Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
RED HAT, INC.,
MIAMI ACQUISITION CORP.
AND
CYGNUS SOLUTIONS
DATED AS OF NOVEMBER 15, 1999
TABLE OF CONTENTS
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ARTICLE I THE MERGER..............................................................................................2
1.1 The Merger......................................................................................2
1.2 Effective Time..................................................................................2
1.3 Effect of the Merger............................................................................2
1.4 Articles of Incorporation; Bylaws...............................................................2
1.5 Directors and Officers..........................................................................3
1.6 Merger Consideration; Effect on Capital Stock...................................................3
1.7 Dissenting Shares...............................................................................5
1.8 Surrender of Certificates.......................................................................6
1.9 No Further Ownership Rights in Company Common Stock.............................................8
1.10 Lost, Stolen or Destroyed Certificates..........................................................8
1.11 Tax and Accounting Consequences.................................................................8
1.12 Taking of Necessary Action; Further Action......................................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................9
2.1 Organization of the Company.....................................................................9
2.2 Subsidiaries....................................................................................9
2.3 Company Capital Structure......................................................................10
2.4 Authority......................................................................................12
2.5 No Conflict....................................................................................12
2.6 Consents.......................................................................................13
2.7 Company Financial Statements...................................................................13
2.8 No Undisclosed Liabilities.....................................................................13
2.9 No Changes.....................................................................................14
2.10 Tax and Other Returns and Reports..............................................................16
2.11 Restrictions on Business Activities............................................................18
2.12 Title to Properties; Absence of Liens and Encumbrances.........................................19
2.13 Governmental Authorization.....................................................................20
2.14 Intellectual Property..........................................................................20
2.15 Year 2000 Compliance...........................................................................24
2.16 Product Warranties; Defects; Liabilities.......................................................25
2.17 Contracts......................................................................................25
2.18 Change of Control Payments.....................................................................27
2.19 Interested Party Transactions..................................................................27
2.20 Compliance with Laws...........................................................................27
2.21 Litigation.....................................................................................27
2.22 Insurance......................................................................................28
2.23 Books and Records..............................................................................28
2.24 Environmental Matters..........................................................................28
2.25 Brokers' and Finders' Fees.....................................................................29
2.26 Employee Matters and Benefit Plans.............................................................30
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2.27 Bank Accounts..................................................................................34
2.28 Affiliate Agreements...........................................................................34
2.29 Pooling of Interests...........................................................................34
2.30 Representations Complete.......................................................................34
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..............................................34
3.1 Organization of Parent and Merger Sub..........................................................34
3.2 Authority......................................................................................34
3.3 Parent Common Stock............................................................................35
3.4 SEC Filings; Parent Financial Statements.......................................................35
3.5 No Material Adverse Change.....................................................................36
3.6 Parent Capital Structure.......................................................................36
3.7 Affiliate Agreements...........................................................................36
3.8 Pooling of Interests...........................................................................37
3.9 Merger Sub.....................................................................................37
ARTICLE IV SECURITIES ACT COMPLIANCE; REGISTRATION...............................................................37
4.1 Securities Act Exemption.......................................................................37
4.2 Restrictions Regarding Securities Law Matters..................................................37
4.3 Fairness Hearing...............................................................................37
4.4 Registration Statement.........................................................................38
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME....................................................................39
5.1 Conduct of Business of the Company.............................................................39
ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................42
6.1 Preparation of Information Statement...........................................................42
6.2 Stockholder Approval...........................................................................43
6.3 Access to Information..........................................................................43
6.4 Confidentiality................................................................................43
6.5 Public Disclosure..............................................................................43
6.6 Consents; HSR Act..............................................................................44
6.7 FIRPTA Compliance..............................................................................44
6.8 Legal Conditions to the Merger.................................................................44
6.9 Reasonable Best Efforts; Additional Documents and Further Assurances...........................44
6.10 Notification of Certain Matters................................................................45
6.11 Pooling Accounting.............................................................................45
6.12 Reorganization.................................................................................45
6.13 Form S-8.......................................................................................45
6.14 Nasdaq National Market Listing.................................................................45
6.15 Blue Sky Laws..................................................................................45
6.16 Termination of Company Investor Rights.........................................................46
6.17 No Solicitation................................................................................46
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ARTICLE VII CONDITIONS TO THE MERGER.............................................................................47
7.1 Conditions to Obligations of Each Party to Effect the Merger...................................47
7.2 Additional Conditions to the Obligations of the Company........................................48
7.3 Additional Conditions to the Obligations of Parent and Merger Sub..............................48
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW..................................................50
8.1 Survival of Representations and Warranties.....................................................50
8.2 Escrow Arrangements............................................................................51
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.....................................................................53
9.1 Termination....................................................................................53
9.2 Effect of Termination..........................................................................54
9.3 Amendment......................................................................................54
9.4 Extension; Waiver..............................................................................54
ARTICLE X GENERAL PROVISIONS.....................................................................................55
10.1 Notices........................................................................................55
10.2 Expenses.......................................................................................56
10.3 Interpretation.................................................................................56
10.4 Counterparts...................................................................................57
10.5 Entire Agreement; Assignment...................................................................57
10.6 Severability...................................................................................57
10.7 Other Remedies.................................................................................57
10.8 Governing Law..................................................................................57
10.9 Rules of Construction..........................................................................57
10.10 Specific Performance...........................................................................58
EXHIBIT DESCRIPTION
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Exhibit A List of Company Stockholders Executing Voting Agreement
Exhibit A-1 Form of Voting Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Agreement of Merger
Exhibit D Form of Articles of Merger
Exhibit E Form of Parent Affiliate Agreement
Exhibit F Form of Escrow Agreement
Exhibit G Form of NonCompetition, NonSolicitation and NonDisclosure
Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into in the State of North Carolina as of November 15, 1999 among
Red Hat, Inc., a Delaware corporation ("PARENT"), Miami Acquisition Corp., a
North Carolina corporation and a wholly-owned subsidiary of Parent ("MERGER
SUB"), and Cygnus Solutions, a California corporation (the "COMPANY").
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger (the
"MERGER") of Merger Sub with and into the Company in accordance with this
Agreement, the California General Corporation Law ("CALIFORNIA LAW") and the
North Carolina Business Corporation Act ("NORTH CAROLINA LAW"). Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly-owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. The Board of Directors of the Company has unanimously (i) determined
that the Merger is fair to, and in the best interests of, the Company and its
stockholders, (ii) approved this Agreement, the Escrow Agreement, the Merger and
the other transactions contemplated by this Agreement and the Escrow Agreement
and (iii) resolved to recommend to the stockholders of the Company that they
adopt and approve this Agreement, the Escrow Agreement, the Merger and the
transactions contemplated hereby and thereby.
D. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement, the Escrow Agreement and the Merger.
E. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's and Merger Sub's willingness to enter into
this Agreement, each of the stockholders of the Company listed on EXHIBIT A
hereto is entering into a Voting Agreement substantially in the form attached
hereto as EXHIBIT A-1, and each of the affiliate stockholders of the Company
listed on SCHEDULE 2.28 hereto is entering into an Affiliate Agreement
substantially in the form attached hereto as EXHIBIT B.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2), and
subject to and upon the terms and conditions of this Agreement, California Law
and North Carolina Law, Merger Sub shall be merged with and into the Company,
the separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation and as a wholly-owned subsidiary of
Parent. The Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 9.1, the closing of the Merger (the "CLOSING") will take
place as promptly as practicable, but no later than three (3) business days,
following satisfaction or waiver of the conditions set forth in Article VII, at
the offices of Xxxxx & Xxx Xxxxx, PLLC, 000 X. Xxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxx, Xxxxx Xxxxxxxx, unless another place or time is agreed to by Parent
and the Company. The date upon which the Closing actually occurs is herein
referred to as the "CLOSING DATE." On the Closing Date, the parties hereto shall
cause the Merger to be consummated by filing (a) an Agreement of Merger, in
substantially the form attached hereto as EXHIBIT C (the "AGREEMENT OF MERGER"),
and the required officers' certificates, with the Secretary of State of the
State of California, in accordance with the relevant provisions of California
Law and (b) the Articles of Merger, in substantially the form attached hereto as
EXHIBIT D (the "ARTICLES OF MERGER"), with the Secretary of State of the State
of North Carolina, in accordance with the relevant provisions of North Carolina
Law (the date and time of such later filing being referred to herein as the
"EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Agreement of Merger, the
Articles of Merger, the applicable provisions of California Law and the
applicable provisions of North Carolina Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the rights,
property, powers, privileges and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Articles of Incorporation of the Surviving
Corporation shall be amended and restated in their entirety as set forth in the
Agreement of Merger until thereafter amended as provided by law and such
Articles of Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Bylaws of the Surviving Corporation shall be
amended and restated in their entirety as set forth in the Agreement of Merger
until thereafter amended.
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1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation.
1.6 MERGER CONSIDERATION; EFFECT ON CAPITAL STOCK.
(a) MERGER CONSIDERATION; CONVERSION. The aggregate number of
shares of common stock of Parent, par value $.0001 per share ("PARENT COMMON
STOCK"), to be issued by Parent and delivered by Merger Sub (including Parent
Common Stock to be reserved for issuance upon exercise of any Company Options
(as defined in Section 1.6(e)) in exchange for the acquisition by Parent of all
outstanding capital stock of the Company ("COMPANY CAPITAL STOCK") and the
assumption by Parent of all outstanding Company Options as provided in Section
1.6(e) shall be 6,624,344 shares of Parent Common Stock ("AGGREGATE SHARE
NUMBER"), which Aggregate Share Number was determined by dividing $600,000,000
by $90.575 (the "DESIGNATED PARENT STOCK PRICE"). No adjustment shall be made in
the Aggregate Share Number as a result of any proceeds received by the Company
from the date hereof to the Closing Date pursuant to the exercise of any Company
Options. Subject to the terms and conditions of (i) this Agreement, including
without limitation Section 1.6(c) hereof, and (ii) the Escrow Agreement (as
defined in Section 7.2(d)), at the Effective Time, by virtue of the Merger and
without any action on the part of Merger Sub, the Company, the holders of any
shares of Company Capital Stock or the holders of any capital stock of Merger
Sub, each share of common stock of the Company, par value $.001 per share
("COMPANY COMMON STOCK"), issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive from Merger Sub the
Applicable Fraction of a share of Parent Common Stock. For purposes of this
Agreement, the term "APPLICABLE FRACTION" shall mean (i) 6,624,344 divided by
(ii) the Fully Diluted Company Share Number as of immediately prior to the
Effective Time. For purposes of this Agreement, the term "FULLY DILUTED COMPANY
SHARE NUMBER" shall mean, as of the date of determination thereof, the sum of
(A) the aggregate number of shares of Company Common Stock then issued and
outstanding, (B) the aggregate number of shares of Company Common Stock issuable
upon the conversion of any shares of Preferred Stock then issued and
outstanding, and (C) the aggregate number of shares of Company Common Stock
issuable under, or otherwise subject to, any Purchase Rights then outstanding
(including any Purchase Rights that are unvested or are otherwise not then
exercisable).
(b) STOCK RESTRICTIONS. If any shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends in the discretion of Parent.
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(c) ESCROW. A number of shares of Parent Common Stock (the "ESCROW
SHARES") equal to ten percent (10%) of the Parent Common Stock to be issued by
Parent and delivered by Merger Sub in the Merger in exchange for the outstanding
Company Common Stock (none of which Escrow Shares shall be unvested, subject to
any right of repurchase, risk of forfeiture or other condition in favor of the
Company or the Surviving Corporation) shall be held in escrow pursuant to the
Escrow Agreement to reimburse Parent and its Affiliates (including the Surviving
Corporation) for any Losses (as defined in Section 8.2(a) hereof) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Escrow Shares will be withheld on a pro rata basis among the holders of Company
Common Stock. The exact number of Escrow Shares held for the account of each
holder of Company Common Stock will be set forth in the Escrow Schedule as
provided in Section 8.2(a). The delivery of the Escrow Shares will be made on
behalf of the holders of Company Common Stock in accordance with the provisions
hereof, with the same force and effect as if such shares had been delivered by
Merger Sub directly to such holders and subsequently delivered by such holders
to the Escrow Agent (as defined in Section 8.2(a)).
(d) CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. At the
Effective Time, by virtue of the Merger and without any action on the part of
Merger Sub, the Company, the holders of any shares of Company Capital Stock, or
the holders of any capital stock of Merger Sub, each share of Company Capital
Stock owned by Merger Sub, Parent, the Company or any direct or indirect
wholly-owned subsidiary of Parent or of the Company immediately prior to the
Effective Time shall be canceled and extinguished without any conversion thereof
and no consideration shall be delivered in exchange therefor.
(e) STOCK OPTIONS. At the Effective Time, the Company's 1995 Stock
Option Plan, 1997 Stock Option Plan and 1998 Executive Stock Option Plan, each
as amended to date (the "OPTION PLANS"), and all options to purchase Company
Common Stock or Series A Preferred Stock (as defined in Section 2.3(a)) then
outstanding under the Option Plans, shall be assumed by Parent in accordance
with the following provisions:
(i) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock or Series A Preferred Stock issued under
the Option Plans (each a "COMPANY OPTION"), whether vested or unvested, shall
be, in connection with the Merger, assumed by Parent. Parent and the Company
will take all action necessary to cause the assumption by Parent as of the
Effective Time of the Option Plans and all of the Company Options set forth on
SCHEDULE 2.3(b) or granted on or after the date hereof with the consent of
Parent and, in each case, outstanding as of the Effective Time. The Company will
take all corporate action necessary to effect, without the consent or
cooperation of the holders of Company Options, such assumption by Parent and the
conversion of the Company Options into options to purchase shares of Parent
Common Stock as set forth herein. Each Company Option so assumed by Parent under
this Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the relevant Option Plan and/or as provided in the
respective option agreements governing such Company Option immediately prior to
the Effective Time, except that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock
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or Series A Preferred Stock that were issuable upon exercise of such Company
Option immediately prior to the Effective Time multiplied by the Applicable
Fraction, rounded down (in the case of Company Options granted under the Option
Plans) to the nearest whole number of shares of Parent Common Stock and (B) the
per share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Option shall be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock or
Series A Preferred Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Applicable Fraction, rounded up
to the nearest whole cent.
(ii) It is the intention of the parties that the Company
Options assumed by Parent pursuant to this Section 1.6(e) qualify following the
Effective Time as incentive stock options as defined in Section 422 of the Code
to the extent the Company Options qualified as incentive stock options
immediately prior to the Effective Time.
(iii) Promptly following the Effective Time, Parent will
issue to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(f) CAPITAL STOCK OF MERGER SUB. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company, the
holders of any shares of Company Capital Stock or the holders of any capital
stock of Merger Sub, each share of Common Stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of Common Stock of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(g) ADJUSTMENTS. In the event of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Parent Common Stock or Company Capital Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock or
Company Capital Stock occurring after the date hereof and prior to the Effective
Time, appropriate adjustments will be made to the number of shares of Parent
Common Stock issuable in exchange for shares of Company Capital Stock and upon
the exercise of Company Options.
