EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
VA LINUX SYSTEMS, INC.
ATLANTA ACQUISITION CORP.
AND
XXXXXXX.XXX, INC.
Dated as of February 2, 2000
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER.........................................................1
1.1 The Merger.................................................1
1.2 Effective Time; Closing....................................2
1.3 Effect of the Merger.......................................2
1.4 Certificate of Incorporation; Bylaws.......................2
1.5 Directors and Officers.....................................3
1.6 Effect on Capital Stock....................................3
1.7 Surrender of Certificates..................................4
1.8 No Further Ownership Rights in Company Common Stock........5
1.9 Lost, Stolen or Destroyed Certificates.....................6
1.10 Tax Consequences...........................................6
1.11 Taking of Necessary Action; Further Action.................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................7
2.1 Organization of the Company................................7
2.2 Company Capital Structure..................................8
2.3 Obligations With Respect to Capital Stock..................9
2.4 Authority; Non-Contravention..............................10
2.5 SEC Filings; Company Financial Statements;
No Undisclosed Liabilities...............................12
2.6 Absence of Certain Changes or Events......................13
2.7 Taxes.....................................................13
2.8 Title to Properties; Absence of Liens and Encumbrances....15
2.9 Intellectual Property.....................................16
2.10 Compliance; Permits; Restrictions.........................19
2.11 Litigation................................................19
2.12 Brokers' and Finders' Fees................................20
2.13 Transactions with Affiliates..............................20
2.14 Employee Benefit Plans....................................20
2.15 Environmental Matters.....................................24
2.16 Year 2000 Compliance......................................25
2.17 Agreements, Contracts and Commitments.....................25
2.18 [RESERVED]................................................27
2.19 Disclosure................................................27
2.20 Board Approval............................................27
2.21 Fairness Opinion..........................................27
2.22 Restrictions on Business Activities.......................27
2.23 Insurance.................................................28
2.24 State Takeover Statutes...................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........28
3.1 Organization and Qualification; Subsidiaries..............28
3.2 Certificate of Incorporation and Bylaws...................28
3.3 Capitalization............................................29
3.4 Authority; Non-Contravention..............................29
3.5 SEC Filings; Parent Financial Statements..................30
3.6 Absence of Certain Changes or Events......................31
3.7 Tax.......................................................31
3.8 Compliance; Permits; Restrictions.........................32
3.9 Litigation................................................32
3.10 Agreements, Contracts and Commitments.....................33
3.11 Registration Statement; Proxy Statement...................33
3.12 Board Approval............................................33
3.13 Benefit Plans.............................................33
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..............................33
4.1 Conduct of Business by the Company........................33
4.2 Conduct of Business by Parent.............................36
ARTICLE V ADDITIONAL AGREEMENTS.............................................36
5.1 Prospectus/Proxy Statement; Registration Statement;
Other Filings...........................................36
5.2 Meeting of Company Stockholders...........................37
5.3 Registration Rights.......................................39
5.4 Confidentiality; Access to Information....................39
5.5 No Solicitation...........................................39
5.6 Public Disclosure.........................................41
5.7 Reasonable Efforts; Notification..........................41
5.8 Third Party Consents......................................42
5.9 Stock Options and Employee Benefits.......................42
5.10 Form S-8..................................................44
5.11 Indemnification...........................................44
5.12 Invention Assignment Agreement............................44
5.13 Nasdaq Listing............................................45
5.14 Company Affiliate Agreement...............................45
5.15 Option Assumption Agreement...............................45
5.16 1999 Stock Option Plan....................................45
ARTICLE VI CONDITIONS TO THE MERGER.........................................45
6.1 Conditions to Obligations of Each Party to
Effect the Merger.......................................45
6.2 Additional Conditions to Obligations of the Company.......46
6.3 Additional Conditions to the Obligations of Parent
and Merger Sub..........................................47
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...............................48
7.1 Termination...............................................48
7.2 Notice of Termination; Effect of Termination..............49
7.3 Fees and Expenses.........................................50
7.4 Amendment.................................................51
7.5 Extension; Waiver.........................................51
ARTICLE VIII GENERAL PROVISIONS.............................................51
8.1 Non-Survival of Representations and Warranties............51
8.2 Notices...................................................51
8.3 Interpretation; Knowledge.................................52
8.4 Counterparts..............................................53
8.5 Entire Agreement; Third Party Beneficiaries...............53
8.6 Severability..............................................53
8.7 Other Remedies; Specific Performance......................53
8.8 Governing Law.............................................54
8.9 Rules of Construction.....................................54
8.10 Assignment................................................54
8.11 WAIVER OF JURY TRIAL......................................54
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INDEX OF EXHIBITS
Exhibit A.........Company Voting Agreement
Exhibit B.........List of Company Affiliates
Exhibit C.........Affiliate Agreement
Exhibit D.........Form of Non-Competition/Non-Solicitation Agreement
Exhibit E.........List of Key Employees
Exhibit F.........Form of Employee Agreement
Exhibit G.........Form of Contractor Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
February 2, 2000, among VA Linux Systems, Inc., a Delaware corporation
("Parent"), Atlanta Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), and Xxxxxxx.Xxx, Inc., a Delaware
corporation (the "Company").
RECITALS
A........Upon the terms and subject to the conditions of this Agreement
and in accordance with the Delaware General Corporation Law ("Delaware Law"),
Parent, Merger Sub and the Company intend to enter into a business combination
transaction.
B........The Board of Directors of the Company (i) has determined that
the Merger (as defined in Section 1.1) is consistent with and in furtherance of
the long-term business strategy of the Company and fair to, and in the best
interests of, the Company and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement
and (iii) has determined to recommend that the stockholders of the Company adopt
and approve this Agreement and approve the Merger.
C........Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's and Company's respective willingness to
enter into this Agreement, certain stockholders of Company are entering into
Voting Agreements in substantially the form attached hereto as Exhibit A (the
"Company Voting Agreements").
D........The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
E........As an inducement for Parent to enter into this Agreement, each
of the individuals set forth on Exhibit E hereof (the "Key Employees") shall
execute the form of Non-Competition/Non-Solicitation Agreement attached hereto
as Exhibit F.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1......The Merger.
----------
(a)......At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
the Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
(b)......Parent, may, in its sole discretion, at any time
prior to the mailing of the Proxy Statement/Prospectus (as defined in Section
2.19 below), change the structure of the Merger to a forward triangular merger
with the Company merging with and into Merger Sub and Merger Sub surviving the
Merger. In such event, Merger Sub, as the surviving corporation after the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.2......Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
Merger") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed in writing by the Company and
Parent and specified in the Certificate of Merger) being the "Effective Time")
as soon as practicable on or after the Closing Date (as herein defined). Unless
the context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and Plan of Reorganization and the Certificate of
Merger. The closing of the Merger (the "Closing") shall take place at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "Closing Date").
1.3......Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers 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......Certificate of Incorporation; Bylaws.
------------------------------------
(a)......At the Effective Time, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by law and such Certificate of
Incorporation of the Surviving Corporation; provided, however, that at the
Effective Time the Certificate of Incorporation of the Surviving Corporation
shall be amended so that the name of the Surviving Corporation shall be
"[Company]."
(b)......The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.
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, until their respective successors are duly elected or
appointed and qualified. The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, until
their respective successors are duly appointed.
1.6......Effect on Capital Stock. Subject to the terms and conditions
of this Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of Merger Sub, the Company or the holders of any of the
following securities, the following shall occur:
(a)......Conversion of Company Common Stock. Each share of
common stock, par value $0.01, of the Company ("Company Common Stock") issued
and outstanding immediately prior to the Effective Time, other than any shares
of the Company Common Stock to be canceled pursuant to Section 1.6(b), will be
canceled and extinguished and automatically converted (subject to Section
1.6(e)) into the right to receive (I) that certain amount of cash (the "Cash
Amount") as determined by the quotient of (A) $60,000,000 divided by (B) the
number of issued and outstanding shares of Company Common Stock immediately
prior to the Effective Time and (II) (A) 0.425 of a share of Parent Common Stock
minus (B) the quotient of (x) the Cash Amount divided by (y) the average trading
price of one share of Parent Common Stock as reported on the Nasdaq National
Market System for the ten (10) consecutive trading days beginning four (4)
trading days prior to the date of this Agreement.
(b)......Cancellation of Parent-Owned Stock. Each share of
Company Common Stock held by the Company or owned by Merger Sub, Parent or any
direct or indirect wholly-owned subsidiary of the Company or of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c)......Stock Options; Employee Stock Purchase Plans. At the
Effective Time, all options to purchase Company Common Stock then outstanding
under the 1995 Stock Option Plan and the 1999 Stock Option Plan (the "Company
Stock Option Plans") shall be assumed by Parent in accordance with Section 5.9
hereof.
(d)......Capital Stock of Merger Sub. Each share of Common
Stock of Merger Sub (the "Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation. Each certificate evidencing ownership of shares of Merger Sub
Common Stock shall evidence ownership of such shares of capital stock of the
Surviving Corporation.
(e)......Fractional Shares. No fraction of a share of Parent
Common Stock will be issued by virtue of the Merger, 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 that otherwise would be received by such holder)
shall, upon surrender of such holder's Certificate(s) (as defined in Section
1.7(c)), receive from Parent an amount of cash (rounded to the nearest whole
cent), without interest, equal to the product of (i) such fraction, multiplied
by (ii) the closing price of Parent Common Stock on the last full trading day
prior to Closing as reported on the Nasdaq National Market System.
(f)......Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after the
date hereof and prior to the Effective Time.
1.7......Surrender of Certificates.
-------------------------
(a)......Exchange Agent. Parent shall select an institution
reasonably satisfactory to the Company to act as the exchange agent (the
"Exchange Agent") in the Merger.
(b)......Parent to Provide Cash and Common Stock. Within ten
(10) business days after the Effective Time, Parent shall make available to the
Exchange Agent for exchange in accordance with this Article I, (i) the shares of
Parent Common Stock issuable pursuant to Section 1.6 in exchange for outstanding
shares of Company Common Stock, (ii) $60,000,000, (iii) cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.6(e)
and (iv) any dividends or distributions which holders of shares of Company
Common Stock may be entitled pursuant to Section 1.7(d).
(c)......Exchange Procedures. Promptly after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of record (as
of the Effective Time) of a certificate or certificates (the "Certificates")
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive cash
and shares of Parent Common Stock pursuant to Section 1.6, cash in lieu of any
fractional shares pursuant to Section 1.6(e) and any dividends or other
distributions pursuant to Section 1.7(d), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) Form W-9 and (iii) instructions for use in
effecting the surrender of the Certificates in exchange for cash and
certificates representing shares of Parent Common Stock, cash in lieu of any
fractional shares pursuant to Section 1.6(e) and any dividends or other
distributions pursuant to Section 1.7(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor cash and
certificates representing the number of whole shares of Parent Common Stock
which such holders have the right to receive pursuant to Section 1.6(e), payment
in lieu of fractional shares which such holders have the right to receive
pursuant to Section 1.6(e) and any dividends or distributions payable pursuant
to Section 1.7(d), and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, outstanding Certificates will be deemed from and
after the Effective Time, for all corporate purposes, subject to Section 1.7(d)
as to the payment of dividends, to evidence the ownership of the number of full
shares of Parent Common Stock and cash 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(e)
and any dividends or distributions payable pursuant to Section 1.7(d). No
interest will be paid or will accrue on the cash consideration payable upon the
surrender of any Certificate.
