party), any Third-Party Claim as the Indemnifying
Party pursues the same in good faith and diligently and so long as the
Third-Party Claim does not relate to an actual or potential Loss to which
Section 9.3(e) applies in which the Indemnified Party is the Parent, Newco or
the Surviving Corporation. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. Notwithstanding the foregoing, the Indemnified Party shall have the
right to participate in any matter through counsel of its own choosing at its
own expense (unless there is a conflict of interest that prevents counsel for
the Indemnifying Party from representing the Indemnified Party, in which case
the Indemnifying Party will reimburse the Indemnified Party for the expenses of
its counsel). After the Indemnifying Party has notified the Indemnified Party of
its intention to undertake to defend or settle any such asserted liability, and
for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses, and except in the case of a Third-Party Claim
relating to an actual or potential Loss to which Section 9.3(e) applies in which
the Indemnified Party is the Parent, Newco or the Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any Third-Party
Claim, consent to entry of any judgment (other than a judgment of dismissal on
the merits without costs)
41
or enter into any settlement, except with the written consent of the Indemnified
Party, which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such claim or matter.
(d) If the Indemnifying Party does not assume the defense of any
Third-Party Claim, then the Indemnified Party may defend against such
Third-Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article 9, if at
any time, in the reasonable opinion of the Parent, Newco or the Surviving
Corporation as the Indemnified Party (notice of which opinion shall be given in
writing to the Indemnifying Party), any Third-Party Claim seeks material
prospective relief which could have an adverse effect on any such Indemnified
Party or any subsidiary, then such Indemnified Party shall have the right to
control or assume (as the case may be) the defense of any such Third-Party Claim
and the amount of any judgment or settlement and the reasonable costs and
expenses of defense (including, but not limited to, fees and disbursements of
counsel and experts, as well as any sampling, testing, investigation, removal,
treatment or remediation undertaken by the Parent, Newco or the Surviving
Corporation and all counseling or engineering fees and expenses related thereto)
shall be included as part of the indemnification obligations of the Indemnifying
Party hereunder. If the Indemnified Party elects to exercise such right, then
the Indemnifying Party shall have the right to participate in, but not control,
the defense of such Third-Party Claim at the sole cost and expense of the
Indemnifying Party.
9.4 Limitations on Indemnification. No Indemnified Party shall assert
any claim (other than a Third-Party Claim) for indemnification hereunder until
such time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall equal Five Million Dollars ($5,000,000), at
which time an Indemnified Party shall be entitled to indemnification for the
total amount for which indemnification may be owing, including the first Five
Million Dollars ($5,000,000). For purposes of the preceding sentence, the
Parent, Newco and the Surviving Corporation shall be considered to be a single
Indemnifying and Indemnified Party and the Company and the Stockholders shall be
considered to be a single Indemnifying and Indemnified Party. Notwithstanding
anything to the contrary contained in this Agreement, the limitations upon
indemnification contained in this Section 9.4 shall not apply to Losses arising
out of: (i) any breach of the representations and warranties of the Company
contained in Sections 4.4, 4.9, 4.23 and 4.24(a) (provided that as to Section
4.24(a), only to the extent such breach resulted from the November 1999
Transfer) hereof, (ii) any IP Tax Liabilities or (iii) any breach of Section 7.3
hereof (collectively, the "Recourse Losses").
9.5 Survival of Representations and Warranties. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive until March 31, 2001 (which date is hereinafter called the "Expiration
Date"), except that:
(a) the representations and warranties contained in Section 4.23 hereof
shall survive until such time as the limitations period has run for all tax
periods ended prior to the Effective Time, which shall be deemed to be the
Expiration Date for purposes of this clause (a)
42
and claims arising from a breach of the representations and warranties contained
in such Section 4.23;
(b) the representations and warranties of the Company contained in
Sections 4.4, 4.9, 4.24(a) (provided that as to Section 4.24(a), only to the
extent such breach resulted from the November 1999 Transfer) hereof shall
survive the Effective Time without time limitation.