(h) FRACTIONAL SHARES. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive from Parent an amount
of cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Designated Parent Stock Price.
1.7 DISSENTING SHARES.(a) Notwithstanding any provision of this
Agreement to the contrary, any shares of Company Common Stock held by a holder
who has demanded and perfected appraisal or dissenters' rights for such shares
in accordance with California Law and
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who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("DISSENTING SHARES"), shall not be converted
into or represent a right to receive Parent Common Stock (and cash in lieu of
fractional shares of Parent Common Stock) pursuant to Section 1.6, but the
holder thereof shall only be entitled to such rights as are granted by
California Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of shares of Company Common Stock who demands appraisal of such shares under
California Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Parent Common Stock and
cash in lieu of fractional shares of Parent Common Stock as provided in Section
1.6, without interest thereon, upon surrender of the certificate representing
such shares in accordance with Section 1.8.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Common Stock, withdrawals of such
demands, and any other instruments served pursuant to California Law and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for
(d) appraisal under California Law. The Company shall not, except
with the prior written consent of Parent, voluntarily make any payment with
respect to any demands for appraisal of Company Common Stock or offer to settle
or settle any such demands.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
designate First Union National Bank, Charlotte, North Carolina (or if First
Union National Bank is not willing or able to so act, another United States bank
or trust company reasonably acceptable to the Company) to act as exchange agent
(the "EXCHANGE AGENT") in the Merger.
(b) MERGER SUB TO DELIVER COMMON STOCK. At the Closing, Merger Sub
shall deliver to the Exchange Agent for exchange in accordance with this Article
I, the aggregate amount of cash and the aggregate number of shares of Parent
Common Stock payable or issuable pursuant to Section 1.6 in exchange for
outstanding shares of Company Common Stock; PROVIDED, HOWEVER, that, on behalf
of the holders of Company Common Stock, and pursuant to the Escrow Agreement and
Section 8.2(a) hereof, Merger Sub shall deposit the Escrow Shares with the
Escrow Agent out of the aggregate number of shares of Parent Common Stock
otherwise issuable pursuant to Section 1.6.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, 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 outstanding shares of
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Company Common Stock (including certificates for shares of Preferred Stock which
have been converted to shares of Company Common Stock but for which new
certificates have not been issued) whose shares were converted into the right to
receive shares of Parent Common Stock from Merger Sub pursuant to Section 1.6,
(i) a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Surviving Corporation, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, and such other customary documents as may be required
pursuant to such instructions (the "TRANSMITTAL DOCUMENTS"), the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock to be deposited with the Escrow Agent on such
holder's behalf pursuant to Section 1.6 and Section 8.2(a) hereof and the Escrow
Agreement), plus cash in lieu of fractional shares in accordance with Section
1.6, to which such holder is entitled pursuant to Section 1.6, and the
Certificate so surrendered shall forthwith be canceled. Any stockholder of
record of the Company, or duly appointed agent thereof, who attends the Closing,
surrenders the Certificate representing his, her or its shares of Company Common
Stock and completes, executes and delivers the Transmittal Documents, shall
receive from the Exchange Agent at the Closing a certificate representing the
number of whole shares of Parent Common Stock (less the number of shares of
Parent Common Stock to be deposited with the Escrow Agent on such holder's
behalf pursuant to Section 1.6, Section 8.2(a) and the Escrow Agreement) and
cash in lieu of fractional shares to which such stockholder is entitled pursuant
to Section 1.6 and the Certificate so surrendered shall forthwith be canceled.
At the Closing, and subject to and in accordance with the provisions of Section
8.2(a) hereof and the Escrow Agreement, Merger Sub shall cause to be delivered
to the Escrow Agent, on behalf of the holders of Certificates, a certificate or
certificates representing the Escrow Shares which shall be registered in the
name of the Escrow Agent. Such shares shall be beneficially owned by the holders
on whose behalf such shares were deposited with the Escrow Agent as set forth in
Section 8.2(a) and the Escrow Agreement and shall be available to reimburse
Parent as provided in Section 8.2(a) and the Escrow Agreement. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock (including Certificates for shares of
Preferred Stock which have been converted to shares of Company Common Stock but
for which new certificates have not been issued) will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Common Stock 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
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holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
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 paid with respect to such whole shares
of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock is to be issued 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 Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.8, none of the Exchange Agent, Parent, the Surviving Corporation or
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All shares of Parent
Common Stock issued by Parent and delivered by Merger Sub upon the surrender for
exchange of shares of Company Common 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 Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Capital 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 I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange in lieu of such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.6; PROVIDED,
HOWEVER, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
1.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code (and
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this Agreement is intended to constitute a plan of reorganization for purposes
of Section 368 of the Code) and (ii) qualify for accounting treatment as a
"pooling of interests."
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and Merger
Sub as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own, lease and operate its
properties and to carry on its business as now being conducted. Except as set
forth in SCHEDULE 2.1 of the written disclosure schedules delivered by the
Company to Parent concurrently with the execution of this Agreement (the
"COMPANY SCHEDULES"), the Company is duly qualified or licensed to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified or licensed has had or could be reasonably
expected to have a Material Adverse Effect (as defined below) on the Company.
For purposes of this Agreement, a "MATERIAL ADVERSE EFFECT" shall mean, with
respect to Parent on the one hand and the Company on the other hand, the result
of one or more events, occurrences, changes or effects which, individually or in
the aggregate, has had or could be reasonably expected to have a material
adverse effect or impact on the business, assets (including intangible assets),
results of operations or financial condition of such party and its subsidiaries,
taken as a whole, or on such party's ability to consummate the transactions
contemplated hereby. The Company has delivered a true and correct copy of its
Articles of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 SUBSIDIARIES.
(a) Except as set forth on SCHEDULE 2.2 of the Company Schedules,
the Company does not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any Person. The Persons set forth on SCHEDULE 2.2
of the Company Schedules are sometimes herein referred to individually as a
"SUBSIDIARY" and collectively as the "SUBSIDIARIES."
(b) Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization (to the extent such concepts are applicable), and
has the corporate power to own, lease and operate its properties and to carry on
its business as now being conducted. Each Subsidiary is duly
-9-
qualified or licensed to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified or
licensed has had or could be reasonably expected to have a Material Adverse
Effect on the Company. The Company has delivered a true and correct copy of the
Articles of Incorporation and Bylaws (or comparable documents) of each of the
Subsidiaries, each as amended to date, to Parent.
(c) All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary is owned by the Company, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). There are no outstanding (i)
securities of the Company or any Subsidiary convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any
Subsidiary, or (ii) options or other rights to acquire from the Company or any
Subsidiary, or to cause the Company or any Subsidiary to issue, any capital
stock, voting securities or other ownership interests in, any Subsidiary (the
items in clauses (i) and (ii) being referred to collectively as the "SUBSIDIARY
SECURITIES"). There are no outstanding obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any outstanding Subsidiary
Securities.
2.3 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of (i)
40,000,000 shares of Company Common Stock, of which 915,463 shares are issued
and outstanding, and (ii) 10,000,000 shares of Preferred Stock, par value $.001
per share (the "PREFERRED STOCK"), of which (x) 4,959,172 shares have been
designated Series A Preferred Stock (the "SERIES A PREFERRED STOCK") and of
which 4,040,916 shares are issued and outstanding, (y) 1,042,000 shares have
been designated Series B Preferred Stock (the "SERIES B PREFERRED STOCK"), all
of which shares are issued and outstanding, and (z) 1,000,000 shares have been
designated Series C Preferred Stock (the "SERIES C PREFERRED STOCK") and of
which 784,570 shares are issued and outstanding. No shares of Company Common
Stock or Preferred Stock are held in the Company's treasury. The Company Common
Stock and Preferred Stock is held of record by the Persons, with the addresses
of record and in the amounts set forth on SCHEDULE 2.3(a) of the Company
Schedules. All of the outstanding shares of Preferred Stock (including any
shares of Preferred Stock that may be issued from and after the date of this
Agreement pursuant to the exercise of any Company Options) will have converted
into shares of Company Common Stock on a one share of Preferred Stock for one
share of Company Common Stock basis prior to the Effective Time (the
"CONVERSION"). As of immediately prior to the Effective Time, there will be no
issued and outstanding shares of Preferred Stock. The Conversion will be
properly authorized by all necessary action of the Company and the holders of
Preferred Stock, including any actions required pursuant to the Company's
Articles of Incorporation, Bylaws and/or agreements and instruments relating to
the Preferred Stock. SCHEDULE 2.3(a) of the Company Schedules also indicates for
each Company stockholder whether any shares of Company Common Stock or Preferred
Stock held by such stockholder are subject to a repurchase right in favor of the
Company, the lapsing schedule for any such restricted shares, including the
extent to which any such repurchase right has lapsed as of the date of this
Agreement and whether (and to what extent) the lapsing will be accelerated by
the transactions
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contemplated by this Agreement. All outstanding shares of Company Common Stock
and Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of the Company or any agreement to which the
Company is a party or by which it is bound. All preferential rights of the
Preferred Stock in connection with the sale of substantially all of the assets
of the Company or a merger involving the Company are set forth in the Articles
of Incorporation of the Company. All issued and outstanding shares of Company
Common Stock and Preferred Stock have been offered, sold and delivered by the
Company in compliance with applicable federal and state securities laws. There
are no shares of Company Capital Stock other than as set forth on SCHEDULE
2.3(a) of the Company Schedules.
(b) The Company has reserved 2,839,902 shares of Company Common
Stock and 225,135 shares of Series A Preferred Stock for issuance to employees
and consultants pursuant to the Option Plans, of which (i) 1,558,493 shares of
Company Common Stock and 225,135 shares of Series A Preferred Stock are subject
to outstanding, unexercised options, (ii) none of the shares are subject to
outstanding unexercised Purchase Rights (as defined below) and (iii) 1,281,509
shares of Company Common Stock and no shares of Series A Preferred Stock remain
available for future grant. SCHEDULE 2.3(b) of the Company Schedules sets forth
each outstanding Company Option, including the name of the holder of such
option, the domicile address of such holder, an indication of whether such
holder is an employee of the Company, the date of grant or issuance of such
option, the number of shares of Common Stock subject to such option, the
exercise price of such option and the vesting schedule for such option,
including the extent vested to the date of this Agreement and whether and to
what extent the exercisability of such option will be accelerated and become
exercisable as a result of the transactions contemplated by this Agreement.
Except for the Company Options, the Preferred Stock and the agreements set forth
on SCHEDULE 2.3(b) of the Company Schedules, there are no options, warrants,
calls, rights, exchangeable or convertible securities, commitments or agreements
of any character, written or oral, to which the Company is a party or by which
it is bound obligating the Company to (i) issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
Company Common Stock or Preferred Stock or (ii) grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such option,
warrant, call, right, exchangeable or convertible securities, commitment or
agreement (collectively, "PURCHASE RIGHTS"). All issued and outstanding Company
Options have been offered, issued and delivered in compliance with applicable
federal and state securities laws. The holders of Company Options have been or
will be given, or shall have properly waived, any required notice prior to the
Merger. As a result of the Merger, Parent will be the record and sole beneficial
owner of all Company Capital Stock and rights to acquire or receive Company
Capital Stock. Upon the assumption by Parent of the outstanding Company Options
as set forth in Section 1.6(e), all of such Company Options shall be exercisable
solely for shares of Parent Common Stock as set forth in Section 1.6(e). The
assumption of the Company Options and the Option Plans by Parent as set forth in
Section 1.6(e) does not conflict with or violate the provisions of any Option
Plan or any stock option or other agreement or instrument relating to or
governing any Company Option and no consent or approval of, or notice to, any
Person is required in connection with such assumption.
-11-
2.4 AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the Escrow Agreement and,
subject only to the requisite approval of the Merger and the terms of this
Agreement and the Escrow Agreement by the Company's stockholders, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The only vote required of the Company's
stockholders to duly approve the Merger and the terms of this Agreement is the
affirmative vote by written consent or at a meeting duly called and held for
such purpose of such number of shares as would constitute as of the record date
for such meeting (a) a majority of the outstanding shares of Company Common
Stock, (b) a majority of the outstanding shares of Company Common Stock and
Preferred Stock, voting together as a single class, (c) a majority of the
outstanding shares of Series A Preferred Stock, and (d) a majority of the
outstanding shares of Series B Preferred Stock and Series C Preferred Stock,
voting together as a single class (in the case of both clauses (b) and (d), with
each share of Preferred Stock being entitled to a number of votes equal to the
number of whole shares of Company Common Stock into which such share of
Preferred Stock could be converted on the record date for the vote, which is one
share of Company Common Stock for each share of Preferred Stock). No vote or
other action is required to be taken by or on behalf of the Subsidiaries to duly
approve the Merger or the terms of this Agreement. The execution and delivery of
this Agreement and the Escrow Agreement and, subject only to the approval of the
Merger and this Agreement by the Company's stockholders, the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company. The Company's Board of
Directors, at a meeting duly called and held, has unanimously (i) determined
that the Merger is fair to, and in the best interests of, the Company and its
stockholders, (ii) approved this Agreement, the Merger, the Escrow Agreement and
the other transactions contemplated by this Agreement and the Escrow Agreement
and (iii) resolved to recommend to the stockholders of the Company that they
adopt and approve this Agreement, the Merger, the Escrow Agreement and all the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Company and constitutes, and the Escrow Agreement,
when duly executed and delivered by the Company will constitute, the legal,
valid and binding obligation of the Company, enforceable in accordance with its
respective terms, except that the enforcement hereof or thereof may be limited
by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). The Company has complied with, or has
taken all actions necessary to render inapplicable, any state takeover statute
or similar statute or regulation applicable to the Merger, this Agreement, the
Escrow Agreement and the transactions contemplated hereby and thereby.
2.5 NO CONFLICT. Except as set forth on SCHEDULE 2.5 of the Company
Schedules, the execution and delivery of this Agreement and the Escrow Agreement
by the Company does not, and the compliance with and performance of this
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby by the Company will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (any such event, a
"CONFLICT") (i) any provision of the Articles of Incorporation or Bylaws of the
Company or any Subsidiary or (ii) any Contract, judgment, order,
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decree, statute, law, ordinance, rule or regulation applicable to the Company,
any Subsidiary or any of its respective properties or assets.
2.6 CONSENTS. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, or notice to, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("GOVERNMENTAL ENTITY") or any third party (so as not to trigger any Conflict),
is required by or with respect to the Company or any Subsidiary in connection
with the execution and delivery of this Agreement or the Escrow Agreement or the
consummation of the transactions contemplated hereby or thereby, except for (i)
the filing of the Agreement of Merger and required certificates with the
California Secretary of State, (ii) the filing of the Articles of Merger with
the Secretary of State of the State of North Carolina, (iii) the permits,
authorizations or other such actions required by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") and (iv) such other
consents, waivers, authorizations, filings, approvals and registrations which
are set forth on SCHEDULE 2.6 of the Company Schedules.