(d)......Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without interest,
cash and certificates representing whole shares of Parent Common Stock issued in
exchange therefor along with payment in lieu of fractional shares pursuant to
Section 1.6(e) hereof and the amount of any such dividends or other
distributions with a record date after the Effective Time payable with respect
to such whole shares of Parent Common Stock.
(e)......Transfers of Ownership. If certificates for shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
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 the cash and
certificates for shares of Parent Common Stock in any name other than that of
the registered holder of the Certificates 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)......Required Withholding. Each of the Exchange Agent,
Parent and the Surviving Corporation shall be entitled to deduct and withhold
from any consideration payable or otherwise deliverable pursuant to this
Agreement to any holder or former holder of Company Common Stock such amounts as
may be required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other applicable Legal
Requirement (as defined in Section 2.2(c)). To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all purposes under this
Agreement as having been paid to the person to whom such amounts would otherwise
have been paid.
(g)......No Liability. Notwithstanding anything to the
contrary in this Section 1.7, neither the Exchange Agent, Parent, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares of Parent
Common Stock or Company Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
1.8......No Further Ownership Rights in Company Common Stock. All cash
and shares of Parent Common Stock issued upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof (including
any cash paid in respect thereof pursuant to Section 1.6(e) and 1.7(d)) 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
Common 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.
1.9......Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for 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, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(e) and any dividends or distributions payable pursuant to Section
1.7(d); 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 Company or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10.....Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section 368
of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations. Accordingly, both prior to and after the
Closing Date, each party's books and records shall be maintained and federal,
state and local income tax and returns and schedules thereto shall be filed in a
manner consistent with the Merger being qualified as a tax-free merger under
Section 368(a) of the Code (unless a court of competent jurisdiction renders a
determination (as defined in Section 1313(a)(1) of the Code) that the Merger
does not qualify as such). Each party shall provide to each other such
information, reports, returns or schedules as may be reasonably required to
assist such party in accounting for reporting the Merger being so qualified.
1.11.....Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub will take all such lawful and necessary action, so
long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, the Company
represents and warrants to Parent and Merger Sub, subject to the exceptions
specifically disclosed in writing in the disclosure letter and referencing a
specific representation (except that disclosure in one part of the disclosure
letter shall be deemed to be disclosure with respect to all reasonably
applicable sections of the disclosure letter) supplied by the Company to Parent
dated as of the date hereof and certified by a duly authorized officer of the
Company (the "Company Schedules"), as follows
2.1......Organization of the Company.
---------------------------
(a)......The Company has no subsidiaries, except for the
corporations identified in Part 2.1(a)(i) of the Company Schedules; and neither
the Company nor any of the other corporations identified in Part 2.1(a)(i) of
the Company Schedules owns any capital stock of, or any equity interest of any
nature in, any other entity, other than the entities identified in Part
2.1(a)(ii) of the Company Schedules, except for passive investments in equity
interests of public companies as part of the cash management program of the
Company. Except as identified in Part 2.1(a)(ii) of the Company Schedules,
neither the Company nor any subsidiary thereof has agreed or is obligated to
make, or is bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature, as in effect as of the date
hereof or as may hereinafter be in effect ("Contract") under which Contract it
may become obligated to make, any future investment in or capital contribution
to any other entity. Neither the Company nor any subsidiary thereof is or at any
time, has been a general partner of any general partnership, limited partnership
or other entity.
(b)......The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all necessary power and
authority: (i) to conduct its business in the manner in which its business is
currently being conducted; (ii) to own and use its assets in the manner in which
its assets are currently owned and used; and (iii) to perform its obligations
under all Contracts by which it is bound.
(c)......The Company and each of its subsidiaries is qualified
to do business as a foreign corporation, and is in good standing, under the laws
of all jurisdictions where the nature of its business requires such
qualification and where the failure to so qualify would have a Material Adverse
Effect (as defined in Section 8.3) on the Company.
(d)......The Company has delivered or made available to Parent
a true and correct copy of the Certificate of Incorporation and Bylaws of the
Company and similar governing instruments of each of its subsidiaries, each as
amended to date (collectively, the "Company Charter Documents"), and each such
instrument is in full force and effect. The Company is not in violation of any
of the provisions of the Company Charter Documents. None of the Company's
subsidiaries is in violation of any provision of its Articles or Certificate of
Incorporation or Bylaws or other similar governing instruments, except for such
violations as are not material to the Company and its subsidiaries taken as a
whole.
(e)......The Company has delivered or made available to Parent
all proposed or considered amendments to the Company Charter Documents.
2.2......Company Capital Structure.
-------------------------
(a)......The authorized capital stock of the Company consists
of: (i) 100,000,000 shares of Company Common Stock, $0.01 par value, of which
15,734,119 shares have been issued and are outstanding as of the date of this
Agreement; and (ii) 1,000,000 shares of preferred stock, $0.01 par value, of
which no shares are outstanding as of the date of this Agreement. All of the
outstanding shares of capital stock of the Company have been duly authorized and
validly issued, and are fully paid and nonassessable. As of the date of this
Agreement, there are no shares of Company Common Stock held in treasury by the
Company. Upon consummation of the Merger, (A) the shares of Parent Common Stock
and cash issued in exchange for any shares of Company Common Stock that are
subject to a Contract pursuant to which the Company has the right to repurchase,
redeem or otherwise reacquire any shares of Company Common Stock will, without
any further act of Parent, the Company or any other person, become subject to
the restrictions, conditions and other provisions contained in such Contract,
and (B) Parent will automatically succeed to and become entitled to exercise the
Company's rights and remedies under any such Contract. Except as set forth in
Part 2.2(a) of the Company Schedules, there are no shares of Company Common
Stock immediately prior to the Effective Time that are unvested or that 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.
(b)......As of the date of this Agreement: (i) 1,695,333
shares of Company Common Stock are subject to issuance pursuant to outstanding
options to purchase Company Common Stock under the Company Stock Option Plans
(excluding options granted pursuant to Section 5.9(d)); and (ii) 960,155 shares
of Company Common Stock are reserved for future grant under the Company's 1999
Stock Option Plan. Stock options granted by the Company pursuant to the Company
Stock Option Plans are referred to in this Agreement as "Company Options." Part
2.2(b) of the Company Schedules sets forth the following information with
respect to each Company Option outstanding as of the date of this Agreement: (i)
the name and address of the optionee; (ii) the particular plan pursuant to which
such Company Option was granted; (iii) the number of shares of Company Common
Stock subject to such Company Option; (iv) the exercise price of such Company
Option; (v) the date on which such Company Option was granted; (vi) the
applicable vesting schedule; (vii) the date on which such Company Option
expires; (viii) whether the exercisability of such option will be accelerated in
any way by the transactions contemplated by this Agreement, and indicates the
extent of any such acceleration; and (ix) whether or not such option was granted
with the intention to qualify as an "incentive stock option" within the meaning
of Section 422 of the Code (i) through (ix) collectively, "Information Option."
The Company has made available to Parent accurate and complete copies of all
stock option plans pursuant to which the Company has granted stock options that
are currently outstanding and the form of all stock option agreements evidencing
such options. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Part
2.2(b)(i) of the Company Schedules, there are no commitments or agreements of
any character to which the Company is bound obligating the Company to accelerate
the vesting of any Company Option as a result of the Merger. Each Company Option
shall be assumed as set forth in Section 5.9.
(c)......All outstanding shares of Company Common Stock, all
outstanding Company Options, and all outstanding shares of capital stock of each
subsidiary of the Company have been issued and granted in compliance with (i)
all applicable securities laws and, to the knowledge of the Company, other
applicable Legal Requirements (as defined below) and (ii) all requirements set
forth in applicable Contracts. For the purposes of this Agreement, "Legal
Requirements" means any federal, state, local, municipal, foreign or other law,
statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined below).
2.3......Obligations With Respect to Capital Stock. Except as set forth
in Part 2.3 of the Company Schedules and except for options under the Company
Stock Option Plans, there are no securities exchangeable or convertible into or
exercisable for any equity securities, partnership interests or similar
ownership interests of any class of any Company equity security, issued,
reserved for issuance or outstanding. Except for securities the Company owns
free and clear of all claims and Encumbrances (as defined below), directly or
indirectly through one or more subsidiaries, and except for shares of capital
stock or other similar ownership interests of certain subsidiaries of the
Company that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries (which
shares or other interests do not materially affect the Company's control of such
subsidiaries), as of the date of this Agreement, there are no securities
exchangeable or convertible into or exercisable for any class of equity security
of any subsidiary of the Company, issued, reserved for issuance or outstanding.
For the purposes of this Agreement "Encumbrances" means any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or, to the knowledge of the Company, any restriction
on the voting of any security, any restriction on the transfer of any security
or other asset, any restriction on the receipt of any income derived from any
asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset. Except as set forth in Part 2.3 of the Company Schedules or as set forth
in Section 2.2 hereof, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which the Company or any of its subsidiaries is a party or by which it is bound
obligating or permitting the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
the Company or any of its subsidiaries or obligating or permitting the Company
or any of its subsidiaries to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. As of the date of this Agreement, except as
contemplated by this Agreement and pursuant to that certain Third Amended and
Restated Registration Rights Agreement dated September 15, 1999 (the "Company
Registration Rights Agreement"), there are no registration rights and there is,
except for the Company Voting Agreement, no voting trust, proxy, rights plan,
antitakeover plan or other agreement or understanding to which the Company is a
party or by which it or, to the knowledge of the Company, any of the
stockholders of the Company is bound with respect to any equity security of any
class of the Company or with respect to any equity security, partnership
interest or similar ownership interest of any class of any of its subsidiaries.
Stockholders of the Company will not be entitled to dissenters' rights under
applicable state law in connection with the Merger.
2.4......Authority; Non-Contravention.
----------------------------
(a)......The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval and adoption of this Agreement and the
approval of the Merger by the Company's stockholders and the filing of the
Certificate of Merger pursuant to Delaware Law. A vote of the holders of a
majority of the outstanding shares of the Company Common Stock is sufficient for
the Company's stockholders to approve and adopt this Agreement and approve the
Merger. This Agreement has been duly executed and delivered by the Company and,
assuming due execution and delivery by Parent and Merger Sub, constitutes a
valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. The execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the Company
Charter Documents, (ii) subject to obtaining the approval and adoption of this
Agreement and the approval of the Merger by the Company's stockholders as
contemplated in Section 5.2 and compliance with the requirements set forth in
Section 2.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which the Company or any of its subsidiaries or any of their respective
properties is bound, or (iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or Encumbrance on any of the material properties or
assets of the Company or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective assets are bound. Part 2.4(a) of
the Company Schedules lists all consents, waivers and approvals under any of the
Company's or any of its subsidiaries' agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby, which, if individually or in the aggregate not obtained,
would result in a material loss of benefits to the Company, Parent or the
Surviving Corporation as a result of the Merger.