9.6 Limitation on Indemnity Obligations. The Stockholders' obligation to
indemnify the Indemnified Parties pursuant to this Agreement shall be payable
only out of the Escrow Property (as defined in the Indemnity Escrow Agreement);
provided, however, (i) the Stockholders' obligations to indemnify the
Indemnified Parties for IP Tax Liabilities may be satisfied out of the Tax
Escrow Shares held in accordance with the Tax Escrow Agreement, if any, and (ii)
in the event the Escrow Property has been fully released in accordance with the
terms of the Indemnity Escrow Agreement, each of the Stockholders shall remain
severally but not jointly liable (to the amount of Merger Consideration received
by such Stockholder pursuant to Section 2.1(a) hereof) for their pro rata share
of Recourse Losses based upon their beneficial ownership of the Company Stock
outstanding as of the Effective Time.
10. TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the Stockholders of the Company:
(a) by mutual written consent of Newco and the Company;
(b) by either Newco or the Company, if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for payment of,
or payment for, shares of Parent Common Stock pursuant to the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable; provided, in the case of an order, decree, ruling or other order,
each of the parties shall have used their best efforts to prevent the entry of
any such order, decree, ruling or other order and to appeal as promptly as
possible any order, decree, ruling or other order that may be entered; provided
further, the right to terminate this Agreement pursuant to the foregoing clause
shall not be available to any party that fails to comply with Section 7.6;
(c) by either the Parent or the Company, if the Effective Time has not
occurred before 11:59 p.m. (Eastern Standard Time) on April 1, 2000; provided,
however, that the right to terminate this Agreement under this clause (c) shall
not be available to any party whose willful failure to fulfill any obligation
hereunder has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(d) by the Parent, if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement by the Company, and
the Company has not cured such breach after notice of the same, and as a result
of such breach the conditions set forth in Sections 8.1 or 8.3, as the case may
be, would not then be satisfied; or
43
(e) by the Company, if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement by the Parent and
the Parent has not cured such breach after notice of the same, and as a result
of such breach the conditions set forth in Sections 8.1 or 8.2, as the case may
be, would not then be satisfied.
10.2 Effect of Termination. In the event of termination of this
Agreement by either Newco or the Company as provided in Section 10.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Newco, Parent, or the Company, other than the
provisions of Sections 7.3, 7.4 and 7.5, this Section 10.2 and Articles 11 and
12 and except to the extent that such termination results from the willful or
grossly negligent and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, in which case
each other party shall be entitled to recover all damages allowable at Law and
all relief available in equity.
10.3 Amendment. This Agreement may be amended by the mutual agreement of
the parties at any time before or after any required approval of matters
presented in connection with the Merger by the Stockholders of the Company;
provided, that after any such approval, there shall not be made any amendment
that by Law requires further approval by such Stockholders without the further
approval of such Stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
10.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 10.3, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
10.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 10.1, an amendment of this
Agreement pursuant to Section 10.3 or an extension or waiver pursuant to Section
10.4 shall, in order to be effective, require in the case of Parent, Newco or
the Company, action by its Board of Directors or the duly authorized designee of
its Board of Directors.
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1 The Parent. The Parent recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
confidential information solely of the Company in connection with its business.
The Parent agrees that, (i) prior to the Closing Date, or, (ii) if this
Agreement terminates prior to the Closing Date, then indefinitely, it will not
disclose any such confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever without prior
written consent of the Company except as may be required by Law or order of a
court of competent jurisdiction, unless the Parent can show that such
information has become known to the public generally through no
44
fault of the Parent. Prior to disclosing any confidential information required
by Law or order of a court of competent jurisdiction, the Parent shall provide
the Company with prompt notice of the disclosure requirement so that the Company
may take whatever action they deem appropriate to prohibit such disclosure. In
the event of a breach or threatened breach by the Parent of the provisions of
this Section 11.1, the Company shall be entitled to an injunction restraining
the Parent from disclosing, in whole or in part, such confidential information.
Nothing contained herein shall be construed as prohibiting the Company from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
11.2 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, the Parent, the Surviving Corporation and the Company agree
that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against them by injunctions and restraining orders.