2.7 COMPANY FINANCIAL STATEMENTS. The Company has previously delivered
to Parent the audited consolidated balance sheets of the Company as of June 30,
1999 and June 30, 1998 and the related audited consolidated statements of
operations and changes in stockholders' equity and cash flows for each of the
years ended June 30, 1999 and June 30, 1998 (the "COMPANY AUDITED FINANCIAL
STATEMENTS"). The Company Audited Financial Statements present fairly, in all
material respects, the financial position of the Company and its Subsidiaries as
of the dates thereof and their results of operations and changes in
stockholders' equity and cash flows for the periods then ended in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods then ended. The Company has also previously
delivered to Parent the unaudited consolidated statement of operations of the
Company and its Subsidiaries for the three months ended September 30, 1999 and
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of September 30, 1999 (the "BALANCE SHEET DATE") (collectively, the "COMPANY
UNAUDITED FINANCIAL STATEMENTS"). The consolidated balance sheet included in the
Company Unaudited Financial Statements (including any related notes) (the
"COMPANY BALANCE SHEET") presents fairly, in all material respects, the
financial position of the Company and its Subsidiaries as of the Balance Sheet
Date and the consolidated statement of operations included in the Company
Unaudited Financial Statements (including any related notes) presents fairly the
results of operations of the Company and its Subsidiaries for the three months
ended September 30, 1999, in each case in accordance with GAAP except as
otherwise stated therein (or in any related notes) and except for the lack of
footnotes and subject to normal audit adjustments which are not material in
amount.
2.8 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 2.8 of
the Company Schedules, neither the Company nor any Subsidiary has any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with GAAP), which (i) has not been fully disclosed, reflected or reserved
against in the Company Balance Sheet or the Company Audited Financial Statements
or (ii) has not arisen in the ordinary course of the Company's business
consistent with past practices
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since September 30, 1999, in each case which has had or could be reasonably
expected to have a Material Adverse Effect on the Company.
2.9 NO CHANGES. Except as set forth in SCHEDULE 2.9 of the Company
Schedules, since the Balance Sheet Date through and including the date hereof
there has not been, occurred or arisen any:
(a) transaction or action or failure to act by the Company or any
Subsidiary except in the ordinary course of business as conducted on the Balance
Sheet Date and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws (or other comparable document) of the Company or any Subsidiary;
(c) capital expenditure or capital commitment by the Company or any
Subsidiary of $50,000 in any individual case or $100,000 in the aggregate (other
than commitments to pay expenses incurred in connection with this transaction);
(d) destruction of, significant damage to or loss of any material
assets, business or customer of the Company or any Subsidiary (whether or not
covered by insurance);
(e) work stoppage, labor strike or other labor trouble, or any
action, suit, claim, labor dispute or grievance relating to any labor, safety or
discrimination matter involving the Company or any Subsidiary, including,
without limitation, charges of wrongful discharge or other unlawful labor
practices or actions;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company or any
Subsidiary;
(g) revaluation by the Company or any Subsidiary of any of its
respective assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to any Company Capital Stock or Subsidiary Securities,
or any direct or indirect redemption, purchase or other acquisition by the
Company or any Subsidiary of any Company Capital Stock or Subsidiary Securities,
other than dividends by any wholly-owned Subsidiary to the Company;
(i) increase in the salary or other compensation payable or to
become payable by the Company or any Subsidiary to any of its respective
officers, directors, employees or advisors, including, but not limited to, the
modification of any existing compensation or equity arrangements with such
individuals (which modification may include the amendment of any vesting terms
related to Company Options or Subsidiary Securities held by such individuals)
other than salary increases in connection with annual salary reviews consistent
with past practices and in no event in excess of fifteen percent per employee
(except three exceptions previously disclosed to Parent), or the declaration,
payment or commitment or obligation of any
-14-
kind for the payment, by the Company or any Subsidiary, of a bonus or other
additional salary or compensation to any such Person other than the payment of
bonuses to existing employees in accordance with the Company's bonus plan as in
effect on the date hereof and previously disclosed to Parent;
(j) agreement, contract, covenant, instrument, lease, license or
commitment to which the Company or any Subsidiary is a party or by which it or
any of its assets is bound or any termination, extension, amendment or
modification of the terms of any agreement, contract, covenant, instrument,
lease, license or commitment to which the Company or any Subsidiary is a party
or by which it or any of its assets is bound except in the ordinary course of
business and consistent with past practices;
(k) sale, lease, license or other disposition of any of the assets
or properties of the Company or any Subsidiary, or creation of any lien or
security interest in such assets or properties, except in the ordinary course of
business and consistent with past practices;
(l) loan by the Company or any Subsidiary to any Person, incurring
by the Company or any Subsidiary of any indebtedness, guaranteeing by the
Company or any Subsidiary of any indebtedness, issuance or sale of any debt
securities of the Company or any Subsidiary or guaranteeing of any debt
securities of others except for advances to employees for travel and business
expenses or extensions of trade credit to customers in the ordinary course of
business on customary terms and consistent with past practices;
(m) waiver or release of any right or claim of the Company or any
Subsidiary, including any write-off or other compromise of any account
receivable of the Company or any Subsidiary except in the ordinary course of
business and consistent with past practices;
(n) commencement or notice or, to the Company's knowledge, threat
of commencement of any lawsuit or proceeding against or investigation of the
Company or any Subsidiary or its respective affairs;
(o) (i) sale by the Company or any Subsidiary of any "COMPANY
INTELLECTUAL PROPERTY" (as defined in Section 2.14 below) or the entering into
of any license agreement (other than customer agreements or end-user license
agreements entered into by the Company or any Subsidiary in the ordinary course
of business consistent with past practices), distribution agreement, reseller
agreement, security agreement, assignment or other conveyance or option for the
foregoing, with respect to the Company Intellectual Property with any Person or
with respect to the "INTELLECTUAL PROPERTY" (as defined in Section 2.14 below)
of any Person, (ii) the purchase or other acquisition of any Intellectual
Property (other than Commercial Software Rights) or the entering into of any
license agreement, distribution agreement, reseller agreement, security
agreement, assignment or other conveyance or option for the foregoing, with
respect to the Intellectual Property (other than Commercial Software Rights) of
any Person or (iii) the change in pricing or royalties set or charged by the
Company or any Subsidiary to its respective customers or licensees or in pricing
or royalties set or charged by Persons who have licensed Intellectual Property
to the Company or any Subsidiary;
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(p) except as set forth on SCHEDULE 2.3(b) of the Company
Schedules, issuance or sale by the Company or any Subsidiary of any Company
Capital Stock, Subsidiary Securities or Purchase Rights or any amendment of any
existing equity arrangement;
(q) event, occurrence, change, effect or condition of any character
that has had or could be reasonably expected to have a Material Adverse Effect
on the Company; or
(r) agreement by the Company or any Subsidiary or any officer or,
to the Company's knowledge, employee thereof to do any of the things described
in the preceding clauses (a) through (q) (other than negotiations with Parent
and its representatives regarding the transactions contemplated by this
Agreement).
2.10 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITIONS.
(i) For the purposes of this Agreement, "TAX" or,
collectively, "TAXES", means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other Person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(ii) For the purposes of this Agreement, "TAX RETURNS" means
all returns, declarations, reports, claims for refund, information statements
and other documents relating to Taxes, including all schedules and attachments
thereto, and including all amendments thereof, and the term "TAX RETURN" means
any one of the foregoing Tax Returns.
(iii) For the purposes of this Agreement, "TAX AUTHORITY"
means any governmental authority responsible for the imposition of any Tax.
(b) TAX RETURNS AND AUDITS. Except as set forth in SCHEDULE 2.10(b)
of the Company Schedules:
(i) The Company and the Subsidiaries have timely filed all
Tax Returns required to be filed. All Tax Returns filed by the Company and the
Subsidiaries are true, correct and complete in all material respects and have
been completed in accordance with applicable law.
(ii) Each of the Company and the Subsidiaries: (A) has paid
or accrued all Taxes it is required to pay or accrue (whether or not shown as
due on any Tax Return) and (B) has withheld with respect to its employees all
federal and state income Taxes, FICA, FUTA and other Taxes required to be
withheld.
-16-
(iii) Neither the Company nor any Subsidiary has been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company or any Subsidiary, nor has
the Company or any Subsidiary executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(iv) None of the Tax Returns filed by the Company or any
Subsidiary or Taxes payable by the Company or any Subsidiary have been the
subject of an audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any governmental authority, and no such audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently pending
or, to the knowledge of the Company, threatened.
(v) Neither the Company nor any Subsidiary has any
liability for unpaid federal, state, local and foreign Taxes which have not been
accrued or reserved against in the Company Balance Sheet, whether asserted or
unasserted, contingent or otherwise, and neither the Company nor any Subsidiary
has incurred any liability for Taxes since the Balance Sheet Date other than in
the ordinary course of business consistent with past practice.
(vi) There are (and as of immediately following the Closing
there will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort (collectively,
"LIENS") on the assets of the Company or any Subsidiary relating to or
attributable to Taxes, other than Liens for ad valorem taxes not yet due and
payable as of such time.
(vii) To the Company's knowledge, there is no basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or any
Subsidiary.
(viii) None of the assets of the Company or any Subsidiary are
treated as "tax-exempt use property" within the meaning of Section 168(h) of the
Code.
(ix) There is no contract, agreement, plan or arrangement to
which the Company or any Subsidiary is a party, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company or any Subsidiary that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to Section 280G
(without regard to the exceptions set forth in Sections 280G(b)(4) and
280G(b)(5) of the Code) or Section 404 of the Code.
(x) Neither the Company nor any Subsidiary has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company or any
Subsidiary.
(xi) Neither the Company nor any Subsidiary is a party to a
tax sharing or allocation agreement nor does the Company or any Subsidiary owe
any amount under any such agreement.
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(xii) Neither the Company nor any Subsidiary is, nor has been
at any time, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
(xiii) The Company's and each Subsidiary's tax basis in its
respective assets for purposes of determining its respective future
amortization, depreciation and other federal income Tax deductions is accurately
reflected on the tax books and records of the Company and the Subsidiaries.
(xiv) No adjustment relating to any Tax Return filed by the
Company or any Subsidiary has been proposed formally or informally by any tax
authority to the Company, any Subsidiary or any representative thereof which was
not resolved more than three years ago to the satisfaction of the relevant tax
authority.
(xv) Neither the Company nor any Subsidiary has agreed to
make any adjustment under Section 481(a) of the Code (or any corresponding
provision of state, local or foreign Tax law) by reason of a change in
accounting method or otherwise, and will not be required to make such an
adjustment as a result of the transactions contemplated by this Agreement other
than changes after the Effective Time to conform to Parent's accounting methods.
(xvi) No material claim has been made by a Tax Authority in a
jurisdiction where the Company and the Subsidiaries do not file Tax Returns that
the Company or any Subsidiary is or may be subject to Tax in that jurisdiction.
(xvii) Neither the Company nor any Subsidiary has, nor has
had, a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country.
(xviii) Neither the Company nor any Subsidiary has ever been a
member of a group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company), and neither the Company nor
any Subsidiary has any liability for the Taxes of any Person (other than the
Company or any Subsidiary) under Treasury Regulation Section 1.1502-6 (or any
corresponding provision of state, local or foreign Tax law), as a transferee or
successor, by contract, or otherwise. Neither the Company nor any Subsidiary has
any net operating losses or other tax attributes presently subject to limitation
under Sections 382, 383 or 384 of the Code, or the federal consolidated return
regulations (other than limitations imposed as a result of the transactions
contemplated pursuant to this Agreement).
2.11 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in
confidentiality agreements and non-disclosure agreements entered into in the
ordinary course of business, there is no agreement (noncompete or otherwise),
judgment, injunction, order or decree to which the Company or any Subsidiary is
a party or otherwise binding upon the Company or any Subsidiary which has had or
could be reasonably expected to have the effect of prohibiting or impairing any
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business practice of the Company or any Subsidiary, any acquisition of property
(tangible or intangible) by the Company or any Subsidiary or the conduct of
business by the Company or any Subsidiary. Without limiting the foregoing and
except as set forth on SCHEDULE 2.11 of the Company Schedules, neither the
Company nor any Subsidiary has entered into any agreement under which the
Company or any Subsidiary is restricted from selling, licensing or otherwise
distributing any of its respective products or services to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.12 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Neither the Company nor any Subsidiary owns any real property,
nor has ever owned any real property. SCHEDULE 2.12(a) of the Company Schedules
sets forth a list of all real property currently leased by the Company or any
Subsidiary, the name of the lessor and the date of the lease and each amendment
thereto and with respect to any current lease, the aggregate annual rent. All
such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default as defined in such leases (or
event which with notice or lapse of time, or both, would constitute a default in
any material respect). Neither the operations of the Company, nor the operations
of any Subsidiary, on such real property, nor to the knowledge of the Company,
such real property, including improvements thereon, violate any applicable
building code, zoning requirement, or classification, or pollution control
ordinance or statute relating to the particular property or such operations, and
such non-violation is not dependent, in any instance, on so-called
non-conforming use exceptions.
(b) The Company and each of the Subsidiaries has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its respective tangible properties and assets, real,
personal and mixed, used or held for use in its respective business, free and
clear of any Liens, except as reflected in the Company Audited Financial
Statements and such Liens, if any, which are not material in character, amount
or extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
(c) All facilities, machinery, equipment, fixtures, vehicles, and
other properties owned, leased or used by the Company or any Subsidiary are (i)
adequate for the conduct of the business of the Company and the Subsidiaries as
currently conducted and as proposed to be conducted and (ii) in good operating
condition, subject to normal wear and tear, and reasonably fit and usable for
the purposes for which they are being used, except where a failure to be in such
condition has not had and could not be reasonably expected to have a Material
Adverse Effect on the Company.
(d) Neither the Company nor any Subsidiary has sold or otherwise
released for distribution any of its respective customer files and other
customer information relating to the current and former customers of the Company
and the Subsidiaries (the "COMPANY CUSTOMER INFORMATION"). Except for
information as provided to sales representatives (which information is subject
to a customary non-disclosure agreement), no Person other than the Company and
the
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Subsidiaries possesses any claims or rights with respect to use of the Company
Customer Information.
2.13 GOVERNMENTAL AUTHORIZATION. SCHEDULE 2.13 of the Company Schedules
accurately lists each consent, license, permit, grant or other authorization
issued to the Company or any Subsidiary by a Governmental Entity (i) pursuant to
which the Company or any Subsidiary currently operates or holds any interest in
any of its respective properties or (ii) which is required for the operation of
its respective business or the holding of any such interest (herein collectively
called "COMPANY AUTHORIZATIONS"). The Company Authorizations are in full force
and effect and constitute all Company Authorizations required to permit the
Company and the Subsidiaries to operate or conduct their businesses or hold any
interest in their respective properties or assets except for Company
Authorizations the absence or invalidity of which has not had and could not be
reasonably expected to have a Material Adverse Effect on the Company.