(b)......No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("Governmental Entity"), is required to be obtained or made by the
Company in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) approval of
the Prospectus/Proxy Statement (as defined in Section 2.19) and the Registration
Statement (as defined in Section 2.19) by the Securities and Exchange Commission
("SEC") in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the securities or antitrust laws of any foreign country, and (iv) to
the knowledge of the Company, such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to the Company or Parent or have a material adverse effect on the ability of the
parties hereto to consummate the Merger.
2.5 SEC Filings; Company Financial Statements; No Undisclosed Liabilities.
---------------------------------------------------------------------
(a)......The Company has filed all forms, reports and
documents required to be filed by the Company with the SEC since December 8,
1999 and has made available to Parent such forms, reports and documents in the
form filed with the SEC. All such required forms, reports and documents
(including those that the Company may file subsequent to the date hereof) are
referred to herein as the "Company SEC Reports." As of their respective dates,
the Company SEC Reports (including, but not limited to, the Company's
registration statement on form S-1 and the prospectus included therein) (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were 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. None of
the Company's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b)......Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "Company Financials"), including each Company SEC Reports filed
after the date hereof until the Closing, (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 United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of the Company's operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and were or are subject to normal and
recurring year-end adjustments. The audited balance sheet of the Company as of
September 30, 1999 previously delivered to Parent by the Company and contained
in the Company SEC Reports as of December 8, 1999 is hereinafter referred to as
the "Company Balance Sheet."
(c)......The Company has heretofore furnished to Parent a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Securities Act or the Exchange Act.
(d)......The Company issued stock in an initial public
offering pursuant to a registration statement on Form S-1 (the "Company S-1"),
which was declared effective on December 8, 1999 (the "Effective Date") and a
prospectus (the "Company Prospectus"), the final form of which was filed with
the SEC on December 8, 1999 pursuant to Rule 424(b) of the Securities Act. At
the Effective Date, the Company S-1 did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements not misleading.
(e)......Neither Company nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Company and its subsidiaries taken as a whole, except (i)
liabilities provided for in Company Balance Sheet or (ii) liabilities incurred
since September 30, 1999 in the ordinary course of business, none of which is
material to the business, results of operations or financial condition of
Company and its subsidiaries, taken as a whole.
2.6......Absence of Certain Changes or Events. Since the date of the
Company Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock, (iv) except as set forth in Part 2.6 of the Company
Schedules, any granting by the Company or any of its subsidiaries of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by the Company or any of its subsidiaries of any bonus, except
for bonuses made in the ordinary course of business consistent with past
practice, or (v) any granting by the Company or any of its subsidiaries of any
increase in severance or termination pay or (vi) any entry by the Company or any
of its subsidiaries into any currently effective employment, severance,
termination or indemnification agreement or any other agreement the benefits of
which are contingent or the terms of which are materially altered upon the
occurrence of a transaction involving the Company of the nature contemplated
hereby, (vii) entry by the Company or any of its subsidiaries into any licensing
or other agreement with regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 2.9) other than licenses in the
ordinary course of business consistent with past practice, (viii) any amendment
or consent with respect to any licensing agreement filed or required to be filed
by the Company with the SEC, (ix) any material change by the Company in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, (x) any revaluation by the Company of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business and consistent with past practice; or (xi) any changes in the vesting
schedules of outstanding Company Options.
2.7......Taxes.
-----
(a)......Definition of Taxes. For the purposes of this
Agreement, "Tax" or "Taxes" refers to any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities relating to taxes, 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.
(b)......Tax Returns and Audits.
----------------------
(i) The Company and each of its subsidiaries have timely filed all
federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to Taxes required to be filed
by the Company and each of its subsidiaries with any Tax authority. The
Company and each of its subsidiaries have paid all Taxes shown to be due on
such Returns.
(ii) The Company and each of its subsidiaries as of the Effective Time
will have withheld with respect to its employees all federal and state
income taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA"), Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and
other Taxes required to be withheld.
(iii) Neither the Company nor any of its subsidiaries has been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed in writing (or otherwise, to the Company's knowledge,
proposed) or assessed against the Company or any of its subsidiaries, nor
has the Company or any of its subsidiaries executed any unexpired waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of the Company or any
of its subsidiaries by any Tax authority is presently in progress, nor has
the Company or any of its subsidiaries been notified in writing (or
otherwise, to the Company's knowledge, notified) of any request for such an
audit or other examination.
(v) No adjustment relating to any Returns filed by the Company or any
of its subsidiaries has been proposed in writing formally or informally by
any Tax authority to the Company or any of its subsidiaries or any
representative thereof.
(vi) Neither the Company nor any of its subsidiaries has any liability
for unpaid Taxes which has not been accrued for or reserved on the Company
Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to the Company, other than any liability for unpaid Taxes
that may have accrued since the date of the Company Balance Sheet in
connection with the operation of the business of the Company and its
subsidiaries in the ordinary course.
(vii) Except as set forth on Part 2.7(b) of the Company Schedules,
there is no contract, agreement, plan or arrangement to which the Company
is a party as of the date of this Agreement, including but not limited to
the provisions of this Agreement, covering any employee or former employee
of the Company or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(viii) Neither the Company nor any of its subsidiaries 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.
(ix) Neither the Company nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(x) Except as may be required as a result of the Merger, the Company
and its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions,
events or accounting methods employed prior to the Closing.
(xi) Part 2.7 of the Company Schedules lists (A) any foreign Tax
holidays, (B) any intercompany transfer pricing agreements, or other
arrangements that have been established by the Company or any of its
subsidiaries with any Tax authority and (C) any expatriate programs or
policies affecting the Company or any of its subsidiaries.
(xii) None of the Company or its subsidiaries (A) has been a member of
an "affiliated group" filing a consolidated federal income tax return
(other than a group the common parent of which was the Company) or (B) has
any liability for the Taxes of any person (other than any of the Company
and its subsidiaries) under Reg. Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(xiii) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (x) in the two years prior to the date of this Agreement or (y)
in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
2.8......Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a)......Part 2.8(a)(i) of the Company Schedules lists the
real property interests owned by the Company as of the date of this Agreement.
Part 2.8(a)(ii) of the Company Schedules lists all real property leases to which
the Company is a party as of the date of this Agreement and each amendment
thereto that is in effect as of the date of this Agreement. All such current
leases are in full force and effect and 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 (or event which with notice or lapse of
time, or both, would constitute a default) that would give rise to a material
claim. Other than the leaseholds created under the real property leases
identified in Part 2.8(a)(ii) of the Company Schedules, the Company owns no
interest in real property.
(b)......The Company has good and valid title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens"), except as reflected in
the Company Financials and except for liens for taxes not yet due and payable
and such Liens or other imperfections of title and encumbrances, 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.
2.9......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, international and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know how, technology,
technical data and customer lists, 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,
URLs, domain names, 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; and (viii) any
similar or equivalent rights to any of the foregoing anywhere
in the world.
"Company Intellectual Property" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the
Company and its subsidiaries.
"Registered Intellectual Property" means all United States,
international 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 domain names and reserved
domain names, (iv) registered copyrights and applications for
copyright registration; and (v) 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 its subsidiaries.
(a)......No Company Intellectual Property or product or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by the Company, or which may affect the validity,
use or enforceability of such Company Intellectual Property.
(b)......Part 2.9(b) of the Company Schedules is a complete
and accurate list of all Company Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of 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. Each material item of Company
Registered Intellectual Property is valid and subsisting, all necessary
registration, maintenance and renewal fees currently due in connection with such
Registered Intellectual Property have been made and all necessary documents,
recordations and certificates in connection with such 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 Registered Intellectual Property.
(c)......The Company owns and has good and exclusive title to,
or has license to or otherwise has a right to use or exploit in the way it has
been used as of the date hereof, each material item of Company Intellectual
Property or other Intellectual Property used by the Company free and clear of
any Encumbrance (excluding licenses and related restrictions granted in the
ordinary course of business consistent with past practices); and the Company is
the exclusive owner of all trademarks and trade names used in connection with
the operation or conduct of the business of the Company, including the sale of
any products or the provision of any services by the Company.
(d)......The Company owns exclusively, and has good title to,
all copyrighted works that are Company products or which the Company otherwise
expressly purports to own.
(e)......Neither the Company nor its subsidiaries have
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was material to the Company Intellectual
Property, to any third party.
(f)......To the extent that any material technology, software
or Intellectual Property has been developed or created independently or jointly
by a third party for Company or any of its subsidiaries or is incorporated into
any of the Company Products, Company has a written agreement with such third
party with respect thereto and Company thereby either (i) has obtained ownership
of, and is the exclusive owner of, or (ii) has obtained a perpetual,
non-terminable 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, to the fullest extent it is legally possible to do so. The
Company Schedules list all material contracts, licenses and agreements to which
the Company is a party (i) with respect to Company Intellectual Property
licensed or transferred to any third party (other than end-user licenses in the
ordinary course); or (ii) pursuant to which a third party has licensed or
transferred any material Intellectual Property to the Company.
(g)......All material contracts, licenses and agreements
relating to either (i) Company Intellectual Property or (ii) Intellectual
Property of a third party licensed to Company or any of its subsidiaries, are in
full force and effect. The consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of such contracts, licenses and
agreements. Each of Company and its subsidiaries is in material compliance with,
and has not materially breached, any term of any such contracts, licenses and
agreements and, to the knowledge of Company, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached, any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of Company's rights under such contracts, licenses and agreements
to the same extent Company and its 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 Company would otherwise be required to pay. Neither this
Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent or Merger Sub by operation of law or otherwise of any
contracts or agreements to which the Company is a party, will result in (i)
either Parent's or the Merger Sub's granting to any third party any right to or
with respect to any material Intellectual Property right owned by, or licensed
to, either of them, (ii) either the Parent's or the Merger Sub's being bound by,
or subject to, any non-compete or other material restriction on the operation or
scope of their respective businesses, or (iii) either the Parent's or the Merger
Sub's being obligated to pay any royalties or other material amounts to any
third party in excess of those payable by Company prior to the Closing.
(h)......The operation of the business of the Company and its
subsidiaries as such business currently is conducted, including the Company's
design, development, marketing and sale of the products or services of the
Company (including with respect to products currently under development) has
not, does not and will not infringe or misappropriate the Intellectual Property
of any third party or constitute unfair competition or trade practices under the
laws of any jurisdiction.
(i)......The Company has received neither written, nor to the
Company's knowledge, oral notice from any third party that the operation of the
business of the Company or any act, product or service of the Company, infringes
or misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.
(j)......To the knowledge of the Company, no person has
infringed or misappropriated or is infringing or misappropriating any Company
Intellectual Property.
(k)......The Company has taken reasonable steps to protect the
Company's rights in the Company's confidential information and trade secrets
that it wishes to protect or any trade secrets or confidential information of
third parties provided to the Company, and, without limiting the foregoing, the
Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement in the form attached
hereto as Exhibit F and, except as set forth on Part 2.9(l) of the Company
Schedules, all current and former employees and contractors of the Company have
executed such an agreement.
2.10.....Compliance; Permits; Restrictions.