12. GENERAL
12.1 Cooperation. The Principal Stockholder, the Company, Newco and the
Parent shall each deliver or cause to be delivered to the other on the Closing
Date, and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The Company and the Principal Stockholder will
cooperate and use their respective best efforts to have the officers, directors
and employees of the Company prior to the Closing Date cooperate with the Parent
on and after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing Date.
12.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (by operation of Law or otherwise) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of the Parent, and the heirs and legal representatives of the
Stockholders.
12.3 Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the Principal Stockholder, the Company, the Parent and Newco
and supersedes any prior agreement and understanding relating to the subject
matter of this Agreement. This Agreement, upon execution, constitutes a valid
and binding agreement of the parties hereto, enforceable in accordance with its
terms, and may be modified or amended only by a written instrument executed by
the Principal Stockholder, the Company, the Parent and Newco acting through
their respective officers, duly authorized by their respective Boards of
Directors.
12.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
45
12.5 Brokers and Agents. Each of the Parent and Newco, on the one hand, and
the Company, on the other hand, agrees to indemnify the other against all loss,
liability, cost damages or expense arising out of or related to claims for fees
or commissions of brokers employed or alleged to have been employed by such
indemnifying party.
12.6 Notices. All notices and other communications hereunder shall be in
writing (including wire, telefax or similar writing) and shall be delivered,
addressed, or telefaxed as follows:
(a) If to the Parent or Newco, addressed to them at:
VerticalNet, Inc.
000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Telefax: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telefax: (000) 000-0000
(b) If to the Company at:
Tradeum, Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention President
Telephone: (000) 000-0000
Telefax: (000) 000-0000
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telefax: (000) 000-0000
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or
46
communication shall be effective (i) if delivered by hand or by nationally
recognized courier service, when delivered at the address specified in this
Section 12.6 (or in accordance with the latest unrevoked written direction from
such party); (ii) if given by telefax, when such telefax is transmitted to the
telefax number specified in this Section 12.6 (or in accordance with the latest
unrevoked written direction from such party), and the appropriate confirmation
is received.
12.7 Governing Law. This Agreement shall be construed in accordance with
the Laws of the Commonwealth of Pennsylvania, without giving effect to any of
the provisions thereof that would require the application of the substantive
Laws of any other jurisdiction. Each party to this Agreement: (a) agrees that
any legal action or proceeding under this Agreement shall be brought in the
courts of the Commonwealth of Pennsylvania or in the United States District
Court for the Eastern District of Pennsylvania; (b) irrevocably submits to the
jurisdiction of such courts; (c) agrees not to assert any claim or defense that
it is not personally subject to the jurisdiction of such courts, that any such
forum is not convenient or the venue thereof is improper, or that this Agreement
or the subject matter hereof may not be enforced in such courts; and (d) agrees
to accept service of process on it by certified or registered mail or by any
other method authorized by applicable Law.
12.8 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
12.9 Time. Time is of the essence with respect to this Agreement.
12.10 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be modified
in such manner as to be valid, legal and enforceable but so as to most nearly
retain the intent of the parties, and if such modification is not possible, such
provision shall be severed from this Agreement, and in either case the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
12.11 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at Law or in equity.
12.12 Captions. The headings of this Agreement are inserted for convenience
only and shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
DEFINITIONS. As used in this Agreement, the following defined terms shall have
the meanings indicated below:
"Acquisition Proposal" is defined in Section 6.3.
47
"Actions or Proceedings" means any action, suit, complaint, petition,
investigation known to the party, proceeding, arbitration, litigation or
Governmental Entity audit or other proceeding known to the party, whether
civil or criminal, in Law or in equity, or before any arbitrator or
Governmental Entity.
"Affiliate's Agreements" is defined in Section 6.8.
"Agent" is defined in Section 6.3.
"Agreement" is defined in the Preamble to this Agreement.
"Assumed Options" is defined in Section 2.1(d).
"Audited Financial Statements" is defined in Section 4.10.
"Authorizations" is defined in Section 4.20.
"Balance Sheet Date" is defined in Section 4.10.
"Benefit Plan" is defined in Section 4.19.