2.14 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United States,
and foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof; (ii) all inventions (whether or not patentable), invention disclosures,
improvements, trade secrets, proprietary information, know how, computer
software programs (in both source code and object code form), technology,
technical data and customer lists, tangible or intangible proprietary
information, and all documentation relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks, trademark and
service xxxx registrations and applications therefor throughout the world; (vi)
all databases and data collections and all rights therein throughout the world;
(vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world; (viii) all Web addresses, sites and domain
names; and (ix) any similar or equivalent rights to any of the foregoing
anywhere in the world.
"COMMERCIAL SOFTWARE RIGHTS" shall mean packaged commercially
available software programs generally available to the public in any manner
which have been licensed to the Company or any Subsidiary pursuant to end-user
licenses and which are lawfully used in the business of the Company or any
Subsidiary but are in no way a component of or incorporated in any products of
the Company or any Subsidiary or any related Company Intellectual Property.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property (other than Commercial Software Rights) that is used in the business of
the Company or any Subsidiary as currently conducted and as proposed to be
conducted.
-20-
"REGISTERED INTELLECTUAL PROPERTY" shall mean all United States and
foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued, filed
with, or recorded by any state, government or other public legal authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the
Registered Intellectual Property owned by, or filed in the name of, the Company
or any Subsidiary.
(a) SCHEDULE 2.14(a) of the Company Schedules sets forth a complete
list of all Company Registered Intellectual Property and specifies the
jurisdictions in which such Company Registered Intellectual Property has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners, together with a list
of all software products currently marketed by the Company or any Subsidiary and
an indication as to which, if any, of such software products have been
registered for copyright protection with the United States Copyright Office and
any foreign offices and by whom such items have been registered. SCHEDULE
2.14(a) of the Company Schedules also sets forth a complete list of any requests
the Company or any Subsidiary has received to make any such registration,
including the identity of the requestor and the item requested to be so
registered and the jurisdiction for which such request has been made.
(b) SCHEDULE 2.14(b) of the Company Schedules sets forth a complete
list of all licenses, sublicenses and other agreements to which the Company or
any Subsidiary is a party and pursuant to which the Company, any Subsidiary or
any other Person is authorized to use any Company Intellectual Property, and
includes the date thereof and identity of all parties thereto.
(c) SCHEDULE 2.14(c) of the Company Schedules sets forth any
agreement pursuant to which a third party has licensed or transferred any
Intellectual Property to the Company or any Subsidiary (other than licenses of
Commercial Software Rights) and includes the date thereof and identity of all
parties thereto.
(d) The execution and delivery of this Agreement by the Company,
and the consummation of the transactions contemplated hereby, will not cause the
Company or any Subsidiary to be in violation or default in any material respect
under any license, sublicense or agreement listed on, or which should be listed
on, SCHEDULE 2.14(b) or SCHEDULE 2.14(c) of the Company Schedules, nor entitle
any other party to any such license, sublicense or agreement to terminate or
modify such license, sublicense or agreement.
(e) Except as set forth on SCHEDULE 2.14(e) of the Company
Schedules, neither the Company nor any Subsidiary has been sued or charged as a
defendant in any claim, suit, action, or proceeding which involves a claim of
infringement of any Intellectual Property of any third party and which has not
been finally terminated prior to the date hereof nor does the
-21-
Company have any knowledge of any such charge or claim or any infringement
liability with respect to, or infringement or violation by, the Company or any
Subsidiary of any Intellectual Property of another. No Company Intellectual
Property or product of the Company or any Subsidiary is subject to any
outstanding decree, order, judgment or stipulation restricting in any manner the
licensing of products by the Company or any Subsidiary.
(f) Each item of Company Registered Intellectual Property is valid
and subsisting. All necessary registration, maintenance and renewal fees
currently due in connection with such Company Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in
connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property.
(g) The Company is the sole and exclusive owner or licensee of,
with all right, title, and interest in and to each item of Company Intellectual
Property, free and clear of any Lien, and has sole and exclusive rights (and
neither the Company nor any Subsidiary is contractually obligated to pay any
compensation (other than licensing fees and royalties set forth in the
applicable license) to any third party in respect thereof) to the use thereof or
the material covered thereby in connection with the services or products in
respect of which the Company Intellectual Property is being used. Except as set
forth on SCHEDULE 2.14(g) of the Company Schedules, no Company Intellectual
Property is subject to any restrictions with respect to its use, modification or
distribution under the terms of the GNU General Public License or other similar
terms. Neither the Company nor any Subsidiary uses nor is licensed to use, and
none of its respective products include or incorporate, any software distributed
free of charge on a trial basis for which a paid license would be required and
has not been obtained for commercial distribution. None of the Company's or any
Subsidiary's products include or incorporate any software whose ownership has
been retained by a third party who controls its distribution.
(h) To the extent that any material Company Intellectual Property
has been developed or created by a third party for the Company or any
Subsidiary, the Company or such Subsidiary has a written agreement with such
third party with respect thereto, and the Company or such Subsidiary thereby
either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has
obtained a license (sufficient for the conduct of its business as currently
conducted and as proposed to be conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(i) Neither the Company nor any Subsidiary has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party.
(j) All contracts, licenses and agreements relating to the Company
Intellectual Property are in full force and effect. Each of the Company and the
Subsidiaries is in material compliance with, and has not breached any term of
such contracts, licenses and agreements and all other parties to such contracts,
licenses and agreements are in compliance with, and have not
-22-
breached any term of, such contracts, licenses and agreements. Following the
Closing Date, the Surviving Corporation will be permitted to exercise all of the
Company's and the Subsidiaries' rights under such contracts, licenses and
agreements to the same extent the Company and the Subsidiaries would have been
able to had the transactions contemplated by this Agreement not occurred and
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or any Subsidiary would
otherwise be required to pay.
(k) No claims with respect to Company Intellectual Property have
been asserted or, to the Company's knowledge, are threatened by any Person, nor
are there any valid grounds for any bona fide claims or infringement liability
(i) to the effect that the manufacture, sale, licensing or use of any of the
products of the Company or any Subsidiary infringes on or misappropriates any
Intellectual Property or constitutes unfair competition or trade practices under
the laws of any jurisdiction; (ii) against the use by the Company or any
Subsidiary of any Intellectual Property used in the business of the Company or
any Subsidiary as currently conducted; or (iii) challenging the ownership by the
Company or any Subsidiary, validity or effectiveness of any Company Intellectual
Property. To the Company's knowledge, there is no unauthorized use, infringement
or misappropriation of any Company Intellectual Property by any third party,
including any employee or former employee of the Company or any Subsidiary.
(l) Except as set forth on SCHEDULE 2.14(l) of the Company
Schedules, each of the Company and the Subsidiaries has taken reasonable steps
to protect the Company's and the Subsidiaries' respective rights in the
Company's and the Subsidiaries' respective confidential information and trade
secrets that it wishes to protect or any trade secrets or confidential
information of third parties provided to the Company or any Subsidiary, and,
without limiting the foregoing, the Company and each of the Subsidiaries has and
enforces a policy requiring each employee and contractor to execute a
proprietary information/nondisclosure agreement substantially in the form
provided to Parent and all employees and contractors of the Company and the
Subsidiaries have executed such an agreement.
(m) None of the Company's nor any Subsidiary's professional
services agreements with customers, agreements with merchants, agreements with
outside consultants for the performance of professional services on the
Company's, any Subsidiary's or customers' behalf, nor any agreement or license
with any end user or reseller of the Company's or any Subsidiary's products,
confers upon any party other than the Company or any Subsidiary any ownership
right with respect to any Intellectual Property developed in connection with
such agreement or license.
(n) Neither the Company nor any Subsidiary has breached or violated
the terms of any license, sublicense, or other agreement relating to any
Commercial Software Rights, and the Company and each of the Subsidiaries has a
valid right to use such Commercial Software Rights under such licenses and
agreements. Neither the Company nor any Subsidiary is nor will be as a result of
the execution and delivery of this Agreement or the performance of the Company's
obligations hereunder, in violation of any license, sublicense, or agreement
relating to Commercial Software Rights. No claims with respect to the Commercial
Software Rights
-23-
have been asserted or, to the knowledge of the Company, are threatened by any
Person against the Company or any Subsidiary, nor to the knowledge of the
Company are there any valid grounds for any bona fide claims (i) to the effect
that the use of any product as now used by the Company or any Subsidiary
infringes on any Intellectual Property, (ii) against the use by the Company or
any Subsidiary of any Company Intellectual Property or (iii) challenging the
validity or effectiveness of any of the rights of the Company or any Subsidiary
to use Commercial Software Rights. There is no unauthorized use, infringement,
or misappropriation of any of the Commercial Software Rights by the Company, any
Subsidiary or any employee or, to the Company's knowledge, former employee
thereof. No Commercial Software Right is subject to any outstanding order,
judgment, decree, stipulation, or agreement restricting in any manner the use
thereof by the Company or any Subsidiary.
2.15 YEAR 2000 COMPLIANCE.
(a) COMPANY PRODUCTS. Except to the extent provided in SCHEDULE
2.15 of the Company Schedules, each product manufactured, sold, licensed, leased
or delivered by the Company or any Subsidiary (the "COMPANY PRODUCTS") and, to
the Company's knowledge, each product used by the Company or any Subsidiary in
connection with operations of the Company's or any Subsidiary's business as
presently conducted (the "THIRD PARTY PRODUCTS"), is designed to be used without
defect prior to, during, and after the calendar year 2000 A.D. Except to the
extent provided in SCHEDULE 2.15 of the Company Schedules,the Company Products
and, to the Company's knowledge, the Third Party Products, will operate during
each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than a century. Without limiting the
generality of the foregoing, the Company further represents and warrants that
the Company Products and, to the Company's knowledge, the Third Party Products,
(i) will not abnormally end or provide invalid or incorrect results as a result
of date data, specifically including date data which represents or references
different centuries or more than one century; (ii) have been designed to ensure
year 2000 compatibility, including, but not limited to, date data century
recognition, calculations which accommodate same century and multi-century
formulas and date values, and date data interface values that reflect the
century; and (iii) include Year 2000 Capabilities. For purposes of this Section
2.15, "YEAR 2000 CAPABILITIES" means that (i) a product will manage, calculate,
sequence, compare and manipulate data involving dates, including single century
formulas and multi-century formulas and including leap years, and will not cause
an abnormally ending scenario within the application or generate incorrect
values or invalid results involving such dates; (ii) all date-related user
interface functionalities and data fields associated with a product include the
indication of century; and (iii) all date-related data interface functionalities
associated with a product include the indication of century.
(b) INTERNAL OPERATING SYSTEMS AND LICENSED THIRD PARTY SOFTWARE.
Each of the Company and the Subsidiaries has audited its respective internal
accounting and operating systems and licensed third party software and, to the
Company's knowledge, those systems and licensed third party software include
Year 2000 Capabilities.
-24-
2.16 PRODUCT WARRANTIES; DEFECTS; LIABILITIES. Each Company Product has
been in all material respects in conformity with all applicable contractual
commitments and all applicable express and implied warranties. Neither the
Company nor any Subsidiary has any liability or obligation (and to the Company's
knowledge, there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against the Company
or any Subsidiary giving rise to any liability or obligation) for replacement or
repair thereof or other damages in connection therewith except liabilities or
obligations incurred in the ordinary course of business consistent with past
practice. No Company Product is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale, license
or lease or beyond that implied or imposed by applicable law. SCHEDULE 2.16 of
the Company Schedules includes a copy of the standard terms and conditions of
sale, license, or lease for each of the Company Products and copies of the
Company's and the Subsidiaries' standard forms of merchant agreements, portal
agreements and professional services agreements.
2.17 CONTRACTS
(a) Except as set forth on SCHEDULE 2.17(a) of the Company
Schedules, neither the Company nor any Subsidiary has, is a party to or is bound
by:
(i) any collective bargaining agreements,
(ii) any employment or consulting agreement, contract or
commitment with any officer, director, employee or member of the Company's or
any Subsidiary's Board of Directors that is not immediately terminable at will
by the Company without payment or penalty,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement with an employee
or individual consultant or salesperson or consulting or sales agreement, under
which a firm or other organization provides services to the Company or any
Subsidiary,
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $25,000 per annum or which is not cancelable by the
Company or a Subsidiary without penalty within ninety (90) days,
(viii) any agreement of indemnification or guaranty other
than customer agreements entered into in the ordinary course of business,
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(ix) any agreement containing any covenant limiting the
freedom of the Company or any Subsidiary to engage in any line of business or
to compete with any Person,
(x) any agreement relating to capital expenditures and
involving future payments in excess of $50,000,
(xi) any agreement relating to the disposition or
acquisition of assets or any interest in any business enterprise outside the
ordinary course of the Company's or any Subsidiary's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit, including guaranties referred to in
clause (viii) hereof, other than extensions of trade credit on customary terms
in customer agreements entered into in the ordinary course of business,
(xiii) any purchase order or contract involving $25,000 or
more,
(xiv) any construction contracts,
(xv) any dealer, distribution, joint marketing (including
any pilot program), development, content provider, destination site or sales
representative agreement,
(xvi) any agreement pursuant to which the Company or any
Subsidiary has granted or may be obligated to grant in the future, to any party
a source-code license or option or other right to use or acquire source-code,
including any agreements which provide for source code escrow arrangements,
(xvii) any original equipment manufacturer, value added,
remarketer or other agreement for distribution of the Company's or any
Subsidiary's products or services, or the products or services of any other
Person,
(xviii) any agreement pursuant to which the Company or any
Subsidiary has advanced or loaned any amount to any stockholder of the Company
or any Subsidiary or any director, officer, employee, or consultant other than
business travel advances in the ordinary course of business consistent with past
practice,
(xix) any client service agreements or customer support
agreements, or
(xx) any other agreement that involves $25,000 or more and
is not cancelable by the Company or a Subsidiary without penalty within ninety
(90) days and any other agreement that is not cancelable by the Company or a
Subsidiary without penalty within one (1) year.
(b) Except for such alleged breaches, violations and defaults, and
events that would constitute a breach, violation or default with the lapse of
time, giving of notice, or both, as
-26-
are all set forth in SCHEDULE 2.17(b) of the Company Schedules, neither the
Company nor any Subsidiary has breached, violated or defaulted under in any
material respect, or received notice that it has breached, violated or defaulted
under in any material respect, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on SCHEDULE 2.17(a) of the
Company Schedules, SCHEDULE 2.14(b) of the Company Schedules or SCHEDULE 2.14(c)
of the Company Schedules (any such agreement, contract or commitment, a
"Contract"). Each Contract is in full force and effect and, except as otherwise
disclosed in SCHEDULE 2.17(b) of the Company Schedules, is not subject to any
default thereunder of which the Company has knowledge by any party obligated to
the Company or any Subsidiary pursuant thereto.
2.18 CHANGE OF CONTROL PAYMENTS. SCHEDULE 2.18 of the Company Schedules
sets forth each plan or agreement pursuant to which any amounts may become
payable (whether currently or in the future) to current or former officers,
directors or employees of or consultants to the Company or any Subsidiary as a
result of or in connection with the Merger.