---------------------------------
(a)......Neither the Company nor any of its subsidiaries is,
in any material respect, in conflict with, or in default or in violation of (i)
any law, rule, regulation, order, judgment or decree applicable to the Company
or any of its subsidiaries or by which the Company or any of its subsidiaries or
any of their respective properties is bound, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective businesses or properties is bound, except for conflicts,
violations and defaults that (individually or in the aggregate) would not cause
the Company to lose any material benefit or incur any material liability. No
investigation or review by any Governmental Entity is pending or, to the
Company's knowledge, has been threatened in a writing delivered to the Company,
against the Company or any of its subsidiaries, nor, to the Company's knowledge,
has any Governmental Entity indicated an intention to conduct an investigation
of the Company or any of its subsidiaries. There is no material agreement,
judgment, injunction, order or decree binding upon the Company or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of the Company or any
of its subsidiaries, any acquisition of material property by the Company or any
of its subsidiaries or the conduct of business by the Company as currently
conducted.
(b)......The Company and its subsidiaries hold, to the extent
legally required, all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities that are material to and required for the
operation of the business of the Company as currently conducted (collectively,
the "Company Permits"). The Company and its subsidiaries are in compliance in
all material respects with the terms of the Company Permits, except where the
failure to be in compliance with the terms of the Company Permits would not be
material to the Company.
2.11.....Litigation. Except as disclosed in Part 2.11 of the Company
Schedules, there are no claims, suits, actions or proceedings pending or, to the
knowledge of the Company, threatened against, relating to or affecting the
Company or any of its subsidiaries, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions contemplated by this
Agreement or which could reasonably be expected, either singularly or in the
aggregate with all such claims, actions or proceedings, to be material to the
Company. No Governmental Entity has at any time challenged or questioned in a
writing delivered to the Company the legal right of the Company to design,
manufacture, offer or sell any of its products or services in the present manner
or style thereof.
Except as disclosed in Part 2.11 of the Company Schedules, the Company
has never been subject to an audit, compliance review, investigation or like
contract review by the GSA office of the Inspector General or other Governmental
Entity or agent thereof in connection with any government contract (a
"Government Audit"), to the Company's knowledge no Government Audit is
threatened, and in the event of such Government Audit, to the knowledge of the
Company, no basis exists for a finding of noncompliance with any material
provision of any government contract or a refund of any amounts paid or owed by
any Governmental Entity pursuant to such government contract. For each item
disclosed in the Company Schedule pursuant to this Section 2.11 a true and
complete copy of all correspondence and documentation with respect thereto has
been made available to Parent.
2.12.....Brokers' and Finders' Fees. Except for fees payable to X.X.
Xxxxxxxxx pursuant to an engagement letter dated January 20, 2000 a copy of
which has been provided to Parent, the Company has not incurred, nor will it
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.
2.13.....Transactions with Affiliates. Except as set forth in the
Company SEC Reports, since September 30, 1999, no event has occurred as of the
date of this Agreement that would be required to be reported by the Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC. Part 2.13 of the
Company Schedules identifies each person who is an "affiliate" (as that term is
used in Rule 145 promulgated under the Securities Act) of the Company as of the
date of this Agreement.
2.14.....Employee Benefit Plans.
----------------------
(a)......Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.14(a)(i) below (which definition shall apply
only to this Section 2.14), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with the Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean 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 written or unwritten or otherwise, 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 for the benefit of any Employee
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended
(iv) "DOL" shall mean the 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 mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit 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) "International Employee Plan" shall mean each Company Employee
Plan that has been adopted or maintained by the Company, whether informally
or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
(xiii) "Pension Plan" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b)......Schedule. Part 2.14(b) of the Company Schedules
contain an accurate and complete list of each Company Employee Plan and each
material Employee Agreement. The Company does not have any legally binding plan
or commitment to establish any new Company Employee Plan, 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), or to enter into any Company
Employee Plan or material Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing. Since December 31, 1999 the Company has
hired five employees and has indicated in written offer letters that an
aggregate of 37,000 options would be granted to these employees (the "New
Options"); none of the vesting terms of the New Options shall accelerate as a
result of the actions contemplated by this Agreement.
(c)......Documents. The Company has provided or made available
to Parent: (i) correct and complete copies of all documents embodying 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
three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached 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 the summary of material modifications thereto, 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 or the DOL with respect to any Company Employee Plan; (vii) all
material written agreements and contracts relating to each Company Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii) all communications
material to any Employee or Employees relating to any Company Employee Plan and
any proposed Company Employee Plans, 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; (ix) all COBRA forms and related notices; and
(x) all registration statements and prospectuses prepared in connection with
each Company Employee Plan.
(d)......Employee Plan Compliance. Except as set forth in Part
2.14(d) of the Company Schedules, (i) the Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each Company Employee Plan, and each Company Employee Plan has been
established and maintained in all material respects 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 letter from the IRS with respect to each such 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 has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination; (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 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 reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Parent,
the Company 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 or any
Affiliates, 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 402(i) of ERISA
or Sections 4975 through 4980 of the Code.
(e)......Pension Plans. The Company does not now, nor has it
ever, maintained, established, sponsored, participated in, or contributed to,
any Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code.
(f)......Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g)......No Post-Employment Obligations. No Company Employee
Plan provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable law, and the Company has
never represented, promised or contracted (whether in oral or written form) to
any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h)......Neither the Company nor any Affiliate has, prior to
the Effective Time, and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i)......Effect of Transaction. Except as set forth on Part
2.14(i) of the Company Schedules, the execution 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 former or current Employee or
director.
(j)......Employment Matters. The Company: (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; (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 material
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).
There are no pending, or, to the Company's knowledge, threatened claims or
actions against the Company under any worker's compensation policy or long-term
disability policy. To the Company's knowledge, no employee of the Company has
violated any employment contract, nondisclosure agreement or noncompetition
agreement by which such employee is bound due to such employee being employed by
the Company and disclosing to the Company or using trade secrets or proprietary
information of any other person or entity.
(k)......Labor. No work stoppage or labor strike against the
Company is pending, threatened or reasonably anticipated. The Company does not
know of any activities or proceedings of any labor union to organize any
Employees. There are no actions, suits, claims, labor disputes or grievances
pending, or, to the knowledge of the Company, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Employee, including, without limitation, charges of unfair labor practices
or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to the
Company. Neither the Company nor any of its subsidiaries has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act.
The Company is not 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.
(l)......International Employee Plan. Each International
Employee Plan has been established, maintained and administered in material
compliance with its terms and conditions and with the requirements prescribed by
any and all statutory or regulatory laws that are applicable to such
International Employee Plan. Furthermore, no International Employee Plan has
unfunded liabilities, that as of the Effective Time, will not be offset by
insurance or fully accrued. Except as required by law, no condition exists that
would prevent the Company or Parent from terminating or amending any
International Employee Plan at any time for any reason.
(m)......Restricted Stock. No shares of outstanding Company
Common Stock 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.
2.15.....Environmental Matters.
---------------------
(a)......Hazardous Material. Except as would not result in
material liability to the Company, no underground storage tanks and no 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 United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, but
excluding office and janitorial supplies, (a "Hazardous Material") are present,
or as a result of the actions of the Company or any of its subsidiaries or any
affiliate of the Company, 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 of its subsidiaries has at any time owned, operated, occupied or
leased.
(b)......Hazardous Materials Activities. Except as would not
result in a material liability to the Company (in any individual case or in the
aggregate) (i) neither the Company nor any of its subsidiaries has transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, and (ii) neither the Company nor any of its subsidiaries has
disposed of, transported, sold, used, released, exposed its employees or others
to or manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c)......Permits. The Company and its subsidiaries currently
hold all environmental approvals, permits, licenses, clearances and consents
(the "Company Environmental Permits") necessary for the conduct of the Company's
and its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d)......Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, and
to the Company's knowledge, no action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against the Company or any of its subsidiaries in a writing delivered to
the Company concerning any Company Environmental Permit, Hazardous Material or
any Hazardous Materials Activity of the Company or any of its subsidiaries. The
Company is not aware of any fact or circumstance which could involve the Company
or any of its subsidiaries in any environmental litigation or impose upon the
Company any material environmental liability.
2.16.....Year 2000 Compliance. Except as disclosed in Part 2.16 of the
Company Schedules, the Company's products and internal systems have been
designed to ensure date and time entry recognition, calculations that
accommodate same century and multi-century formulas and date values, leap year
recognition and calculations, and date data interface values that reflect the
century. The Company's products and internal systems manage and manipulate data
involving dates and times, including single century formulas and multi-century
formulas, and do not cause an abnormal ending scenario within the application or
generate incorrect values or invalid results involving such dates.
2.17.....Agreements, Contracts and Commitments. Except as otherwise set
forth in Part 2.14 or 2.17 of the Company Schedules, neither the Company nor any
of its subsidiaries is a party to or is bound by:
(a)......any employment or consulting agreement, contract or
commitment greater than $100,000 with any officer, employee or member of the
Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty (30) days' notice
without liability or financial obligation, except to the extent general
principles of wrongful termination law may limit the Company's or any of its
subsidiaries' ability to terminate employees at will;
(b)......any agreement of indemnification or any guaranty
other than any agreement of indemnification entered into in connection with the
sale or license of software products in the ordinary course of business;
(c)......any agreement, contract or commitment containing any
covenant limiting in any respect the right of the Company or any of its
subsidiaries to engage in any line of business or to compete with any person or
granting any exclusive distribution rights;
(d)......any agreement, contract or commitment currently in
force relating to the disposition or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of a material amount of assets not
in the ordinary course of business or pursuant to which the Company has any
material ownership interest in any corporation, partnership, joint venture or
other business enterprise other than the Company's subsidiaries;
(e)......any joint marketing or development agreement
currently in force under which the Company or any of its subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of 90 days or
less, or any material agreement pursuant to which the Company or any of its
subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by the
Company or any of its subsidiaries and which may not be canceled without penalty
upon notice of 90 days or less;
(f)......any agreement, contract or commitment currently in
force to provide source code to any third party for any product or technology
that is material to the Company and its subsidiaries taken as a whole;
(g)......except as set forth on Part 2.2 of Company Schedules,
any agreement or plan, including, without limitation, any stock option plan,
stock appreciation right 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;
(h)......any agreement, contract or commitment currently in
force to sell or distribute any Company products, service or technology except
agreements with distributors or sales representatives in the normal course of
business cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided to Parent;
(i)......any mortgages, indentures, guarantees, loans or
credit agreements, security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit;
(j)......any settlement agreement entered into within three
(3) years prior to the date of this Agreement; or
(k)......any other agreement, contract or commitment that has
a value of $100,000 or more individually.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), is in
breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound that are required to be
disclosed in the Company Schedules or are required to be filed with any Company
SEC Report (any such agreement, contract or commitment, a "Company Contract") in
such a manner as would permit any other party to cancel or terminate any such
Company Contract, or would permit any other party to seek material damages or
other remedies (for any or all of such breaches, violations or defaults, in the
aggregate).
2.18.....[RESERVED].
2.19.....Disclosure. None of the information supplied or to be supplied
by or on behalf of the Company for inclusion or incorporation by reference in
the registration statement on Form S-4 (or similar successor form) to be filed
with the SEC by Parent in connection with the issuance of Parent Common Stock in
the Merger (the "Registration Statement") will, at the time the Registration
Statement is filed with the SEC or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
Prospectus/Proxy Statement to be filed with the SEC as part of the Registration
Statement (the "Prospectus/Proxy Statement"), will, at the time the
Prospectus/Proxy Statement is mailed to the stockholders of the Company, at the
time of the Company Stockholders' Meeting or as of 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 in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to any information
supplied by the Parent which is contained in any of the foregoing documents.