"Business Combination" means, with respect to any person, (i) any merger,
consolidation or other business combination to which such person is a
party, (ii) any sale, dividend, split or other disposition of any capital
stock or other equity interests of such person, (iii) any tender offer
(including a self tender), exchange offer, recapitalization, restructuring,
liquidation, dissolution or similar or extraordinary transaction, (iv) any
sale, dividend or other disposition of all or a material portion of the
assets and properties of such person or (v) the entering into of any
agreement or understanding, the granting of any rights or options, or the
acquiescence of the Company, with respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the Commonwealth of Pennsylvania are authorized or
obligated to close.
"California Code" means the California Corporations Code, as amended.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq.
"Certificates" is defined in Section 2.11.
"Charter Documents" means, with respect to any Person, its
Articles/Certificates of Incorporation and By-Laws or other organization
documents.
"Closing" is defined in Section 1.6.
48
"Closing Date" is defined in Section 1.6.
"Code" is defined in the Recitals to this Agreement.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
"Company" is defined in the Preamble to this Agreement.
"Company Documents" is defined in Section 4.2.
"Company Required Consents" is defined in Section 4.8.
"Company Stock" is defined in Section 2.1(a).
"Constituent Corporations" is defined in the Recitals to this Agreement.
"Contracts" is defined in Section 4.14.
"Conversion Number" is defined in Section 2.1(a).
"Convertible Securities" is defined in Section 4.9.
"Delaware Code" means the Delaware General Corporation Law, as amended.
"Effective Time" is defined in Section 1.2.
"Employment Agreements" is defined in Section 6.7.
"Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals,
authorizations, licenses or binding agreements issued, promulgated or
entered into by any Governmental Entity, relating to the environment,
preservation or reclamation of natural resources, or to the management,
Release or threatened Release of or exposure to Hazardous Substances,
including CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section
300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., and any similar or implementing state or local law
and all amendments or regulations promulgated thereunder.
49
"Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental
Laws for the operation of the business of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and all regulations and rules issued thereunder, or any successor
law.
"ERISA Affiliate" is defined in Section 4.19.
"Escrow Shares" is defined in Section 3.1(a).
"Exchange Act" is defined in Section 9.1.
"Exchange Agent" means the exchange agent designated by the Parent and
reasonably acceptable to the Company.
"Expiration Date" is defined in Section 9.5.
"Foreign Plans" is defined in Section 4.19.
"GAAP" means generally accepted accounting principles in the United States,
consistently applied.
"Governmental Entity" means any court, administrative or regulatory agency
or commission, or other governmental authority or instrumentality,
domestic, foreign or supranational.
"Governmental Permit" means any permit issued by a Governmental Entity.
"Hazardous Substances" mean all explosive or regulated radioactive
materials or substances, hazardous or toxic materials, wastes or chemicals,
petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, polychlorinated
biphenyls and all other materials or chemicals regulated pursuant to any
Environmental Law, including materials listed in 49 C.F.R. (S) 172.101 and
materials defined as hazardous pursuant to Section 101(14) of CERCLA.
"Indemnified Party" is defined in Section 9.3(a).
"Indemnifying Party" is defined in Section 9.3(a).
"Indemnity Escrow Agent" is defined in Section 3.1(a).
"Intellectual Property" means all right, title, and interest in and to all
registered or unregistered United States and foreign trademarks, service
marks, trade names, trade dress, logos, slogans, rights of publicity, brand
names, domain names, copyrights, industrial or product designs, trade
secrets, inventions (whether or not patentable),
50
invention disclosures, data, databases and data collections, technology,
methodologies, computer programs (including all source codes, object codes,
firmware, development tools, files, records, data, and related
documentation), any other confidential or proprietary right or information,
whether or not subject to statutory registration, and any goodwill
associated with any of the foregoing, and all related technical
information, manufacturing, engineering and technical drawings, and
know-how, and all documents, disks and other media on which any of the
foregoing is stored, and all right, title, and interest in and to pending
UnitedStates and foreign applications for and registrations of patents
(including all reissues, divisions, renewals, extensions, provisionals,
substitutions, additions, and extensions, continuations, and continuations
in part), trademarks, service marks and copyrights, and the right to xxx
for past or present infringement, if any, in connection with any of the
foregoing.