2.19 INTERESTED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
2.19 of the Company Schedules, to the Company's knowledge, no officer, director
or Affiliate of the Company or any Subsidiary has or has had, directly or
indirectly, (i) an economic interest in any Person which furnished or sold, or
furnishes or sells, services or products that the Company or any Subsidiary
furnishes or sells, or proposes to furnish or sell, or (ii) an economic interest
in any Person that purchases from or sells or furnishes to, the Company or any
Subsidiary, any goods or services or (iii) a beneficial interest in any
Contract; PROVIDED, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed an
"economic interest in any entity" for purposes of this Section 2.19. There are
no receivables of the Company or any Subsidiary owing by any director, officer,
employee, or consultant to the Company or any Subsidiary (or any ancestor,
sibling, descendant, or spouse of any such Persons, or any Person in which any
of such Persons has an economic interest), other than advances in the ordinary
and usual course of business for reimbursable business expenses (as determined
in accordance with the Company's or any Subsidiary's established employee
reimbursement policies and consistent with past practice). None of the
stockholders of the Company or any Subsidiary has agreed to, or assumed, any
obligation or duty to guaranty or otherwise assume or incur any obligation or
liability of the Company or any Subsidiary.
2.20 COMPLIANCE WITH LAWS. Each of the Company and the Subsidiaries has
complied in all material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any foreign, federal,
state or local statute, ordinance, law, rule or regulation or any judgment,
order or injunction.
2.21 LITIGATION. Except as set forth on SCHEDULE 2.21 of the Company
Schedules, there is no action, suit, claim or proceeding of any nature pending
or to the Company's knowledge threatened against the Company or any Subsidiary,
its respective properties or any of its respective officers, directors or
employees, nor, to the knowledge of the Company, is there any reasonable basis
therefor. There is no investigation pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary, its respective properties or
any of its
-27-
respective officers, directors or employees by or before any Governmental
Entity. To the Company's knowledge, no Governmental Entity has at any time
challenged or questioned the legal right of the Company or any Subsidiary to
conduct its respective operations as presently or previously conducted.
2.22 INSURANCE. SCHEDULE 2.22 of the Company Schedules sets forth a
complete list of all insurance policies and fidelity bonds covering the
respective assets, business, equipment, properties, operations, employees,
officers and directors of the Company and the Subsidiaries. There is no claim by
the Company, any Subsidiary or any Company Employee Plan pending under any of
such policies or bonds as to which coverage has been denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company and each of the
Subsidiaries is otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.23 BOOKS AND RECORDS.
(a) The books, records and accounts of the Company and the
Subsidiaries (i) are accurate and complete in all material respects and have
been maintained in accordance with good business practices on a basis consistent
with prior years, (ii) are stated in reasonable detail and accurately and fairly
reflect the transactions and dispositions of the respective assets of the
Company and the Subsidiaries and (iii) accurately and fairly reflect the basis
for the Company Unaudited Financial Statements.
(b) The Company and each of the Subsidiaries has implemented and
maintained a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary (A) to permit preparation of financial statements in conformity
with GAAP consistently applied and (B) to maintain accountability for assets;
and (iii) the amount recorded for assets on the respective books and records of
the Company and the Subsidiaries is compared with the existing assets at
reasonable intervals in connection with the preparation of annual audits of the
Company's consolidated financial statements and appropriate action is taken with
respect to any differences.
(c) The respective minute books of the Company and the Subsidiaries
have been made available to counsel for Parent and are the only minute books of
the Company and the Subsidiaries and contain an accurate summary of all meetings
of directors (or committees thereof) and stockholders or actions by written
consent since the respective times of incorporation of the Company and the
Subsidiaries.
2.24 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Neither the Company nor any Subsidiary has:
(i) operated any underground storage tanks at any property that the Company or
any
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Subsidiary has at any time owned, operated, occupied or leased; or (ii)
released any material amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the federal
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, (a "HAZARDOUS MATERIAL"), but excluding
office and janitorial supplies properly and safely maintained. No Hazardous
Materials are present, as a result of the actions of the Company or any
Subsidiary, or, to the Company's knowledge, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company or
any Subsidiary has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Neither the Company nor any
Subsidiary has transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any law,
nor has the Company or any Subsidiary disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "HAZARDOUS MATERIALS ACTIVITIES") in
violation of any law, rule, regulation, treaty or statute promulgated by any
Governmental Entity to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) PERMITS. The Company and each of the Subsidiaries currently
holds all environmental approvals, permits, licenses, clearances and consents
(the "ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and the
Subsidiaries Hazardous Material Activities and other businesses of the Company
and the Subsidiaries as such activities and businesses are currently being
conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding,
investigation, revocation proceeding, amendment procedure, writ, injunction or
claim is pending or, to the Company's knowledge, threatened, concerning any
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
the Company or any Subsidiary. The Company is not aware of any fact or
circumstance which could reasonably be expected to involve the Company or any
Subsidiary in any environmental litigation or impose upon the Company or any
Subsidiary any environmental liability.
2.25 BROKERS' AND FINDERS' FEES. Except as set forth on SCHEDULE 2.25
of the Company Schedules, neither the Company nor any Subsidiary has incurred,
nor will incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby. Attached to SCHEDULE 2.25 of
the Company Schedules are copies of any written agreements and the summary of
terms for any oral agreements with respect to such fees.
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2.26 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.26(a)(i) below (such definition shall only
apply to this Section 2.26), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other Person under common
control with the Company within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate or for the benefit of any
"EMPLOYEE" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability contingent or otherwise;
(iv) "DOL" shall mean the United States Department of Labor.
(v) "EMPLOYEE" shall mean any current, former, or retired
employee, officer, or director of the Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall refer to each management,
employment, severance, consulting, relocation, repatriation, expatriation, or
similar agreement or contract between the Company or any Affiliate and any
Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
(xi) "PENSION PLAN" shall refer to each Company Employee
Plan which is an "employee pension benefit plan", within the meaning of Section
3(2) of ERISA.
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(b) SCHEDULE. SCHEDULE 2.26(b) of the Company Schedules contains an
accurate and complete list of each Company Employee Plan and each Employee
Agreement. Neither the Company nor any Affiliate has any stated plan or
commitment to establish or enter into any new Company Employee Plan or Employee
Agreement, to modify any Company Employee Plan or Employee Agreement (except to
the extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement),
nor any intention or commitment to do any of the foregoing.
(c) DOCUMENTS. The Company has provided to Parent (i) correct and
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with any applicable summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination, opinion, notification and advisory letters and rulings
relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS, DOL or any other governmental agency with
respect to any Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (vii) all material written agreements and contracts relating to each
Company Employee Plan or its related trust; (viii) all communications material
to any Company Employee Plan and any proposed Company Employee Plans or any
Employee's participation thereunder, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to the Company or the Company Employee Plan; (ix) the most
recent COBRA forms and related notices; (x) all policies pertaining to fiduciary
liability insurance covering the fiduciaries of for each Company Employee Plan;
(xi) 401(k) discrimination tests, if any, for each Company Employee Plan for the
most recent plan year; and (xii) all registration statements, annual reports
(Form 11-K and all attachments thereto) and prospectuses, if any, prepared in
connection with each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on SCHEDULE
2.26(d) of the Company Schedules, (i) the Company and each Affiliate has
performed in all material respects all obligations required to be performed by
it under each Company Employee Plan and each Company Employee Plan has been
established and maintained in accordance with its terms and in compliance with
all applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Company Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable determination
or opinion, letter from the IRS with respect to each such Company Employee Plan
as to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or
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has a period of time remaining under applicable Treasury regulations or IRS
pronouncements in which to apply for and obtain such a letter; (iii) no
non-exempt "prohibited transaction", within the meaning of Section 4975 of the
Code or Section 406 of ERISA, has occurred with respect to any Company Employee
Plan; (iv) there are no actions, suits or claims pending, or, to the knowledge
of the Company, threatened or anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any Company
Employee Plan; and (v) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to the Company, Parent or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(vi) there are no audits, inquiries or proceedings pending or, to the knowledge
of the Company, threatened by the IRS or DOL with respect to any Company
Employee Plan; and (vii) neither the Company nor any Affiliate is subject to any
penalty or tax with respect to any Company Employee Plan under Section 501(i) of
ERISA or Section 4975 through 4980D of the Code.
(e) PENSION PLANS. The Company and each Affiliate does not now, nor
has it ever, maintained, established, sponsored, participated in, or contributed
to, any Pension Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has the Company or any
Affiliate contributed to or been requested to contribute to any Multiemployer
Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in SCHEDULE
2.26(g) of the Company Schedules, no Company Employee Plan provides, or has any
liability to provide, life insurance, medical or other employee benefits to any
Employee upon his or her retirement or termination of employment for any reason,
except as may be required by statute, and neither the Company nor any Affiliate
has ever represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment, except to
the extent required by statute.
(h) COBRA. Neither the Company nor any Affiliate has, prior to the
Closing Date, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of the California
Family Rights Act applicable to its Employees.
(i) EFFECT OF TRANSACTION. Except as provided in Section 1.6 of
this Agreement or as set forth on SCHEDULE 2.26(i) of the Company Schedules, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
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(j) EMPLOYMENT MATTERS. SCHEDULE 2.26(j) of the Company Schedules
lists all current officers, directors and employees of the Company and each
Affiliate. The Company and each Affiliate (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees
(including any immigration laws with respect to the same); (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees; (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). Except as set forth on SCHEDULE
2.26(j) of the Company Schedules, there are no pending, reasonably anticipated
or, to the Company's knowledge, threatened claims or actions against the Company
or any Affiliate under any workers compensation policy or long-term disability
policy. Each Person who is acting or has acted as a consultant or service
provider to the Company or any Affiliate is acting or acted as an "independent
contractor" and could not, based on the facts and circumstances of his
consultancy, reasonably be deemed to be or have been "employed" with the Company
or any Affiliate. SCHEDULE 2.26(j) of the Company Schedules also sets forth all
outstanding offers of employment, whether written or oral, made to any employee
or prospective employee, which offer has not been rejected by the offeree.
(k) LABOR. No work stoppage or labor strike against the Company or
any Affiliate is pending or, to the Company's knowledge, threatened. Neither the
Company nor any Affiliate is involved in or, to the Company's knowledge,
threatened with, any labor dispute, grievance, or litigation relating to labor,
safety or discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, could, individually or in the aggregate, result
in any liability to the Company or any Affiliate. Neither the Company nor any
Affiliate has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act which could, individually or in the aggregate,
directly or indirectly result in any liability to the Company or any Affiliate.
To the Company's knowledge, there are no activities or proceedings of any labor
union to organize any Employees. Neither the Company nor any Affiliate is
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by the Company or any
Affiliate.
(l) NO INTERFERENCE OR CONFLICT. To the Company's knowledge, no
officer, employee or consultant of the Company or any Affiliate is obligated
under any contract or agreement or subject to any judgment, decree or order of
any court or administrative agency that would interfere with such Person's
efforts to promote the interests of the Company or any Affiliate or that would
interfere with the Company's or any Affiliate's business. To the Company's
knowledge, none of the execution, delivery or performance of this Agreement by
the Company, nor the carrying on of the Company's or any Affiliate's respective
business as presently conducted nor any activity of such officers, directors,
employees or consultants in
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connection with the carrying on of the Company's or any Affiliate's respective
business as presently conducted, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract
or agreement under which any of such officers, directors, employees or
consultants is now bound.
2.27 BANK ACCOUNTS. SCHEDULE 2.27 of the Company Schedules constitutes
a full and complete list of all the bank accounts and safe deposit boxes of the
Company and each Subsidiary, the number of each such account or box, and the
names of the Persons authorized to draw on such accounts or to access such
boxes.
2.28 AFFILIATE AGREEMENTS. SCHEDULE 2.28 of the Company Schedules sets
forth those Persons who are "affiliates" of the Company within the meaning of
Rule 145 under the Securities Act and Accounting Series Releases 130 and 135, as
amended, of the SEC (each such Person an "AFFILIATE"). The Company has delivered
to Parent, concurrently with the execution of this Agreement, from each of its
Affiliates, an executed Affiliate Agreement in the form attached hereto as
EXHIBIT B.
2.29 POOLING OF INTERESTS. Neither the Company nor any of its
Affiliates or Subsidiaries has taken or agreed to take any action which could
materially affect the ability of Parent to account for the business combination
to be effected by the Merger as a "pooling of interests."
2.30 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company in this Agreement, nor any statement made in any
Schedule or certificate furnished by the Company pursuant to this Agreement,
when taken together, contains any untrue statement of a material fact, or omits
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub jointly and severally represents and warrants to
the Company as follows:
3.1 ORGANIZATION OF PARENT AND MERGER SUB. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina. Each of Parent and
Merger Sub has the corporate power to own, lease and operate its properties and
to carry on its business as now being conducted and is duly qualified or
licensed to do business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified has had or could be
reasonably expected to have a Material Adverse Effect on Parent.
3.2 AUTHORITY. Parent and Merger Sub have all requisite corporate power
and authority to execute and deliver this Agreement and the Escrow Agreement, to
perform their
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obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub. Each of this Agreement
and the Escrow Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes the legal, valid and binding obligation of Parent and
Merger Sub, enforceable against each of them in accordance with its respective
terms, except as the enforcement hereof or thereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). The execution and delivery of this Agreement
and the Escrow Agreement by Parent and Merger Sub does not, and the compliance
with and performance of this Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby by Parent and
Merger Sub will not, conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a benefit under (i) any provision of the Certificate of Incorporation or
Bylaws of Parent or the Articles of Incorporation or Bylaws of Merger Sub or
(ii) any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, the breach, violation,
default, termination or forfeiture of which could be reasonably expected to have
a Material Adverse Effect on Parent. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, or notice to, any
Governmental Entity is required by or with respect to Parent or Merger Sub in
connection with the execution and delivery of this Agreement or the Escrow
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub
of the transactions contemplated hereby or thereby except for (i) the filing of
the Agreement of Merger and required certificates with the Secretary of State of
the State of California, (ii) the filing of the Articles of Merger with the
Secretary of State of the State of North Carolina, (iii) the permits,
authorizations or other such actions required by the HSR Act, (iv) filings,
consents and approvals of or with the Nasdaq National Market ("NASDAQ"), or (v)
such consents, approvals, order, authorizations, registrations, declarations and
filings as may be required under applicable state and federal securities laws.
3.3 PARENT COMMON STOCK. The shares of Parent Common Stock to be issued
pursuant to the Merger, when issued and delivered in accordance with this
Agreement, will be duly authorized, validly issued, fully paid, and
non-assessable.