2.20.....Board Approval. The Board of Directors of the Company has, as
of the date of this Agreement, unanimously (i) determined that the Merger is
fair to, and in the best interests of the Company and its stockholders, (ii)
approved and deemed advisable, subject to stockholder approval, this Agreement
and the transactions contemplated hereby and (iii) determined to recommend that
the stockholders of the Company approve and adopt this Agreement and approve the
Merger.
2.21.....Fairness Opinion. The Company's Board of Directors has
received a verbal opinion from X.X. Xxxxxxxxx, dated as of the date hereof, to
the effect that as of the date hereof, the Exchange Ratio is fair to the
Company's stockholders from a financial point of view and has delivered to
Parent such verbal opinion. The Company has a legally enforceable agreement with
X.X. Xxxxxxxxx to provide this opinion in writing to the Company within three
(3) days of the date of this Agreement and that such opinion shall be included
in the Prospectus/Proxy Statement.
2.22.....Restrictions on Business Activities. Except as set forth in
Part 2.22 of the Company Schedule, there is no agreement, commitment, judgment,
injunction, order or decree binding upon the Company or to which the Company is
a party which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of the Company, any
acquisition of property by the Company or the conduct of business by the Company
as currently conducted.
2.23.....Insurance. The Company maintains insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company and its subsidiaries
(collectively, the "Insurance Policies") which are of the type and in amounts
customarily carried by persons conducting businesses similar to those of the
Company and its subsidiaries. There is no material claim by the Company or any
of its subsidiaries pending under any of the material Insurance Policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds.
2.24.....State Takeover Statutes. No state takeover statute or similar
statute or regulation applies to or purports to apply to the Merger, this
Agreement and the Company Voting Agreements or the transactions contemplated by
this Agreement and the Company Voting Agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date hereof and as of the Closing Date, Parent and Merger Sub
represent and warrant to the Company, as follows:
3.1......Organization and Qualification; Subsidiaries. Each of Parent
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted, except
where the failure to do so would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Each of Parent and its subsidiaries is in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. Each
of Parent and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would
not, either individually or in the aggregate, have a Material Adverse Effect on
Parent.
3.2......Certificate of Incorporation and Bylaws. Parent has previously
furnished to Company complete and correct copies of its Certificate of
Incorporation and Bylaws, (the "Parent Charter Documents") as amended to date.
Such Parent Charter Documents and equivalent organizational documents of each of
its subsidiaries are in full force and effect. Parent is not in violation of any
of the provisions of the Parent Charter Documents, and no subsidiary of Parent
is in violation of any of its equivalent organizational documents.
3.3......Capitalization. The authorized capital stock of Parent
consists of (i) 250,000,000 shares of Parent Common Stock, par value $0.001 per
share, and (ii) 10,000,000 shares of Preferred Stock, par value $0.001 per share
("Parent Preferred Stock"). At the close of business on January 31, 2000 (i)
41,385,986 shares of Parent Common Stock were issued and outstanding, (ii) 0
shares of Parent Common Stock were held in treasury by Parent or by subsidiaries
of Parent, (iii) 1,000,000 shares of Parent Common Stock were reserved for
future issuance pursuant to Parent's employee stock purchase plan, and (iv)
8,144,826 shares of Parent Common Stock were reserved for issuance upon the
exercise of outstanding options ("Parent Options") to purchase Parent Common
Stock. As of the date hereof, no shares of Parent Preferred Stock were issued or
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, par value $0.001 per share, all of which, as of the date
hereof, are issued and outstanding. All of the outstanding shares of Parent's
and Merger Sub's respective capital stock have been duly authorized and validly
issued and are fully paid and nonassessable. All shares of Parent Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, shall, and the
shares of Parent Common Stock to be issued pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock (other than directors' qualifying shares) of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares (other than directors' qualifying shares) are
owned by Parent or another subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Parent's voting rights,
charges or other encumbrances of any nature whatsoever.
3.4......Authority; Non-Contravention
(a)......Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent, subject only
to the filing of the Certificate of Merger pursuant to Delaware Law. This
Agreement has been duly executed and delivered by Parent and Merger Sub, and
upon due execution and delivery by the Company, constitutes a valid and binding
obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub
in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub will not, (i)
conflict with Parent Charter Documents, (ii) subject to compliance with the
requirements set forth in Section 3.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Parent or any of
its subsidiaries or by which Parent or any of its subsidiaries or any of their
respective properties are bound or affected, or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or impair Parent's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a material Encumbrance on any of the material
properties or assets of Parent or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, concession, or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective assets are bound or affected.
(b)......No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity, is required to
be obtained or made by Parent in connection with the execution and delivery of
this Agreement or the consummation of the Merger, except for (i) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
(ii) the approval of the Registration Statement and the Prospectus/Proxy
Statement in accordance with the Securities Act and the Exchange Act,
respectively, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the HSR Act, and the
securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Parent or have a material adverse
effect on the ability of the parties hereto to consummate the Merger.
3.5......SEC Filings; Parent Financial Statements.
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(a)......Parent has filed all forms, reports and documents
required to be filed by Parent with the SEC since December 9, 1999 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) are referred to herein as
the "Parent SEC Reports"). As of their respective dates, Parent SEC Reports (i)
were prepared in accordance and complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, 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 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. None of
Parent's subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b)......Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in Parent SEC
Reports (the "Parent Financials"), including each Parent SEC Report filed after
the date hereof until the Closing, (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 United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented 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, except that the unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring
year-end adjustments. The balance sheet of Parent dated October 29, 1999
contained in Parent's registration statement on Form S-1 dated December 9, 1999
is hereinafter referred to as (the "Parent Balance Sheet").
(c)......Parent has heretofore furnished to the Company a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by Parent with
the SEC pursuant to the Securities Act or the Exchange Act.
(d)......Neither Parent nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except (i)
liabilities provided for in Parent's Balance Sheet or (ii) liabilities incurred
since October 29, 1999 in the ordinary course of business, none of which is
material to the business, results of operations or financial condition of Parent
and its subsidiaries, taken as a whole.
3.6......Absence of Certain Changes or Events. Since the date of Parent
Balance Sheet there has not been: (i) any Material Adverse Effect on Parent,
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of Parent's
or any of its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by Parent of any of Parent's capital stock or any other securities
of Parent or its subsidiaries or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of Parent's or any of its subsidiaries' capital
stock, (iv) any granting by Parent or any of its subsidiaries of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Parent or any of its subsidiaries of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by Parent or any of its subsidiaries of any increase in
severance or termination pay or any entry by Parent or any of its subsidiaries
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Parent of the nature contemplated hereby, (v) entry by
Parent or any of its subsidiaries into any licensing or other agreement with
regard to the acquisition or disposition of any material Intellectual Property
(as defined in Section 2.9) other than licenses in the ordinary course of
business consistent with past practice, (vi) any amendment or consent with
respect to any licensing agreement filed or required to be filed by Parent with
the SEC, (vii) any material change by Parent in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP, or
(viii) any revaluation by Parent of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course of business.
3.7......Tax. Parent has timely filed all Tax Returns required to be
filed by it, has paid all Taxes shown thereon to be due, and has provided
adequate accruals in accordance with GAAP in its financial statements for any
Taxes that have not been paid. No audit of any Tax Return of Parent is being
conducted by a Tax authority. No extension of the statute of limitations on the
assessment of any Taxes has been granted by Parent and is currently in effect.
3.8......Compliance; Permits; Restrictions.
---------------------------------
(a)......Neither Parent nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or in violation of (i) any
law, rule, regulation, order, judgment or decree applicable to Parent or any of
its subsidiaries or by which Parent or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or any of its subsidiaries is a
party or by which Parent or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for conflicts, violations and
defaults that (individually or in the aggregate) would not cause Parent to lose
any material benefit or incur any material liability. No investigation or review
by any Governmental Entity is pending or, to Parent's knowledge, has been
threatened in a writing delivered to Parent against Parent or any of its
subsidiaries, nor, to Parent's knowledge, has any Governmental Entity indicated
an intention to conduct an investigation of Parent or any of its subsidiaries.
There is no material agreement, judgment, injunction, order or decree binding
upon Parent or any of its subsidiaries which has or could reasonably be expected
to have the effect of prohibiting or materially impairing any business practice
of Parent or any of its subsidiaries, any acquisition of material property by
Parent or any of its subsidiaries or the conduct of business by Parent as
currently conducted.
(b)......Parent and its subsidiaries hold, to the extent
legally required, all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities that are material to and required for the
operation of the business of Parent as currently conducted (collectively, the
"Parent Permits"). Parent and its subsidiaries are in compliance in all material
respects with the terms of Parent Permits, except where the failure to be in
compliance with the terms of Parent Permits would not be material to Parent.
3.9......Litigation. There are no claims, suits, actions or proceedings
pending or, to the knowledge of Parent, threatened against, relating to or
affecting Parent or any of its subsidiaries, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
singularly or in the aggregate with all such claims, actions or proceedings, to
be material to Parent. No Governmental Entity has at any time challenged or
questioned in a writing delivered to Parent the legal right of Parent to design,
manufacture, offer or sell any of its products or services in the present manner
or style thereof. As of the date hereof, to the knowledge of Parent, no event
has occurred, and no claim, dispute or other condition or circumstance exists,
that will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of Parent to seek indemnification from
Parent.
3.10.....Agreements, Contracts and Commitments. As of the date of this
Agreement, neither Parent nor any of its subsidiaries, nor to Parent's knowledge
any other party to a material Contract of Parent, is in breach, violation or
default under such Contract, and neither Parent nor any of its subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any material Contract of Parent in such a
manner as would permit any other party to cancel or terminate any such material
Contract of Parent, or would permit any other party to seek material damages or
other remedies (for any or all of such breaches, violations or defaults, in the
aggregate).
3.11.....Registration Statement; Proxy Statement. None of the
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in (i) the Registration Statement will, at the time the
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading; and (ii)
the Proxy Statement/Prospectus will, at the dates mailed to the stockholders of
Company, at the time of the Company Stockholders' Meeting and as of 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 in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing,
Parent makes no representation or warranty with respect to any information
supplied by the Company which is contained in any of the foregoing documents.
3.12.....Board Approval. The Board of Directors of Parent has, as of
the date of this Agreement, approved the issuance of shares of Parent Common
Stock and the payment of an aggregate of in connection with the Merger.
3.13.....Benefit Plans. To the extent eligible, employees of the
Company may participate and/or receive options and stock under the Parent's 1998
Stock Option Plan and 1998 Employee Stock Plan, pursuant to applicable laws.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1......Conduct of Business by the Company. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, the Company and each
of its subsidiaries shall, except to the extent that Parent shall otherwise
consent in writing, carry on its business, in all material respects, in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations,
pay its debts and taxes when due subject to good faith disputes over such debts
or taxes, pay or perform other material obligations when due subject to good
faith disputes over such obligations, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others with which it has
business dealings.