"IP Tax Liabilities" shall have the meaning set forth under the definition
of "Representation and Warranty Insurance."
"Laws" means any foreign or domestic (federal, state, local or municipal)
law, statute, ordinance, rule or regulation or body of law or judgment,
order, injunction, ruling, decree, stipulation or award of any Governmental
Entity or private mediation or arbitration tribunal.
"Liabilities" or "liabilities" shall have the meaning set forth in Section
4.11.
"Lock-Up Agreements" are defined in Section 6.6.
"Losses" are defined in Section 9.1.
"Material Adverse Effect" means when used in connection with the Company or
any of its Subsidiaries, means any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
liabilities, condition (financial or otherwise), operations or results of
operations of the Company and its Subsidiaries individually or taken as a
whole.
"Merger" is defined in the Recitals to this Agreement.
"Merger Consideration" is defined in Section 2.1(a).
"Minor Contract" means any Contract that involves an amount of less than
$25,000; provided that all Minor Contracts in the aggregate involve an
aggregate amount of less than $100,000.
"Newco" is defined in the Preamble to this Agreement.
"Non-Competition Agreements" are defined in Section 6.5.
"Options" is defined in Section 2.1(d).
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"Other Company Agreements" is defined in Section 4.2.
"Other Parent Agreements" is defined in Section 5.2.
"Parent" is defined in the Preamble to this Agreement.
"Parent Common Stock" means the common stock, par value $.01 per share of
the Parent.
"Parent Documents" is defined in Section 5.2.
"Parent Financial Statements" is defined in Section 5.5.
"Parent Required Consents" is defined in Section 5.3.
"Pension Plan" is defined in Section 4.19.
"Permits" mean all permits, licenses, franchises, concessions, approvals
and authorizations from any Governmental Entity that are owned or held by
the Company, its Subsidiaries or any Stockholder that relate to the
operations of the Company or its Subsidiaries.
"Person" means any individual, corporation, limited liability company,
partnership, estate, trust, sole proprietorship, unincorporated society or
association, or any entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the preferred stock , par value $0.001 per share,
of the Company.
"Proceeding" means any action, claim, suit, or arbitration or proceeding
(including, without limitation, an investigation or partial proceeding,
such as deposition), whether commenced or, to the knowledge of the Company,
threatened.
"Qualified Company Options" is defined in Section 2.1(d).
"Release" means any spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including
ambient air, surface water, ground water, soils, land surface, subsurface
strata, workplace or structure).
"Representation and Warranty Insurance" shall mean a representation and
warranty insurance policy obtained by the Company at the Stockholders' sole
cost and expense in an amount equal to 3% of the value of the Aggregate
Parent Stock Consideration (for such purpose valued at $237.50 per share)
insuring against any and all Tax liabilities in connection with the sale of
intellectual property assets by Tradeum Technologies, Ltd. to
52
the Company pursuant to that certain Transfer of Intellectual Property
Agreement dated as of November 25, 1999 (the "IP Tax Liabilities") and
which names the Company, its Subsidiaries and Parent as named insureds
therein.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" is defined in Section 4.13.
"Series A Preferred Stock" means the shares of the class of Preferred Stock
designated as Series A.
"Stockholders" means all of the stockholders of the capital stock of the
Company.
"Surviving Corporation" is defined in Section 1.1.
"Tax" or "Taxes" is defined in Section 4.23.
"Tax Returns" is defined in Section 4.23.
"Technology" is defined in Section 4.24(g).
"Third-Party Claim" is defined in Section 9.3(a).
"Transactions" is defined in Section 1.6.
"Welfare Plan" is defined in Section 4.19.
"Year 2000 Compliant" is defined in Section 4.24.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Merger as of the day and year first above written.
VERTICALNET, INC.
By:______________________
Name:
Title:
VERT ACQUISITION CORP.
By:______________________
Name:
Title:
TRADEUM, INC.
By:______________________
Name:
Title:
--------------------------
XXX XXXXXXXXX, an individual
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