3.4 SEC FILINGS; PARENT FINANCIAL STATEMENTS.
(a) Since August 16, 1999, Parent has filed all forms, reports, and
documents required to be filed by Parent with the SEC pursuant to the Exchange
Act and has made available to the Company such forms, reports, and documents in
the form filed with the SEC. All such required forms, reports and documents
(including those that Parent may file subsequent to the date hereof until the
Effective Time) are referred to herein as the "PARENT SEC REPORTS." As of their
respective filing dates, the Parent SEC Reports (i) complied or will comply in
all material
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respects with the requirements of the Exchange Act and the rules and regulations
of the SEC thereunder applicable to such Parent SEC Reports and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) or will not at the time
they are filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements of Parent
(including, in each case, the notes thereto) included in the final prospectus
relating to the initial public offering of Parent Common Stock and in the Parent
SEC Reports, including each Parent SEC Report filed after the date hereof until
the Effective Time (the "PARENT FINANCIAL STATEMENTS"), (i) complied as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto; (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as may be permitted
by the SEC on Form 10-Q under the Exchange Act); and (iii) fairly presented, in
all material respects, the consolidated financial position of Parent and its
subsidiaries as at the respective dates thereof and the consolidated results of
Parent's operations and cash flows for the periods indicated (subject, in the
case of unaudited financial statements, to normal audit adjustments).
3.5 NO MATERIAL ADVERSE CHANGE. Except as set forth in SCHEDULE 3.5 of
the written disclosure schedules delivered by Parent to the Company concurrently
with the execution of this Agreement (the "PARENT SCHEDULES"), during the period
commencing on September 1, 1999 through and including the date of this
Agreement, Parent has conducted its business in the ordinary course of business
consistent with past practices and no events, occurrences, changes or effects
have occurred which, individually or in the aggregate, have had or could be
reasonably expected to have a Material Adverse Effect on Parent.
3.6 PARENT CAPITAL STRUCTURE. The authorized capital stock of Parent
consists of 5,000,000 shares of preferred stock, par value $.0001 per share,
none of which shares are issued and outstanding, and 225,000,000 shares of
Parent Common Stock, of which, as of October 29, 1999, (a) 68,794,604 shares
were issued and outstanding and (b) 13,086,088 shares were reserved for issuance
pursuant to Parent's stock option and stock purchase plans. Except as set forth
in SCHEDULE 3.6 of the Parent Schedules, there are no options, warrants, calls,
rights, exchangeable or convertible securities, commitments or agreements of any
character, written or oral, to which Parent is a party or by which it is bound
obligating Parent to issue shares of its capital stock or any other securities
convertible into or evidencing the right to subscribe to shares of its capital
stock.
3.7 AFFILIATE AGREEMENTS. SCHEDULE 3.7 of the Parent Schedules sets
forth those Persons who are Affiliates of Parent (each such Person a "PARENT
AFFILIATE"). Parent has delivered to the Company, concurrently with the
execution of this Agreement, from each Parent Affiliate, an executed Affiliate
Agreement in the form attached hereto as EXHIBIT E.
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3.8 POOLING OF INTERESTS. Neither Parent nor any Parent Affiliate has
taken or agreed to take any action which could materially affect the ability of
Parent to account for the business combination to be effected by the Merger as a
"pooling of interests."
3.9 MERGER SUB. Merger Sub was formed solely by Parent for the purpose
of engaging in the transactions contemplated hereby and has not (i) engaged in
any business activities, (ii) conducted any operations other than in connection
with the transactions contemplated hereby or (iii) incurred any liabilities
other than in connection with the transactions contemplated hereby.
ARTICLE IV
SECURITIES ACT COMPLIANCE; REGISTRATION
4.1 SECURITIES ACT EXEMPTION. The Parent Common Stock to be issued
pursuant to this Agreement will not be registered under the Securities Act in
reliance on the exemption from the registration requirements of Section 5 of the
Securities Act set forth in Section 3(a)(10) thereof, assuming approval of the
terms and conditions of the Merger pursuant to the Fairness Hearing and the
issuance of the Order (as described in Section 4.3); otherwise the provisions of
Section 4.4 shall apply.
4.2 RESTRICTIONS REGARDING SECURITIES LAW MATTERS. Each stockholder of
the Company, by virtue of the Merger and the conversion into Parent Common Stock
of the Company Common Stock held by such stockholder, shall be bound by the
following provisions:
(a) Such stockholder will not offer, sell, or otherwise dispose of
any shares of Parent Common Stock except in compliance with the Securities Act
and the rules and regulations thereunder.
(b) Such stockholder will not sell, transfer or otherwise dispose
of any shares of Parent Common Stock unless (i) such sale, transfer or other
disposition is within the limitations of and in compliance with Rule 144
promulgated by the SEC under the Securities Act and the stockholder furnishes
Parent with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel, reasonably satisfactory to Parent and its counsel, some other
exemption from registration under the Securities Act is available with respect
to any such proposed sale, transfer, or other disposition of Parent Common Stock
or (iii) the offer and sale of Parent Common Stock is registered under the
Securities Act.
4.3 FAIRNESS HEARING. Promptly after the execution of this Agreement,
Parent shall prepare and cause to be filed with the North Carolina Secretary of
State or her delegate (the "ADMINISTRATOR") an application under Section 78A-30
of the General Statutes of North Carolina, and shall request a hearing on the
fairness of the terms and conditions of the Merger and the issuance of an order
(the "ORDER") stating the Administrator's determination that the Merger is fair
to the stockholders of the Company (the "FAIRNESS HEARING"). The parties to this
Agreement shall use their reasonable best efforts to cause the Administrator to
issue an Order approving the terms and conditions of the Merger at such a
hearing; PROVIDED, HOWEVER, that Parent shall not be
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required to modify any of the terms of this Agreement or the Merger in order to
cause the Administrator to approve the fairness of such terms and conditions.
4.4 REGISTRATION STATEMENT.
(a) In the event that either (i) the Fairness Hearing is not
available to Parent and the Company, (ii) the Fairness Hearing is available but
the Administrator does not issue the Order or (iii) the exemption from
registration under Section 3(a)(10) of the Securities Act is otherwise not
available in connection with the Merger, then Parent shall, promptly upon notice
of the occurrence of the event specified in clause (i) or (ii) above, prepare
and file a Registration Statement on Form S-4 under the Securities Act for the
purpose of registering under the Securities Act the offering and issuance of
shares of Parent Common Stock pursuant to Section 1.6 hereof (the "REGISTRATION
STATEMENT"). In connection with the preparation of the Registration Statement,
Parent and Merger Sub, on the one hand, and the Company, on the other hand,
shall:
(i) provide promptly to the other such information
concerning its business, financial condition and affairs as may be required or
appropriate for inclusion in the Registration Statement;
(ii) cause its counsel and accountants to cooperate with the
other's counsel and accountants in the preparation of the Registration
Statement;
(iii) promptly advise the other if at any time prior to the
Effective Time it should obtain any knowledge of any fact that might make it
necessary or appropriate to amend or supplement the Registration Statement; and
(iv) agree to customary indemnification and other provisions
in connection with the preparation and filing of the Registration Statement.
(b) Parent shall make all filings and take all actions that may be
necessary, proper or advisable under federal and state securities laws, rules
and regulations in connection with the offering and issuance of the shares of
Parent Common Stock to be issued in the Merger; PROVIDED, HOWEVER, that Parent
shall not be required in connection with this Section 4.4 to qualify as a
foreign corporation or consent to service of process in any jurisdiction.
(c) In addition, Parent shall:
(i) use its reasonable best efforts to have the
Registration Statement declared effective by the SEC under the Securities Act as
soon after filing as may be practicable; and
(ii) advise the Company, promptly after it receives notice
thereof, of: (A) any requests by the SEC for additional information or amendment
of the Registration Statement or comments thereon or responses thereto; (B) the
time when the Registration Statement has become effective or any supplement or
amendment thereto has been filed; and (C)
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the issuance of any stop order of the suspension of qualification of the shares
of Parent Common Stock issuable in connection with the Merger for offering or
sale in any jurisdiction.
(d) The information supplied by the Company for inclusion in the
Registration Statement shall not, at (i) the time the Registration Statement is
filed, amended, supplemented or declared effective and (ii) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(e) The information supplied by the Parent for inclusion in the
Registration Statement shall not, at (i) the time the Registration Statement is
filed, amended, supplemented or declared effective and (ii) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to, and shall cause each of the
Subsidiaries to, carry on its business in the usual, regular and ordinary course
of business in substantially the same manner as heretofore conducted, to pay its
debts and Taxes when due, to pay or perform other obligations when due, and, to
the extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
all with the goal of preserving unimpaired its goodwill and ongoing businesses
at the Effective Time. The Company shall promptly notify Parent of any
materially negative event involving or adversely affecting the Company or its
business or any Subsidiary or its business. By way of amplification and not
limitation, except as expressly contemplated by this Agreement, the Company
shall not, and shall not permit any Subsidiary to, without the prior written
consent of Parent:
(a) Waive any stock repurchase rights, accelerate, amend, or change
the period of exercisability of any outstanding Company Options, Company Capital
Stock or Subsidiary Securities subject to vesting (except pursuant to the terms
of employment agreements in existence on October 21, 1999 and disclosed in the
Company Schedules), or reprice Company Options or Subsidiary Securities or
authorize cash payments in exchange for any such outstanding options;
(b) Make any payments or enter into any commitment or transaction
outside of the ordinary course of business in excess of $15,000;
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(c) Modify, amend or terminate any material contract or agreement
to which the Company or any Subsidiary is a party or waive, release or assign
any material rights or claims thereunder;
(d) Transfer to any person or entity any rights to the Company
Intellectual Property (other than pursuant to end-user licenses granted to
customers of the Company or any Subsidiary in the ordinary course of business);
(e) Enter into (except in the ordinary course of business and
consistent with past practices) or amend any agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of the Company or any Subsidiary;
(f) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts;
(g) Commence any litigation except to enforce its rights hereunder
or under any agreements related hereto;
(h) Declare, set aside or pay any dividends on or make any other
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 any Company Capital Stock;
(i) Purchase, redeem or otherwise acquire, directly or indirectly,
any Company Capital Stock or Company Options, except repurchases of unvested
shares of Company Capital Stock at cost in connection with the termination of
the employment relationship with any employee or consultant pursuant to stock
option or purchase agreements in effect on the date hereof;
(j) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any Company Capital Stock, Purchase Rights or Subsidiary Securities (except for
the issuance of any Company Common Stock upon exercise or conversion of
presently outstanding Company Options or Preferred Stock);
(k) Cause or permit any amendments to its Articles of Incorporation
or Bylaws or any equivalent documents of any Subsidiary;
(l) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any Person or other business organization or division thereof, or
otherwise acquire or agree to acquire outside of the ordinary course of business
any assets in any amount, or in the ordinary course of business in an amount in
excess of $25,000 in the case of a single transaction or in excess of $150,000
in the aggregate;
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(m) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(n) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or any
Subsidiary or guarantee any debt securities of others;
(o) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other Employee except payments made pursuant to written
agreements outstanding on the date hereof and as disclosed in the Company
Schedules, or adopt any new severance plan;
(p) Adopt or amend any Company Employee Plan, or enter into any
Employee Agreement, extend employment offers, pay or agree to pay any special
bonus or special remuneration to any director or Employee, or increase the
salaries or wage rates of its Employees; except that from and after the date
that the Company and Parent agree on a mutually acceptable hiring plan (which
shall be agreed within fourteen days of the date hereof) the Company may extend
employment offers consistent with the hiring plan, may extend employment offers
outside of the hiring plan only with Parent's written consent, which consent
shall not be unreasonably withheld and may grant salary increases in connection
with annual salary reviews consistent with past practices and in no event in
excess of ten percent per employee, and the Company shall notify Parent of all
such actions;
(q) Effect or agree to effect, including by way of involuntary
termination, any change in the Company's or any Subsidiary's directors, officers
or key Employees;
(r) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(s) Pay, discharge or satisfy, in an amount in excess of $10,000
(in any one case) or $25,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Company Balance
Sheet (or the notes thereto) or that arose in the ordinary course of business
subsequent to the Balance Sheet Date or expenses consistent with the provisions
of this Agreement incurred in connection with the transaction contemplated
hereby;
(t) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle 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;
(u) Enter into any strategic alliance, joint development or joint
marketing agreement;
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(v) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement;
(w) Take or agree to take any action which would preclude the
ability of Parent to account for the business combination to be effected by the
Merger as a "pooling of interests;" or
(x) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (w) above, or any other action that
would prevent the Company or any Subsidiary from performing or cause the Company
or any Subsidiary not to perform its covenants and obligations hereunder.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PREPARATION OF INFORMATION STATEMENT.
(a) As soon as practicable after the execution of this Agreement,
the Company shall prepare, with the cooperation of Parent, an Information
Statement (the "INFORMATION STATEMENT") for use in connection with the Company
Stockholders Meeting (as defined in Section 6.2) or the solicitation of written
consent of the stockholders in lieu of a meeting pursuant to which the
stockholders of the Company will be asked to approve the terms of this
Agreement, the Escrow Agreement, the Merger and the transactions contemplated
hereby and thereby. Parent and the Company shall each use its reasonable best
efforts to cause the Information Statement to comply in all material respects
with applicable federal and state securities laws requirements. Each of Parent
and the Company agrees to provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Information Statement, or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with the
other's counsel and auditors in the preparation of the Information Statement.
The Information Statement shall not, on the date the Information Statement (or
any amendment thereof or supplement thereto) is first mailed to the Company's
stockholders, at the time of the Company's Stockholders Meeting or action by
written consent and at the Effective Time, contain any statement which, at such
time and in light of the circumstances under which it shall be made, is false or
misleading in any material respect or omits to state any material fact necessary
in order to make the statements therein not false or misleading. The Company
will promptly advise Parent and Parent will promptly advise the Company, in
writing, if at any time prior to the Effective Time either the Company or Parent
shall obtain knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Information Statement. Notwithstanding the foregoing,
(i) Parent and Merger Sub make no representation or warranty with respect to any
information regarding the Company and (ii) the Company makes no representation
or warranty with respect to any information regarding Parent or Merger Sub.
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(b) The Information Statement shall contain a statement that the
Board of Directors of the Company has unanimously approved the terms of this
Agreement, the Escrow Agreement, the Merger and the other transactions
contemplated hereby and thereby and the conclusion of the Board of Directors
that the Merger is fair to, and in the best interests of, the Company and its
stockholders. The Information Statement shall contain the unanimous
recommendation of the Board of Directors of the Company that the Company
stockholders approve the terms of this Agreement, the Escrow Agreement, the
Merger and the other transactions contemplated hereby and thereby. Anything to
the contrary contained herein notwithstanding, the Company shall not include in
the Information Statement any information with respect to Parent or its
affiliates or associates, the form and content of which information shall not
have been approved by Parent prior to such inclusion.