In addition, except as permitted by the terms of this Agreement, and
except as provided in Article 4 of the Company Schedules, without the prior
written consent of Parent, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following:
(a)......Except for the acceleration of the vesting of stock
options pursuant to pre-existing contractual arrangement as set forth in Part
2.2(b) of the Company Schedules, waive any stock repurchase rights, accelerate,
amend or change the period of exercisability of options or restricted stock, or
reprice options granted under any employee, consultant, director or other stock
plans or authorize cash payments in exchange for any options granted under any
of such plans;
(b)......Grant any severance or termination pay to any officer
or employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to Parent, or adopt any new severance plan;
(c)......Transfer or license to any person or entity or
otherwise extend, amend or modify in any material respect any rights to the
Company Intellectual Property, or enter into grants to future patent rights,
other than non-exclusive licenses in the ordinary course of business and
consistent with past practice;
(d)......Declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock, equity securities or property)
in respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for any capital stock;
(e)......Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of the Company or its subsidiaries,
except repurchases of unvested shares at cost in connection with the termination
of the employment relationship with any employee pursuant to stock option or
purchase agreements in effect on January 20, 2000;
(f)......Issue, deliver, sell, authorize, pledge or otherwise
encumber, any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than (i) stock
options pursuant to the Company Stock Option Plans granted to employees of the
Company to purchase 1,200,000 shares (as appropriately adjusted for stock splits
and the like) of Company Common Stock with strike prices equal to the fair
market value of the Company Common Stock at the time of grant and otherwise with
vesting schedules and other terms subject to Section 5; (ii) issuance of shares
of the Company Common Stock in connection with the prior acquisitions of the
Company, as set forth in Part 4.1 of the Company Schedules; and (iii) issuance
of shares by the Company Common Stock pursuant to the exercise of stock options
therefor outstanding as of January 20, 2000 or granted pursuant to the preceding
clause (i);
(g)......Cause, permit or propose any amendments to its
Certificate of Incorporation, Bylaws or other charter documents (or similar
governing instruments of any of its subsidiaries) except to the extent required
to comply with the Company's obligations hereunder, required by law or required
by the rules and regulations of Nasdaq;
(h)......Except as set forth on Part 4.1 of the Company
Schedules and except for the acquisition of Question Exchange, Inc. pursuant to
the terms of a certain Agreement and Plan of Merger dated January 27, 2000,
acquire or agree to acquire by merging or consolidating with, or by purchasing
any equity interest in or a portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company or enter into any material joint ventures, strategic partnerships or
alliances;
(i)......Sell, lease, license, encumber or otherwise dispose
of any properties or assets which are material, individually or in the
aggregate, to the business of the Company, except sales of inventory and used
equipment in the ordinary course of business consistent with past practice;
(j)......Incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of the Company, enter into any "keep well" or other agreement to
maintain any financial statement condition or enter into any arrangement having
the economic effect of any of the foregoing other than in connection with the
financing of ordinary course trade payables consistent with past practice;
(k)......Adopt or amend any employee benefit plan or employee
stock purchase or employee stock option plan, or enter into any employment
contract or collective bargaining agreement (other than offer letters and letter
agreements entered into in the ordinary course of business consistent with past
practice with employees who are terminable "at will"), pay any special bonus or
special remuneration to any director or employee, or increase the salaries or
wage rates or fringe benefits (including rights to severance or indemnification)
of its directors, officers, employees or consultants other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedures;
(l)......Except for payments made in connection with the
acquisition of Question Exchange, Inc., make any payments outside of the
ordinary course of business consistent with past practices in excess of $50,000
individually or in the aggregate;
(m)......Modify, amend or terminate any Company Contract or
other material contract or agreement to which the Company or any subsidiary
thereof is a party or waive, release or assign any material rights or claims
thereunder;
(n)......Enter into any contracts, agreements, or obligations
relating to the distribution, sale, license or marketing by third parties of the
Company's products or products licensed by the Company other than in the
ordinary course of business consistent with past practice;
(o)......Materially revalue any of its assets or, except as
required by GAAP, make any change in accounting methods, principles or
practices;
(p)......Take any action that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code; or
(q)......Agree in writing or otherwise to take any of the
actions described in (a) through (p) above.
4.2......Conduct of Business by Parent. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, except as permitted by
the terms of this Agreement and except as provided in Section 4.2 of the Parent
Schedule, without the prior written consent of Company, Parent shall not engage
in any action that could reasonably be expected to cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1......Prospectus/Proxy Statement; Registration Statement; Other
Filings. As promptly as practicable after the execution of this Agreement, the
Company and Parent will prepare and file with the SEC, the Prospectus/Proxy
Statement and Parent will prepare and file with the SEC the Registration
Statement in which the Prospectus/Proxy Statement will be included as a
prospectus. Each of Parent and Company shall 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 Proxy Statement/Prospectus and the
Registration 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 Proxy Statement/Prospectus and the
Registration Statement. Each of the Company and Parent will respond to any
comments of the SEC, will use its respective commercially reasonable efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing and the Company will cause the
Prospectus/Proxy Statement to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. As promptly as practicable after the date of this Agreement, each of the
Company and Parent will prepare and file (i) with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties (the "Antitrust Filings") and (ii) any other filings required to be
filed by it under the Exchange Act, the Securities Act or any other Federal,
state or foreign laws relating to the Merger and the transactions contemplated
by this Agreement (the "Other Filings"). The Company and Parent each shall
promptly supply the other with any information which may be required in order to
effectuate any filings pursuant to this Section 5.1. Each of the Company and
Parent will notify the other promptly upon the receipt of any comments from the
SEC or its staff or any other government officials in connection with any filing
made pursuant hereto and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Prospectus/Proxy Statement or any Antitrust Filings or Other
Filing or for additional information and will supply the other with copies of
all correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Prospectus/Proxy
Statement, the Merger or any Antitrust Filing or Other Filing. Each of the
Company and Parent will cause all documents that it is responsible for filing
with the SEC or other regulatory authorities under this Section 5.1 to comply in
all material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Prospectus/Proxy Statement,
the Registration Statement or any Antitrust Filing or Other Filing, the Company
or Parent, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of the Company and/or Parent, such
amendment or supplement.
5.2......Meeting of Company Stockholders.
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(a)......Promptly after the date hereof, the Company will take
all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene a meeting of the Company's stockholders to
consider adoption and approval of this Agreement and approval of the Merger (the
"Company Stockholders' Meeting") to be held as promptly as practicable, and in
any event (to the extent permissible under applicable law) within 45 days after
the declaration of effectiveness of the Registration Statement. The Company will
use its commercially reasonable efforts to solicit from its stockholders proxies
in favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action necessary or advisable to secure the vote
or consent of its stockholders required by the rules of Nasdaq or Delaware Law
to obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, with Parent's prior written consent, the Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to the Company's stockholders in advance of a vote on the Merger and
this Agreement or, if as of the time for which the Company Stockholders' Meeting
is originally scheduled (as set forth in the Prospectus/Proxy Statement) there
are insufficient shares of Company Common Stock represented (either in person or
by proxy) to constitute a quorum necessary to conduct the business of the
Company's Stockholders' Meeting. The Company shall ensure that the Company
Stockholders' Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited by the Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with the Delaware Law, the
Company's Certificate of Incorporation and Bylaws, the rules of Nasdaq and all
other applicable legal requirements. The Company's obligation to call, give
notice of, convene and hold the Company Stockholders' Meeting in accordance with
this Section 5.2(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to the Company of any
Acquisition Proposal (as defined below), or by any withdrawal, amendment or
modification of the recommendation of the Board of Directors of the Company with
respect to the Merger and/or this Agreement.
(b)......Subject to Section 5.2(c): (i) the Board of Directors
of the Company shall unanimously recommend that the Company's stockholders vote
in favor of and adopt and approve this Agreement and approve the Merger at the
Company Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include
a statement to the effect that the Board of Directors of the Company has
unanimously recommended that the Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Stockholders'
Meeting; and (iii) neither the Board of Directors of the Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of the Company that the Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(c)......Nothing in this Agreement shall prevent the Board of
Directors of the Company from withholding, withdrawing, amending or modifying
its unanimous recommendation in favor of the Merger if (i) a Superior Offer (as
defined below) is made to the Company and is not withdrawn, (ii) the Company
shall have provided written notice to Parent (a "Notice of Superior Offer")
advising Parent that the Company has received a Superior Offer, specifying the
material terms and conditions of such Superior Offer and identifying the person
or entity making such Superior Offer, (iii) Parent shall not have, within five
(5) business days of Parent's receipt of the Notice of Superior Proposal, made
an offer that the Company Board by a majority vote determines in its good faith
judgment (after consultation with a financial adviser of nationally recognized
reputation) to be at least as favorable to the Company's stockholders as such
Superior Proposal (it being agreed that the Company Board shall convene a
meeting to consider any such offer by Parent promptly following the receipt
thereof), (iv) the Board of Directors of the Company concludes in good faith,
after consultation with its outside counsel, that, in light of such Superior
Offer, the withholding, withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of the Company to
comply with its fiduciary obligations to the Company's stockholders under
applicable law and (v) neither the Company nor any of its representatives shall
have violated any of the restrictions set forth in Section 5.5 or this Section
5.2. The Company shall provide Parent with at least three business days prior
notice (or such lesser prior notice as provided to the members of the Company's
Board of Directors but in no event less than twenty-four hours) of any meeting
of the Company's Board of Directors at which the Company's Board of Directors is
reasonably expected to consider any Acquisition Transaction (as defined below).
Nothing contained in this Agreement shall limit the Company's obligation to hold
and convene the Company Stockholders' Meeting (regardless of whether the
unanimous recommendation of the Board of Directors of the Company shall have
been withdrawn, amended or modified). For purposes of this Agreement "Superior
Offer" shall mean an unsolicited, bona fide written offer made by a third party
to consummate any of the following transactions: (i) a merger or consolidation
involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction hold none of the equity interest in the
surviving or resulting entity of such transaction or (ii) the acquisition by any
person or group (including by way of a tender offer or an exchange offer),
directly or indirectly, of ownership of 100% of the then outstanding shares of
capital stock of the Company, in each case on terms that the Board of Directors
of the Company determines, in its reasonable judgment (based on the written
advice of a financial adviser of nationally recognized reputation) to be more
favorable to the Company stockholders from a financial point of view than the
terms of the Merger; provided, however, that any such offer shall not be deemed
to be a "Superior Offer" if any financing required to consummate the transaction
contemplated by such offer is not committed.
(d)......Nothing contained in this Agreement shall prohibit
the Company or its Board of Directors from taking and disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act.
5.3......Registration Rights. Parent shall use its best efforts to
amend that certain First Amended and Restated Registration Rights Agreement
dated June 16, 1999 so that each Company Affiliate shall receive registration
rights for Parent-initiated secondary public offerings of Parent Common Stock,
such that in the aggregate, the Company Affiliates shall receive the right to
sell no less than twenty percent (20%) of the selling stockholder component of
the first Parent-initiated secondary offering of Parent Common Stock and pari
passu rights on subsequent Parent-initiated secondary offering.
5.4......Confidentiality; Access to Information
(a)......The parties acknowledge that the Company and Parent
have previously executed a Confidentiality Agreement, dated as of January __,
2000 (the "Confidentiality Agreement"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
(b)......Access to Information. Each of the Company and Parent
will afford the other and the other's accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel during the period prior to the
Effective Time to obtain all information concerning its business, including the
status of product development efforts, properties, results of operations and
personnel, as such other party may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 5.4 will 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.
5.5......No Solicitation.
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(a)......From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Article VII, the
Company and its subsidiaries will not, nor will they authorize or permit any of
their respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly, (i) solicit, initiate, knowingly encourage or induce the
making, submission or announcement of any Acquisition Proposal (as hereinafter
defined), (ii) participate in any discussions or negotiations regarding, or
furnish to any person other than Parent any non-public information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) subject to Section 5.2(c) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction; provided, however, that after receipt of an
unsolicited, written, bona fide Acquisition Proposal that the Board of Directors
of the Company reasonably concludes may constitute a Superior Offer, the Company
may submit to the party making such Acquisition Proposal a written list of
questions, the sole purpose of which is to elicit clarifications as to the
material terms of the Acquisition Proposal so as to enable the Board of
Directors of the Company to make a determination whether such Acquisition
Proposal is in fact a Superior Offer (it being agreed that any correspondence
with such party shall be limited to questions and such questions shall be
limited to the purpose of clarifying the material terms of such Acquisition
Proposal and shall not solicit or encourage any new Acquisition Proposal or any
change to the Acquisition Proposal, and it being further agreed that the Company
shall provide Parent with a copy of any correspondence to be delivered pursuant
to this Section 5.5(a) at least 24 hours prior to sending such correspondence to
any third party). The Company and its subsidiaries will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set forth
in the preceding two sentences by any officer, director or employee of the
Company or any of its subsidiaries or any investment banker, attorney or other
advisor or representative of the Company or any of its subsidiaries shall be
deemed to be a breach of this Section 5.5 by the Company.
For purposes of this Agreement, "Acquisition Proposal" shall mean any
offer or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean any transaction or series of related transactions
involving: (A) any purchase from the Company or acquisition by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 5% interest in the total outstanding
voting securities of the Company or any of its subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 5% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the
Company; (B) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 5% of the assets of the Company; or (C)
any liquidation or dissolution of the Company.
(b)......In addition to the obligations of the Company set
forth in paragraph (a) of this Section 5.5, the Company as promptly as
practicable shall advise Parent orally and in writing of any Acquisition
Proposal or any request for non-public information which the Company reasonably
believes would lead to an Acquisition Proposal or to any Acquisition
Transaction, or any inquiry with respect to or which the Company reasonably
should believe would lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the person or group making any such request, Acquisition Proposal or inquiry.
The Company will keep Parent informed as promptly as practicable in all material
respects of the status and details (including material amendments or proposed
material amendments) of any such Acquisition Proposal, request or inquiry.
5.6......Public Disclosure. Parent and the Company will consult with
each other, and to the extent practicable, agree, before issuing any press
release or otherwise making any public statement with respect to the Merger,
this Agreement or any Acquisition Proposal and will not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.7......Reasonable Efforts; Notification.
--------------------------------
(a)......Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using reasonable efforts to accomplish
the following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, the Company and its Board of Directors shall, if any
state takeover statute or similar statute or regulation is or becomes applicable
to the Merger, this Agreement or any of the transactions contemplated by this
Agreement, use all reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this Agreement
and the transactions contemplated hereby. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall be deemed to require Parent or the
Company or any subsidiary or affiliate thereof to agree to any divestiture by
itself or any of its affiliates of shares of capital stock or of any business,
assets or property, or the imposition of any material limitation on the ability
of any of them to conduct their businesses or to own or exercise control of such
assets, properties and stock.
(b)......The Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of the Company to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3(a) or 6.3(b) would not be satisfied, provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(c)......Parent shall give prompt notice to the Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.2(a) or 6.2(b) would not be
satisfied, provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.8......Third Party Consents. As soon as practicable following the
date hereof, Parent and the Company will each use its commercially reasonable
efforts to obtain any consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
5.9......Stock Options and Employee Benefits.
-----------------------------------
(a)......At the Effective Time, each then outstanding Company
Option, whether or not exercisable at the Effective Time and regardless of the
respective exercise prices thereof, will be assumed by Parent. Each Company
Option so assumed by Parent under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the applicable Company
Stock Option Plan (and any applicable stock option agreement for such Company
Option) immediately prior to the Effective Time (including, without limitation,
any repurchase rights or vesting provisions), except that (i) each Company
Option will be exercisable (or will become exercisable in accordance with its
terms) for that number of whole shares of Parent Common Stock equal to the
product of the number of shares of Company Common Stock that were issuable upon
exercise of such Company Option immediately prior to the Effective Time
multiplied by 0.425 (the "Exchange Ratio"), rounded down to the nearest whole
number of shares of Parent Common Stock and (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Option will be equal to the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded down to the nearest whole cent. Each assumed Company Option shall be
vested immediately following the Effective Time as to the same percentage of the
total number of shares subject thereto as it was vested as of the Effective Time
(taking into consideration the effect of the Merger on the vesting of such
assumed Company Options); provided however, that the Company shall take all best
efforts so that no Company Option shall vest in excess of 50% of the unvested
portion immediately prior to the Effective Time as a result of the Merger.
(b)......It is intended that Company Options assumed by Parent
shall qualify following the Effective Time as incentive stock options as defined
in Section 422 of the Code to the extent Company Options qualified as incentive
stock options immediately prior to the Effective Time and the provisions of this
Section 5.9 shall be applied consistent with such intent.
(c)......It is intended that prior to Closing, the Company
shall place into escrow with an escrow agent and form of escrow agreement
reasonably acceptable to Parent shares of Company Common Stock (the "Escrow
Shares") which would have been issued by the Company in connection with its
prior acquisitions as set forth on Part 4.1 of the Company Schedules. Upon
Closing, such Escrow Shares shall be converted into shares of Parent Common
Stock in accordance with the terms of this Agreement and be released from escrow
in accordance with the terms of the respective acquisition agreements.
(d)......Prior to the Effective Time, the Company shall grant
stock options pursuant to the Company 1999 Stock Option Plan to purchase an
aggregate of 1,200,000 shares (as appropriately adjusted for stock splits and
the like) of Company Common Stock to such persons and in such amounts as to
which Parent shall have agreed, with strike prices equal to the fair market
value of the Company Common Stock at the time of grant, with no acceleration of
vesting triggered by this Merger, with 25% of the option vested 12 months from
the date of grant and 1/48th per month thereafter. These options shall only be
granted to employees of the Company and in such individual amounts as set forth
on a written schedule approved in writing by Parent prior to the granting of
such options ("Option Schedule"); provided, however that no New Options shall be
included on the Option Schedule. The Company shall provide the Option Schedule
to Parent no later than ten (10) calendar days from the date hereof.
(e)......For purposes of determining eligibility to
participate, vesting, and accrual or entitlement to benefits where length of
service is relevant under any employee benefit plan or arrangement of Parent,
the Surviving Corporation, or any of their respective subsidiaries or
affiliates, the employees, officers, directors, and consultants of the Company
as of the Effective Time ("Affected Employees") shall receive service credit for
service with the Company (and any predecessors thereto) to the same extent that
such service credit was granted under the Company Employee Plans, subject to no
duplication of benefits; provided, however, that this paragraph shall not apply
to any of Parent's equity benefit plans.
(f)......Parent shall assume and honor, or shall cause the
Surviving Corporation to assume and honor, in accordance with their terms, all
written employment, retention, consulting, bonus, severance and termination
plans and agreements (including change in control provisions) of Affected
Employees provided or made available to Parent on or prior to the Effective
Time.
5.10.....Form S-8. If available for use by Parent, Parent agrees to
file a registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Stock Options as soon as is reasonably
practicable after the Effective Time, and in no event later than 45 days after
the Effective Time and shall use its commercially reasonable efforts to have
such registration statement become effective and to maintain the effectiveness
of such registration statement for so long as such options remain outstanding.
5.11.....Indemnification.
---------------
(a)......From and after the Effective Time, Parent will, and
will cause the Surviving Corporation to fulfill and honor in all respects the
obligations of the Company pursuant to any indemnification agreements between
the Company and its directors and officers as of the Effective Time (the
"Indemnified Parties"). The Certificate of Incorporation and Bylaws of the
Surviving Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Certificate of Incorporation and Bylaws of the Company as
in effect on the date hereof, which provisions will not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers, employees or
agents of the Company, unless such modification is required by law.
(b)......For a period of three years after the Effective Time,
Parent will cause the Surviving Corporation to use its commercially reasonable
efforts to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms comparable to those
applicable to the current directors and officers of the Company; provided,
however, that in no event will Parent or the Surviving Corporation be required
to expend in excess of 150% of the annual premium currently paid by the Company
for such coverage (or such coverage as is available for such 150% of such annual
premium).
5.12.....Invention Assignment Agreement. The Company shall use its best
efforts to have all employees and independent contractors execute, respectively,
that certain Employee Agreement attached hereto as Exhibit F and that certain
Contractor Agreement attached hereto as Exhibit G. The Company shall pay each
such employee and independent contractor one hundred (100) dollars
contemporaneously with such execution.
5.13.....Nasdaq Listing. Parent agrees to authorize for listing on
Nasdaq the shares of Parent Common Stock issuable, and those required to be
reserved for issuance, in connection with the Merger, upon official notice of
issuance.
5.14.....Company Affiliate Agreement. Set forth on Exhibit B is a list
of those persons who may be deemed to be, in the Company's reasonable judgment,
affiliates of the Company within the meaning of Rule 145 promulgated under the
Securities Act (each a "Company Affiliate"). The Company will provide Parent
with such information and documents as Parent reasonably requests for purposes
of reviewing such list. Contemporaneously herewith, the Company shall deliver or
cause to be delivered to Parent, from each Company Affiliate an executed
affiliate agreement in substantially the form attached hereto as Exhibit C (the
"Company Affiliate Agreement"), each of which will be in full force and effect
as of the Effective Time. Parent will be entitled to place appropriate legends
on the certificates evidencing any Parent Common Stock to be received by a
Company Affiliate pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Parent
Common Stock, consistent with the terms of the Company Affiliate Agreement.
5.15.....Option Assumption Agreement. The Company shall use its best
efforts to cause each holder of a Company Option to execute and deliver to
Parent an option assumption agreement in form delivered to the Company by Parent
(the "Option Assumption Agreement").
5.16.....1999 Stock Option Plan. The Company shall include in the
Proxy/Prospectus a proposal for its stockholders to increase the number of
shares authorized under the Company's 1999 Stock Option Plan so that no less
than 1,200,000 shares of Company Common Stock are available for grant to the
individual employees on the Option Schedule, prior to the Closing (the "Option
Increase").
5.17.....Option Information. The Company shall provide Parent with the
Option Information no later than 5:00 p.m., California time on February 4, 2000.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1......Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a)......Company Stockholder Approval. This Agreement shall
have been approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the stockholders of the Company.
(b)......Registration Statement Effective; Proxy Statement.
The SEC shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Prospectus/Proxy Statement, shall have been
initiated or threatened in writing by the SEC.