6.2 STOCKHOLDER APPROVAL. The Company shall take all action necessary
(i) to obtain the written consent of the holders of Company Capital Stock or to
convene a meeting of the holders of Company Capital Stock (the "COMPANY
STOCKHOLDERS MEETING") as promptly as practicable following receipt of the Order
in connection with the Fairness Hearing in order to obtain the approval by the
Company's stockholders of the Merger, this Agreement, the Escrow Agreement, and
the transactions contemplated hereby and thereby and (ii) to solicit the
approval of holders of Company Capital Stock of the Merger, this Agreement, the
Escrow Agreement and the transactions contemplated hereby and thereby. The
Company shall ensure that stockholder approval is solicited in compliance with
the procedural requirements of California Law, the Articles of Incorporation and
Bylaws of the Company. The Company agrees to use its best efforts and to take
all action necessary or advisable to secure the necessary votes required by
California Law, the Company's Articles of Incorporation and Bylaws to effect the
Merger. Parent will make a representative available to stockholders to answer
any questions Company stockholders may have regarding the Parent's business,
management and financial affairs.
6.3 ACCESS TO INFORMATION. The Company shall afford Parent and its
accountants, legal counsel, and other representatives reasonable access during
normal business hours during the period prior to the Effective Time to (a) the
properties, books, contracts, commitments and records of the Company and the
Subsidiaries and (b) such other information concerning the business, properties,
and personnel of the Company and the Subsidiaries as Parent may reasonably
request. The Company agrees to provide Parent and its accountants, legal
counsel, and other representatives copies of internal financial statements
promptly upon request. No information or knowledge obtained in any investigation
pursuant to this Section 6.3 or otherwise shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
6.4 CONFIDENTIALITY. The parties acknowledge that the Company and
Parent have previously executed a Nondisclosure Agreement, dated as of September
20, 1999 (the "NONDISCLOSURE AGREEMENT"), which Nondisclosure Agreement will
continue in full force and effect in accordance with its terms.
6.5 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, securities laws) or, as to Parent, by regulatory authority
of the National Association of
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Securities Dealers, Inc. ("NASD") or Nasdaq, prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto (other than disclosures to
Company stockholders pursuant to Section 6.2) unless approved by Parent and the
Company prior to release, provided that such approval shall not be unreasonably
withheld. In the event that Parent is required by law or regulatory authority to
make any such disclosure, Parent shall notify the Company prior to making such
disclosure and shall use its reasonable best efforts to give the Company an
opportunity to comment on such disclosure.
6.6 CONSENTS; HSR ACT.
(a) The Company shall promptly apply for or otherwise seek and use
its best efforts to obtain all consents and approvals required to be obtained by
it for the consummation of the Merger, including all consents, waivers, or
approvals under any of the Contracts in order to preserve the benefits
thereunder for the Surviving Corporation and otherwise in connection with the
Merger. All of such consents and approvals are set forth in SCHEDULE 2.6 of the
Company Schedules.
(b) Parent, Merger Sub and the Company agree to file as soon as
practicable, and to cause any other Person obligated to do so as a result of
his, her or its stock holdings in Parent or the Company, a Notification and
Report Form in accordance with the notification requirements of the HSR Act with
the Antitrust Division of the United States Department of Justice and the
Federal Trade Commission and to use its and their reasonable best efforts to
achieve the prompt termination or expiration of the waiting period or any
extension thereof provided for under the HSR Act as a prerequisite to the
consummation of the transactions provided for herein.
6.7 FIRPTA COMPLIANCE. On the Closing Date, the Company shall deliver
to Parent a properly executed statement or statements in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
6.8 LEGAL CONDITIONS TO THE MERGER. Each of Parent, Merger Sub and the
Company will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on such party with respect to the Merger
and will promptly cooperate with and furnish information to any other party
hereto in connection with any such requirements imposed upon such other party in
connection with the Merger. Each party will take all reasonable actions to
obtain (and will cooperate with the other parties in obtaining) any consent,
authorization, order or approval of, or any registration, declaration, or filing
with, or notice to, or an exemption by, any Governmental Entity, or other third
party, required to be obtained or made by such party or its subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement.
6.9 REASONABLE BEST EFFORTS; ADDITIONAL DOCUMENTS AND FURTHER
ASSURANCES. Each of the parties to this Agreement shall use its reasonable best
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to Closing under this
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Agreement. Each party hereto, at the request of another party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be reasonably necessary or desirable for effecting completely
the consummation of this Agreement, and the transactions contemplated hereby.
6.10 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event which has caused or is likely to cause
any representation or warranty of the Company, Parent or Merger Sub,
respectively, contained in this Agreement to be untrue or inaccurate at or prior
to the Effective Time and (ii) any failure of the Company, Parent or Merger Sub,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section 6.10 shall not limit or
otherwise affect any remedies available to the party receiving such notice.
6.11 POOLING ACCOUNTING. Parent and the Company shall each use its
reasonable best efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests in accordance with GAAP
which shall be acceptable to the SEC. Each of Parent and the Company shall use
its reasonable best efforts to cause its respective employees, directors,
stockholders and Affiliates not to take any action that would adversely affect
the ability of Parent to account for the business combination to be effected by
the Merger as a pooling of interests in accordance with GAAP which shall be
acceptable to the SEC. Neither Parent nor the Company shall take any action,
either before or after consummation of the Merger, including the acceleration of
vesting of any options, stock purchase rights, warrants, restricted stock or
other rights to acquire shares of the capital stock of the Company, which
reasonably would be expected to interfere with Parent's ability to account for
the Merger as a pooling of interests in accordance with GAAP which shall be
acceptable to the SEC.
6.12 REORGANIZATION. It is the intent of the Company, Parent and the
Surviving Corporation that this Merger qualify as a tax-free reorganization
under Section 368(a) of the Code. Neither Parent nor the Company shall take any
action which reasonably would be expected to interfere with the qualification of
the Merger as a tax-free reorganization under Section 368(a) of the Code.
6.13 FORM S-8. Parent shall file a Registration Statement on Form S-8
with the SEC covering the shares of Parent Common Stock issuable with respect to
assumed Company Options no later than 30 days after the Closing Date.
6.14 NASDAQ NATIONAL MARKET LISTING. Parent will prepare and file with
Nasdaq an additional listing application and use its reasonable best efforts to
have the shares of Parent Common Stock issuable in the Merger accepted by Nasdaq
for listing on the Nasdaq National Market as soon as practicable after the
Effective Time.
6.15 BLUE SKY LAWS. Parent shall use its reasonable best efforts to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent
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Common Stock pursuant hereto. The Company shall use its reasonable best efforts
to assist Parent as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of Parent Common Stock pursuant hereto.
6.16 TERMINATION OF COMPANY INVESTOR RIGHTS. The Company shall take
such steps as may be necessary to provide for the termination as of the Closing
of all Company investor rights granted by the Company to its stockholders and in
effect prior to the Closing, including but not limited to the Management Rights
Agreement by and between the Company and Access Technology Partners dated as of
June 7, 1999 (the "MANAGEMENT RIGHTS AGREEMENT"), rights of co-sale, voting,
registration, first refusal, board observation or information or operational
covenants.
6.17 NO SOLICITATION. From and after the date of this Agreement until
the earlier to occur of the Effective Time or termination of this Agreement
pursuant to its terms, the Company will not, and the Company will not permit its
directors, officers, employees, representatives, investment bankers, agents, or
Affiliates to, directly or indirectly (i) initiate, solicit, encourage or
entertain any inquiries, offers or proposals that constitute, or could
reasonably be expected to lead to, any "ACQUISITION PROPOSAL" (as defined
herein) by any Person, or (ii) participate in any discussions or negotiations
with, or disclose any non-public information concerning the Company or any
Subsidiary to, or afford access to the properties, books, or records of the
Company or any Subsidiary, or otherwise assist or facilitate, or enter into any
agreement or understanding with, any Person (other than Parent and its
Affiliates, agents, and representatives) for the purpose of making, or take any
other action to facilitate the making, of an Acquisition Proposal or inquiry,
offer or proposal that could reasonably be expected to lead to an Acquisition
Proposal; or (iii) agree to, approve or recommend any Acquisition Proposal or
change, withdraw or modify its position with respect to the Merger. For the
purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any of one
following (other than the transactions between the Company, Parent and Merger
Sub contemplated hereunder) involving the Company or any Subsidiary: (i) a
proposal for any transaction pursuant to which any Person or its Affiliates (a
"THIRD PARTY") proposes to acquire beneficial ownership of at least ten percent
(10%) of the outstanding equity securities of the Company, whether from the
Company or pursuant to a tender offer, exchange offer, recapitalization,
reorganization or otherwise, (ii) a proposal for any merger, consolidation or
other business combination involving the Company pursuant to which any Third
Party proposes to acquire beneficial ownership of at least ten percent (10%) of
the outstanding equity securities of the Company, or the entity surviving such
merger, consolidation or other business combination, (iii) a proposal for any
other transaction or series of related transactions (including any license)
pursuant to which any Third Party proposes to acquire control of assets of the
Company and its subsidiaries having a fair market value equal to or greater than
ten percent (10%) of the fair market value of all of the assets of the Company
and its subsidiaries, taken as a whole, immediately prior to such transaction,
or (iv) any public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing. The Company
will, and will cause its directors, officers, employees, representatives,
investment bankers, agents and Affiliates to, immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company will promptly (i)
notify Parent if it receives any
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proposal or inquiry or request for information in connection with an Acquisition
Proposal or potential Acquisition Proposal and (ii) notify Parent of the
significant terms and conditions of any such Acquisition Proposal including the
identity of the party making an Acquisition Proposal. In addition, from and
after the date of this Agreement until the earlier to occur of the Effective
Time or termination of this Agreement pursuant to its terms, the Company will
not, and will instruct its directors, officers, employees, representatives,
investment bankers, agents, and Affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation, or solicitation in support of
any Acquisition Proposal made by any Person (other than Parent).
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 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 Effective Time of the
following conditions:
(a) STOCKHOLDER APPROVAL. The terms of this Agreement, the Escrow
Agreement and the Merger shall have been approved and adopted by the
stockholders of the Company by the requisite vote under applicable law and the
Company's Articles of Incorporation.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect; and
there shall not have been any action taken, or any statute, rule, regulation or
order enacted, entered, enforced, promulgated, issued or deemed applicable to
the Merger, which makes consummation of the Merger illegal.
(c) TAX OPINION. The Company shall have received a written opinion
from Xxxxx & XxXxxxxx, counsel to the Company, addressed to the Company and the
Company's stockholders, in form and substance reasonably satisfactory to Parent
and the Company, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code.
(d) HSR ACT. The waiting period required pursuant to the HSR Act
and the regulations promulgated thereunder shall have expired or been terminated
or any approvals required in connection with the HSR Act and the regulations
promulgated thereunder shall have been obtained.
(e) FAIRNESS HEARING; REGISTRATION STATEMENT. The Administrator
shall have issued an Order approving the fairness of the terms and conditions of
the Merger after a hearing conducted in accordance with Section 78A-30 of the
General Statutes of North Carolina or, in the absence of such approval and
issuance, the Registration Statement shall have been declared effective by the
Securities and Exchange Commission (the "SEC").
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(f) NO PROCEEDINGS OR CHALLENGES. No investigation, action, suit or
proceeding by any Governmental Entity, and no action, suit or proceeding by any
other Person, shall be pending on the Closing Date which challenges this
Agreement or the Merger or seeks to restrain or prohibit the consummation of the
transactions contemplated by this Agreement;
7.2 ADDITIONAL CONDITIONS TO THE 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 the following conditions, any of which may be waived,
in writing, by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall have been
true and correct (in the case of representations and warranties qualified as to
materiality) or true and correct in all material respects (in the case of other
representations and warranties) on and as of the date of this Agreement and
shall be so true and correct on and as of the Closing Date except for those
representations and warranties which address matters only as of a particular
date (which shall remain so true and correct as of such date), except where the
failure to be so true and correct in the aggregate would not have a Material
Adverse Effect on Parent, and the Company shall have received a certificate to
such effect signed on behalf of Parent by a duly authorized officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed or complied with by
them on or prior to the Closing Date, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Parent.
(c) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall not have occurred any events, occurrences, changes or effects which,
individually or in the aggregate, have had or could be reasonably expected to
have a material adverse effect on the business, assets (including intangible
assets), results of operations or financial condition of Parent and its
subsidiaries taken as a whole, excluding any events, occurrences, changes or
effects directly resulting from or attributable to general economic conditions
or conditions affecting the software development and related services industry
generally.
(d) ESCROW AGREEMENT. Each of Parent, Merger Sub and First Union
National Bank, as Escrow Agent, shall have executed and delivered to the Company
an Escrow Agreement in substantially the form attached hereto as EXHIBIT F (the
"ESCROW AGREEMENT").
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub 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, by Parent:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct (in the case of representations and warranties qualified as to
materiality) or true and correct in all material respects (in the case of other
representations and warranties) on and as of the date of this Agreement and
shall be so true and correct on and as of the Closing Date except for those
representations and warranties which address matters only as of a particular
date (which shall remain so true and correct as of such date), except where the
failure to be so true and correct in the aggregate would not have a Material
Adverse Effect on the Company, and Parent and Merger Sub shall have received a
certificate to such effect signed on behalf of the Company by a duly authorized
officer of the Company.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed or complied with by it on or prior to
the Closing Date, and Parent and Merger Sub shall have received a certificate to
such effect signed by a duly authorized officer of the Company.
(c) OPINION OF ACCOUNTANTS. Each of PricewaterhouseCoopers LLP
(Raleigh office), on behalf of Parent, and PricewaterhouseCoopers LLP (San Xxxx
office), on behalf of the Company, shall have delivered a letter to Parent
affirming that firm's unconditional written concurrence, delivered concurrently
with the Closing, with Parent management's and the Company management's
conclusions, respectively, that no conditions exist that would preclude Parent
from accounting for the Merger as a "pooling of interests" under Accounting
Principles Board Opinion No. 16 and the applicable rules and regulations of the
SEC, if consummated in accordance with this Agreement.
(d) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in SCHEDULE 2.6 of the Company Schedules.
(e) LEGAL OPINION. Parent shall have received a legal opinion from
Xxxxx & XxXxxxxx, legal counsel to the Company, in form and substance reasonably
acceptable to Parent.
(f) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall not have occurred any events, occurrences, changes or effects which,
individually or in the aggregate, have had or could be reasonably expected to
have a material adverse effect on the business, assets (including intangible
assets), results of operations or financial condition of the Company and its
subsidiaries taken as a whole, excluding any events, occurrences, changes or
effects directly resulting from or attributable to general economic conditions
or conditions affecting the software development and related services industry
generally.
(g) MINIMUM STOCKHOLDER VOTE; DISSENTING SHARES. Either (x) this
Agreement and the Merger shall have been approved by stockholders of the Company
holding at least ninety three and three quarters percent (93.75%) of the voting
power of the shares of outstanding Company Capital Stock or (y) the holders of
no more than 6.25% of the outstanding Company
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Capital Stock shall have made written demand upon the Company for the purchase
of their shares or shall have the right to make such demand under
(Section)1301(b) of the California General Corporation Law.
(h) TERMINATION OF COMPANY INVESTOR RIGHTS. Parent shall have been
furnished evidence reasonably satisfactory to it that all investor rights
granted by the Company to its stockholders and in effect prior to the Closing,
including but not limited to the Management Rights Agreement, rights of co-sale,
voting, registration, first refusal, board observation or information or
operational covenants, shall have been terminated as of the Closing.
(i) FIRPTA CERTIFICATES. The Company shall have delivered to Parent
a properly executed statement or statements satisfying the requirements of
Treasury Regulation Sections 1.897-2(h) and 1.1445-2(c)(3) in a form reasonably
satisfactory to Parent.
(j) NON-COMPETITION AND NON-SOLICITATION AGREEMENTS AND CONTINUED
EMPLOYMENT. Each of Xxxx Xxxx and Xxxxxxx Xxxxxxx shall have executed and
delivered to Parent a NonCompetition, NonSolicitation and NonDisclosure
Agreement substantially in the form attached hereto as EXHIBIT G. Each of
Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx Xxxxxxxxx and Xxx Xxxxxxxx shall remain in
the employment of the Company as of the Closing Date and shall not have provided
to Parent or the Company notice of intention to cease employment with the
Company or Parent (or of intention not to become employed by Parent).
(k) ESCROW AGREEMENT. Each of the Company, the Securityholder Agent
(as defined in Section 8.2(c)) and First Union National Bank, as Escrow Agent,
shall have executed and delivered to Parent the Escrow Agreement.
(l) FULLY-DILUTED COMPANY SHARE NUMBER. The Company shall have
delivered to Parent a schedule setting forth the Fully-Diluted Company Share
Number and its components as of immediately prior to the Effective Time,
certified by a duly authorized officer of the Company.
(m) AMENDMENT TO 401(K) PLAN. The Company shall have amended its
401(k) Plan to exclude all employees other than the employees of the Company.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger and continue until 5:00
p.m., California time, on the date which is the one year anniversary of the
Closing Date (the "EXPIRATION DATE"). All of the covenants and agreements of the
parties hereto shall survive the Merger without limitation.
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8.2 ESCROW ARRANGEMENTS.
(a) ESCROW FUND. At the Effective Time, the Company's stockholders
will be deemed to have received from Merger Sub and deposited with the Escrow
Agent the Escrow Shares (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time) without any act on the part of any stockholder. As soon as
practicable after the Effective Time, the Escrow Shares, without any act on the
part of any Company stockholder, will be deposited with First Union National
Bank as Escrow Agent (the "ESCROW AGENT"), such deposit to constitute an escrow
fund (the "ESCROW FUND") to be governed by the terms set forth herein and in the
Escrow Agreement. The number of Escrow Shares deposited on behalf of each
stockholder of the Company shall be in proportion to the aggregate Parent Common
Stock to which such holder would otherwise be entitled under Sections 1.6(a) and
(b) and shall be in the respective share amounts and percentages listed opposite
each Company stockholder's name listed in a schedule in form and substance
reasonably acceptable to Parent to be executed by the Company and delivered to
Parent at Closing (the "ESCROW SCHEDULE"). No shares of Parent Common Stock
deposited in the Escrow Fund shall be unvested or subject to any right of
repurchase, risk of forfeiture or other condition in favor of the Company or the
Surviving Corporation. The Escrow Fund shall be available to reimburse Parent
and its Affiliates (including the Surviving Corporation) for any claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses, and expenses of investigation and defense
(hereinafter individually a "LOSS" and collectively "LOSSES") incurred by
Parent, its officers, directors, agents or Affiliates (including the Surviving
Corporation) directly or indirectly as a result of (i) any inaccuracy in, or
breach of, a representation or warranty of the Company contained herein (or in
any certificate, instrument, schedule or document attached to this Agreement and
delivered by the Company in connection with the Merger) or (ii) any failure by
the Company to perform or comply with any covenant contained herein; provided
that claims arising out of an inaccuracy in, or breach of, any representations
and warranties or any covenant of the Company contained in this Agreement and in
any certificate, instrument, schedule or document delivered by the Company at
the Closing in connection with this Agreement or the Merger must be asserted on
or before 5:00 p.m. (California Time) on the Expiration Date. Parent shall
provide notice to the Securityholder Agent (as defined below) within 30 days of
Parent becoming aware of any claims for Losses if such claims are reasonably
identifiable and determinable; PROVIDED, HOWEVER, that no delay or failure on
the part of Parent in notifying the Securityholder Agent shall relieve the
Securityholder Agent or the stockholders of the Company on whose behalf the
Escrow Amount was contributed from any obligation unless they are materially
prejudiced thereby (and then only to the extent of such prejudice). Except as
otherwise provided herein, Parent may not receive any shares from the Escrow
Fund unless and until Officer's Certificates (as defined in the Escrow
Agreement) identifying Losses, the aggregate amount of which exceed $500,000,
have been delivered to the Escrow Agent as provided in the Escrow Agreement and
such amount is determined pursuant to the Escrow Agreement to be payable; in
such case, Parent may recover shares from the Escrow Fund equal in value to all
indemnified Losses (including any Losses within the $500,000 threshold) for
which there is no objection or any objection had been resolved in accordance
with the provisions of the Escrow Agreement; PROVIDED, HOWEVER, that to the
extent the aggregate premiums for the Company's Directors' and Officers'
Liability insurance policy exceed $40,000,
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such excess shall be deemed a Loss for purposes of this Section 8.2(a) and the
Escrow Agreement.
(b) MAXIMUM LIABILITY AND REMEDIES. The rights of Parent to make
claims upon the Escrow Fund in accordance with Article VIII and the Escrow
Agreement shall be the sole and exclusive remedy for money damages of Parent and
the Surviving Corporation after the Closing with respect to any representation,
warranty, covenant or agreement made by Company under this Agreement.
(c) SECURITYHOLDER AGENT OF THE STOCKHOLDERS; POWER OF ATTORNEY.
(i) In the event that the Merger is approved, effective
upon such vote, and without further act of any stockholder, Xxxxxxx Xxxxxxx
shall be appointed as agent and attorney-in-fact (the "SECURITYHOLDER AGENT")
for each stockholder of the Company (except such stockholders, if any, as shall
have perfected their dissenters' rights under California Law), for and on behalf
of stockholders of the Company, to act as the Securityholder Agent under the
Escrow Agreement and to give and receive notices and communications, to
authorize delivery to Parent of Escrow Shares from the Escrow Fund in
satisfaction of claims by Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the foregoing in accordance with
the terms and provisions of the Escrow Agreement. Such agency may be changed by
the stockholders of the Company from time to time upon not less than thirty (30)
days prior written notice to Parent; provided that the Securityholder Agent may
not be removed unless holders of a two-thirds interest of the Escrow Fund agree
to such removal and to the identity of the substituted agent. Any vacancy in the
position of Securityholder Agent may be filled by approval of the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the stockholders
of the Company.
(ii) The Securityholder Agent shall not be liable for any
act done or omitted hereunder or under the Escrow Agreement as Securityholder
Agent while acting in good faith and in the exercise of reasonable judgment. The
stockholders of the Company on whose behalf the Escrow Amount was contributed to
the Escrow Fund shall jointly indemnify the Securityholder Agent and hold the
Securityholder Agent harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Securityholder Agent
and arising out of or in connection with the acceptance or administration of the
Securityholder Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Securityholder Agent. The Company
shall reimburse the Securityholder Agent, up to an aggregate of $10,000, for the
reasonable expenses incurred by the Securityholder Agent in connection with the
administration of his duties hereunder and under the Escrow Agreement.
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(d) ACTIONS OF THE SECURITYHOLDER AGENT. A decision, act, consent
or instruction of the Securityholder Agent relating to the Escrow Shares, the
Escrow Fund or the Escrow Agreement shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such stockholders, and the Escrow Agent and Parent may rely upon any
such written decision, consent or instruction of the Securityholder Agent as
being the decision, consent or instruction of each every such stockholder of the
Company. The Escrow Agent and Parent are hereby relieved from any liability to
any Person for any acts done by them in accordance with such decision, consent
or instruction of the Securityholder Agent.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. Except as provided in Section 9.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Closing Date notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual written consent duly authorized by the Board of
Directors of the Company and Parent;
(b) by either Parent or the Company if: (i) the Closing Date has
not occurred by January 27, 2000 (the "TERMINATION DATE"), unless the
Administrator has not issued the Order by January 10, 2000, in which case the
"TERMINATION DATE" shall be February 29, 2000 (provided that the right to
terminate this Agreement under this clause 9.1(b)(i) shall not be available to
any party whose 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 and such action or failure constitutes a breach of this Agreement); (ii)
there shall be a final nonappealable order, decree or ruling of a Governmental
Entity having jurisdiction in effect preventing consummation of the Merger; or
(iii) there shall be any statute, rule, regulation or order enacted, entered,
enforced, promulgated, issued or deemed applicable to the Merger by any
Governmental Entity which makes consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
7.3(a) or 7.3(b), as the case may be, would not then be satisfied;
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PROVIDED, HOWEVER, that if such breach is curable by the Company prior to the
Termination Date through the exercise of its reasonable best efforts, then for
so long as the Company continues to exercise such reasonable best efforts Parent
may not terminate this Agreement under this Section 9.1(d) unless such breach is
not cured prior to the Termination Date (but no cure period shall be required
for a breach which by its nature cannot be cured);
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and as a result of such breach the conditions
set forth in Section 7.2(a) or 7.2(b), as the case may be, would not then be
satisfied; PROVIDED, HOWEVER, that if such breach is curable by Parent or Merger
Sub prior to the Termination Date through the exercise of its reasonable best
efforts, then for so long as Parent or Merger Sub continues to exercise such
reasonable best efforts the Company may not terminate this Agreement under this
Section 9.1(e) unless such breach is not cured prior to the Termination Date
(but no cure period shall be required for a breach which by its nature cannot be
cured). Where action is taken to terminate this Agreement pursuant to Section
9.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
9.2 EFFECT OF TERMINATION. Except as set forth in Section 10.2, any
termination of this Agreement under Section 9.1 above will be effective
immediately upon the delivery of written notice of the terminating party to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 9.1, this Agreement shall be of no further force or effect,
except (i) as set forth in this Section 9.2 and Article X (general provisions,
including expenses), each of which shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any breach of this Agreement. No termination of this Agreement shall affect the
obligations of the parties contained in the Nondisclosure Agreement, all of
which obligations shall survive termination of this Agreement.
9.3 AMENDMENT. Except as is otherwise required by applicable law, prior
to the Closing, this Agreement may be amended by the parties hereto at any time
by execution of an instrument in writing signed by Parent and the Company;
provided, however, that the Company shall not agree to amend this Agreement
without first obtaining the consent of each of the Company stockholders who have
executed a Voting Agreement as of the date hereof. Except as is otherwise
required by applicable law, after the Closing, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
by Parent and by either the Securityholder Agent or former Company stockholders
who receive more than 66 2/3% of the Parent Common Stock issued pursuant to
Section 1.6(a).
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
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agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Red Hat, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxxx, Esq.
Chief Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Company, to:
Cygnus Solutions
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxx & XxXxxxxx
000 Xxxxxx Xxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to the Securityholder Agent:
Xxxxxxx Xxxxxxx
c/o Cygnus Solutions
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10.2 EXPENSES.
(a) In the event the Merger is not consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses.
(b) Subject to the provisions of the Escrow Agreement and Section
8.2, in the event the Merger is consummated, the Surviving Corporation shall be
responsible for the payment of all reasonable Third Party Expenses, including
reasonable Third Party Expenses incurred by the Company. Without limiting the
forgoing and subject to the provisions of the Escrow Agreement and Section 8.2,
on the Closing Date the Surviving Corporation (or Parent on behalf of Surviving
Corporation) shall pay to Xxxxx & XxXxxxxx, Company counsel, the aggregate
amount of reasonable Company attorneys' fees and expenses payable thereto in
connection with this Agreement and the transactions contemplated hereby,
provided that Parent receives, at least three (3) days prior to the Closing
Date, a written invoice for the fees and expenses incurred to such date and the
estimated amount of such fees and expenses through the Closing Date and for a
reasonable period thereafter.
10.3 INTERPRETATION. The words "INCLUDE," "INCLUDES" and "INCLUDING"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The word "AGREEMENT" when used herein shall be deemed in
each case to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
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way the meaning or interpretation of this Agreement. The term "PERSON" means any
individual, corporation, partnership, association, trust, limited liability
company or partnership, unincorporated organization, joint venture, other entity
or group (as defined in Section 13(d)(3) of the Exchange Act).
10.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.5 ENTIRE AGREEMENT; ASSIGNMENT. Except for the Nondisclosure
Agreement, this Agreement, the schedules and Exhibits hereto, and the documents
and instruments and other agreements among the parties hereto referenced herein:
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other Person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided, except that Parent and
Merger Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective Affiliates.
10.6 SEVERABILITY. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.7 OTHER REMEDIES. Except as otherwise provided herein (including as
set forth in Section 8.2(b)), any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto agrees that process may be served upon them
in any manner authorized by the laws of the State of California for such persons
and waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
10.9 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in
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an agreement or other document will be construed against the party drafting such
agreement or document.
10.10 SPECIFIC PERFORMANCE. Notwithstanding Section 8.2(b), the parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Securityholder Agent
have caused this Agreement to be signed by their duly authorized respective
officers, all as of the date first written above.
RED HAT, INC., CYGNUS SOLUTIONS,
a Delaware corporation a California corporation
By /s/ Xxxxxxx Xxxxxx By /s/ Xxx Xxxxxxx
------------------------------ ------------------------------
Xxxxxxx Xxxxxx Xxx Xxxxxxx
President Vice President of Finance and
Chief Financial Officer
SECURITYHOLDER AGENT MIAMI ACQUISITION CORP.,
a North Carolina corporation
By: /s/ Xxxxxxx Xxxxxxx By /s/ Xxxxxxx Xxxxxx
------------------------------- ------------------------------
Xxxxxxx Xxxxxxx Xxxxxxx Xxxxxx
President
EXHIBIT A
COMPANY STOCKHOLDERS EXECUTING VOTING AGREEMENTS*
Number of Number of Number of Number of
shares of shares of Series shares of Series shares of Series
Common A Preferred B Preferred C Preferred
Name Stock Stock Stock Stock
---- --------- ---------------- ---------------- ----------------
August Capital, L.P. -- 448,958 576,474 66,667
Xxxxxxx Xxxxxxx -- 660,343 -- --
Xxxx Xxxx 609,882 -- -- --
Xxxx Xxxxxxx -- 431,822 -- --
Greylock IX Limited -- 146,529 223,518 25,000
Partnership
Greylock Equity Limited -- 146,528 223,517 25,000
Partnership
Cisco Systems 117,000 -- -- 266,667
Xxxxx Xxxxxx-Xxxxxxx -- 380,843 -- --
Intel Corporation -- -- -- 333,333
Xxxxxx Xxxxxx -- 45,000 -- --
TOTAL: 726,882 2,260,023 1,023,509 716,667
OUTSTANDING: 915,463 4,040,916 1,042,000 784,570
PERCENT: 79.42% 55.925% 98.22% 91.34%
*Inclusion on this list is not an admission by the person or entity
listed that such person or entity is an "affiliate" of the Company.