(c)......No Order; HSR Act. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.
(d)......Tax Opinions. Parent and the Company shall each have
received written opinions from their respective tax counsel (Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, and Xxxxxxxx, Xxxxxxx and Xxxxxxx,
a Professional Corporation, respectively), in form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been withdrawn; provided, however, that if the counsel
to either Parent or the Company does not render such opinion, this condition
shall nonetheless be deemed to be satisfied with respect to such party if
counsel to the other party renders such opinion to such party. The parties to
this Agreement agree to make such reasonable representations as requested by
such counsel for the purpose of rendering such opinions.
(e)......Nasdaq Listing. The shares of Parent Common Stock to
be issued in the Merger shall have been authorized for listing on Nasdaq,
subject to notice of issuance.
6.2......Additional Conditions to Obligations of the Company. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a)......Representations and Warranties. Each representation
and warranty of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date except, (A) in each case, or in the aggregate, as does
not constitute a Material Adverse Effect on Parent or Merger Sub; and (B) for
those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct (subject
to the qualifications set forth in the preceding clause (A)) as of such
particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, (i) all "Material Adverse
Effect" qualifications and other qualifications based on the word, "material" or
other similar phrases contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Parent Schedules made
or purported to have been made after the execution of this Agreement shall be
disregarded). The Company shall have received a certificate with respect to the
foregoing signed on behalf of Parent by an authorized officer of Parent.
(b)......Agreements and Covenants. Parent and Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement 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 on behalf of Parent by an authorized officer of Parent.
(c)......Material Adverse Effect. No Material Adverse Effect
with respect to Parent shall have occurred since the date of this Agreement.
6.3......Additional Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:
(a)......Representations and Warranties. Each representation
and warranty of the Company contained in this Agreement (i) shall have been true
and correct as of the date of this Agreement and (ii) shall be true and correct
on and as of the Closing Date with the same force and effect as if made on and
as of the Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on the Company; provided, however, such
Material Adverse Effect qualification shall be inapplicable with respect to the
representations and warranties contained in Sections 2.2(a) and (b), 2.3, 2.20,
2.21 and 2.22, and (B) for those representations and warranties which address
matters only as of a particular date (which representations shall have been true
and correct (subject to the qualifications set forth in the preceding clause
(A)) as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based on the
word, "material" or other similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Schedules made or purported to have been made after the execution of
this Agreement shall be disregarded). Parent shall have received a certificate
with respect to the foregoing signed on behalf of the Company by an authorized
officer of the Company.
(b)......Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date, and Parent shall have received a certificate to such effect
signed on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company.
(c)......Material Adverse Effect. No Material Adverse Effect
with respect to the Company and its subsidiaries shall have occurred since
December 31, 1999.
(d)......Consents. The Company shall have obtained all
consents, waivers and approvals required in connection with the consummation of
the transactions contemplated hereby in connection with the agreements,
contracts, licenses or leases set forth on Schedule 6.3(e).
(e)......Registration Rights Agreement. The Company
Registration Rights Agreement shall have been terminated and none of the shares
of Company Common Stock shall have registration rights, except pursuant to
contractual arrangements with Parent.
(f)......1999 Stock Option Plan. The Option Increase shall
have been duly approved by the requisite vote under applicable law by the
stockholders of the Company.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1......Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the requisite approvals of
the stockholders of the Company:
(a)......by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company;
(b)......by either the Company or Parent if the Merger shall
not have been consummated by June 30, 2000 (the "End Date") for any reason;
provided, however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose action or failure to act has
been a principal cause of or resulted in the failure of the Merger to occur on
or before such date and such action or failure to act constitutes a material
breach of this Agreement;
(c)......by either the Company or Parent if a Governmental
Entity shall have issued an order, decree or ruling or taken any other action,
in any case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d)......by either the Company or Parent if the required
approval of the stockholders of the Company contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote at a
meeting of the Company stockholders duly convened therefore or at any
adjournment thereof; provided, however, that the right to terminate this
Agreement under this Section 7.1(d) shall not be available to the Company where
the failure to obtain the Company stockholder approval shall have been caused by
(i) the action or failure to act of the Company and such action or failure to
act constitutes a breach by the Company of this Agreement or (ii) a breach of
the Company Voting Agreement by any party thereto other than Parent.
(e)......by Parent (at any time prior to the adoption and
approval of this Agreement and the Merger by the required vote of the
stockholders of the Company) if a Company Triggering Event (as defined below)
shall have occurred;
(f)......by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided that if
such inaccuracy in Parent's representations and warranties or breach by Parent
is curable by Parent through the exercise of its commercially reasonable
efforts, then the Company may not terminate this Agreement under this Section
7.1(f) prior to End Date, provided Parent continues to exercise commercially
reasonable efforts to cure such breach (it being understood that the Company may
not terminate this Agreement pursuant to this paragraph (f) if it shall have
materially breached this Agreement or if such breach by Parent is cured prior to
the End Date);
(g)......by Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 6.3(a) or
Section 6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided, that if
such inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company through the exercise of its commercially
reasonable efforts, then Parent may not terminate this Agreement under this
Section 7.1(g) prior to the End Date, provided the Company continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
Parent may not terminate this Agreement pursuant to this paragraph (g) if it
shall have materially breached this Agreement or if such breach by the Company
is cured prior to the End Date);
(h)......by Parent, upon a breach of the provisions in Section
5.5 of this Agreement. For the purposes of this Agreement, a "Company
Triggering Event" shall be deemed to have occurred if:
(i) the Board of Directors of the Company or any committee thereof shall for any
reason have withdrawn or shall have amended or modified in a manner adverse to
Parent its unanimous recommendation in favor of, the adoption and approval of
the Agreement or the approval of the Merger; (ii) the Company shall have failed
to include in the Prospectus/Proxy Statement the unanimous recommendation of the
Board of Directors of the Company in favor of the adoption and approval of the
Agreement and the approval of the Merger; (iii) the Board of Directors of the
Company fails to reaffirm its unanimous recommendation in favor of the adoption
and approval of the Agreement and the approval of the Merger within ten (10)
days after Parent requests in writing that such recommendation be reaffirmed;
(iv) the Board of Directors of the Company or any committee thereof shall have
approved or recommended any Acquisition Proposal; or (v) a tender or exchange
offer relating to securities of the Company shall have been commenced by a
Person unaffiliated with Parent and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten (10) business days after such tender or exchange offer is first
published sent or given, a statement disclosing that the Company recommends
rejection of such tender or exchange offer.
7.2......Notice of Termination; Effect of Termination. Any termination
of this Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 5.4(a), this Section 7.2, Section 7.3 and Article 8 (general
provisions), each of which shall survive the termination of this Agreement, and
(ii) nothing herein shall relieve any party from liability for any willful
breach of this Agreement. No termination of this Agreement shall affect the
obligations of the parties contained in the Confidentiality Agreement, all of
which obligations shall survive termination of this Agreement in accordance with
their terms.
7.3......Fees and Expenses.
-----------------
(a)......General. Except as set forth in this Section 7.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred in relation to the
printing and filing (with the SEC) of the Prospectus/Proxy Statement (including
any preliminary materials related thereto) and the Registration Statement
(including financial statements and exhibits) and any amendments or supplements
thereto.
(b)......Company Payments. In the event that this Agreement is
terminated by Parent or the Company, as applicable, pursuant to Sections 7.1(b),
(d) or (g), the Company shall promptly, but in no event later than two days
after the date of such termination, pay Parent a fee equal to $30,000,000 in
immediately available funds (the "Termination Fee"); provided, that in the case
of termination under Section 7.1(b) or 7.1(d), such payment shall be made only
if following the date hereof and prior to the termination of this Agreement, a
third party has publicly announced an Acquisition Proposal and within 15 months
following the termination of this Agreement a Company Acquisition (as defined
below) is consummated or the Company enters into an agreement providing for a
Company Acquisition. The Company acknowledges that the agreements contained in
this Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(b) , and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company for
the amounts set forth in this Section 7.3(b), the Company shall pay to Parent
its reasonable costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set forth in
this Section 7.3(b) at the prime rate of The Chase Manhattan Bank in effect on
the date such payment was required to be made. Payment of the fees described in
this Section 7.3(b) shall not be in lieu of damages incurred in the event of
breach of this Agreement. For the purposes of this Agreement "Company
Acquisition" shall mean any of the following transactions (other than the
transactions contemplated by this Agreement); (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction hold less than 50% of the
aggregate equity interests in the surviving or resulting entity of such
transaction, (ii) a sale or other disposition by the Company of assets
representing in excess of 50% of the aggregate fair market value of the
Company's business immediately prior to such sale or (iii) the acquisition by
any person or group (including by way of a tender offer or an exchange offer or
issuance by the Company), directly or indirectly, of beneficial ownership or a
right to acquire beneficial ownership of shares representing in excess of 50% of
the voting power of the then outstanding shares of capital stock of the Company.
7.4......Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent and the Company.
7.5......Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the 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. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1......Non-Survival of Representations and Warranties. The
representations and warranties of the Company, Parent and Merger Sub contained
in this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
8.2......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 sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a)......if to Parent or Merger Sub, to:
VA Linux Systems, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. X'Xxxxx, Esq.
Xxxxx X. XxXxxxxx, Esq.
Xxxx X. XxXxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b)......if to the Company, to:
Xxxxxxx.Xxx, Inc.
00 Xxxxx Xxxx
Xxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
8.3......Interpretation; Knowledge.
-------------------------
(a)......When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated the words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation." The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "the business of" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
(b)......For purposes of this Agreement the term "knowledge"
means with respect to a party hereto, with respect to any matter in question,
that any of the Chief Executive Officer, Chief Financial Officer, General
Counsel or Controller of such party, has actual knowledge of such matter.
(c)......For purposes of this Agreement, the term "Material
Adverse Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect that is materially adverse to the
business, assets (including intangible assets), capitalization, financial
condition or results of operations of such entity taken as a whole with its
subsidiaries provided however, that none of the following, in and of itself,
shall be deemed to have a Material Adverse Effect: (i) an event, violation,
inaccuracy, circumstance or other matter that results from conditions affecting
the U.S. economy in general; (ii) an event, violation, inaccuracy, circumstance
or other matter that results from the taking of any action expressly required by
the Agreement; (iii) a decline in Parent's Common Stock.
(d)......For purposes of this Agreement, the term "person"
shall mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
(e)......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.
8.5......Entire Agreement; Third Party Beneficiaries. This Agreement
and the documents and instruments and other agreements among the parties hereto
as contemplated by or referred to herein, including the Company Schedules and
the Parent Schedules (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, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder, except as specifically provided in
Section 5.11.
8.6......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.
8.7......Other Remedies; Specific Performance. Except as otherwise
provided herein, 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. 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 seek 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.
8.8......Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
8.9......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 an agreement or other
document will be construed against the party drafting such agreement or
document.
8.10.....Assignment. No party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
8.11.....WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND MERGER
SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
[remainder of page intentionally left blank; signature page follows immediately
hereafter]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
VA LINUX SYSTEMS, INC.
By:
Name:
Title:
ATLANTA ACQUISITION CORP.
By:
Name:
Title:
XXXXXXX.XXX, INC.
By:
Name:
Title:
