AGREEMENT AND PLAN OF
MERGER
BY AND AMONG
XXXXX.XXX, INC.
XXXXXX.XXX, INC.
ONYX ACQUISITION CORP.
AND
XXXXXXX XXXXX, AS STOCKHOLDERS' AGENT
February 13, 2000
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER 2
SECTION 1.1 THE MERGER........................................2
SECTION 1.2 CLOSING...........................................2
SECTION 1.3 EFFECTIVE TIME....................................2
SECTION 1.4 EFFECT OF THE MERGER..............................2
SECTION 1.5 CERTIFICATE OF INCORPORATION; BYLAWS..............3
SECTION 1.6 DIRECTORS; OFFICERS...............................3
SECTION 1.7 EFFECT ON CAPITAL STOCK...........................3
SECTION 1.8 SURRENDER OF CERTIFICATES.........................6
SECTION 1.9 NO FURTHER OWNERSHIP RIGHTS
IN COMPANY CAPITAL STOCK.........................9
SECTION 1.10 LOST, STOLEN OR DESTROYED CERTIFICATES............9
SECTION 1.11 TAX CONSEQUENCES..................................9
SECTION 1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION........9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
SECTION 2.1 ORGANIZATION, STANDING AND POWER.................10
SECTION 2.2 CAPITALIZATION; TITLE TO THE SHARES..............11
SECTION 2.3 AUTHORITY........................................12
SECTION 2.4 FINANCIAL STATEMENTS.............................13
SECTION 2.5 ABSENCE OF CERTAIN CHANGES.......................13
SECTION 2.6 ABSENCE OF UNDISCLOSED LIABILITIES...............14
SECTION 2.7 LITIGATION.......................................14
SECTION 2.8 RESTRICTIONS ON BUSINESS ACTIVITIES..............15
SECTION 2.9 GOVERNMENTAL AUTHORIZATION.......................15
SECTION 2.10 [INTENTIONALLY LEFT BLANK].......................15
SECTION 2.11 TITLE TO PROPERTY................................15
SECTION 2.12 INTELLECTUAL PROPERTY............................16
SECTION 2.13 ENVIRONMENTAL MATTERS............................17
SECTION 2.14 TAXES............................................19
SECTION 2.15 EMPLOYEE BENEFIT PLANS...........................20
SECTION 2.16 CERTAIN AGREEMENTS AFFECTED BY THE MERGER........22
SECTION 2.17 EMPLOYEE MATTERS.................................22
SECTION 2.18 INTERESTED PARTY TRANSACTIONS....................23
SECTION 2.19 INSURANCE........................................23
SECTION 2.20 COMPLIANCE WITH LAWS.............................23
SECTION 2.21 MINUTE BOOKS.....................................24
SECTION 2.22 COMPLETE COPIES OF MATERIALS.....................24
SECTION 2.23 STOCKHOLDER AGREEMENTS; IRREVOCABLE PROXIES......24
SECTION 2.24 VOTE REQUIRED....................................24
SECTION 2.25 BROKERS' AND FINDERS' FEES.......................24
SECTION 2.26 BOARD APPROVAL...................................24
SECTION 2.27 CUSTOMERS AND SUPPLIERS..........................25
SECTION 2.28 MATERIAL CONTRACTS...............................25
SECTION 2.29 NO BREACH OF MATERIAL CONTRACTS..................26
SECTION 2.30 THIRD PARTY CONSENTS.............................26
SECTION 2.31 MATERIAL THIRD PARTY CONSENTS....................26
SECTION 2.32 [INTENTIONALLY LEFT BLANK].......................26
SECTION 2.33 YEAR 2000........................................26
SECTION 2.34 TAX MATTERS......................................26
SECTION 2.35 [INTENTIONALLY LEFT BLANK].......................27
SECTION 2.36 [INTENTIONALLY LEFT BLANK].......................27
SECTION 2.37 STATE TAKEOVER STATUTES..........................27
SECTION 2.38 ACCOUNTS RECEIVABLE..............................27
SECTION 2.39 REPRESENTATIONS COMPLETE.........................27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........27
SECTION 3.1 ORGANIZATION, STANDING AND POWER.................27
SECTION 3.2 CAPITAL STRUCTURE................................28
SECTION 3.3 AUTHORITY........................................28
SECTION 3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS..............29
SECTION 3.5 ABSENCE OF UNDISCLOSED LIABILITIES...............29
SECTION 3.6 BROKER'S AND FINDERS' FEES.......................30
SECTION 3.7 STOCKHOLDER APPROVAL.............................30
SECTION 3.8 APPROVAL.........................................30
SECTION 3.9 TAX MATTERS......................................30
SECTION 3.10 ABSENCE OF CERTAIN CHANGES.......................30
ARTICLE IV CONDUCT PRIOR TO THE CLOSING DATE................................31
SECTION 4.1 CONDUCT OF BUSINESS OF THE COMPANY...............31
SECTION 4.2 RESTRICTION ON CONDUCT OF
BUSINESS OF THE COMPANY.........................31
SECTION 4.3 SOLICITATION.....................................34
SECTION 4.4 STOCKHOLDER APPROVAL.............................35
SECTION 4.5 FURTHER INFORMATION..............................35
ARTICLE V ADDITIONAL AGREEMENTS.............................................35
SECTION 5.1 PREPARATION OF PERMIT APPLICATION, HEARING
REQUEST, HEARING NOTICE AND
INFORMATION STATEMENT...........................35
SECTION 5.2 ACCESS TO INFORMATION............................36
SECTION 5.3 CONFIDENTIALITY..................................37
SECTION 5.4 PUBLIC DISCLOSURE................................37
SECTION 5.5 CONSENTS; COOPERATION............................37
SECTION 5.6 LEGAL REQUIREMENTS...............................38
SECTION 5.7 BLUE SKY LAWS....................................38
SECTION 5.8 EMPLOYEE BENEFIT PLANS; ASSUMPTION OF OPTIONS....38
SECTION 5.9 FORM S-8.........................................39
SECTION 5.10 LISTING OF ADDITIONAL SHARES.....................39
SECTION 5.11 EMPLOYEES........................................40
SECTION 5.12 EXPENSES.........................................40
SECTION 5.13 REASONABLE BEST EFFORTS AND FURTHER ASSURANCES...40
SECTION 5.14 INDEMNIFICATION..................................40
SECTION 5.15 TERMINATION OF PENSION PLAN......................41
SECTION 5.16 INFORMATION SUPPLIED.............................41
SECTION 5.17 ESTABLISHMENT OF OPTION POOL.....................42
SECTION 5.18 REGISTRATION STATEMENT...........................42
ARTICLE VI CONDITIONS TO THE CLOSING........................................42
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY
TO EFFECT THE MERGER............................42
SECTION 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS
OF THE COMPANY..................................43
SECTION 6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS
OF PARENT AND MERGER SUB........................44
SECTION 6.4 FRUSTRATION OF CONDITIONS........................46
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...............................46
SECTION 7.1 TERMINATION......................................46
SECTION 7.2 EFFECT OF TERMINATION............................47
SECTION 7.3 EXPENSES.........................................47
SECTION 7.4 AMENDMENT........................................47
SECTION 7.5 EXTENSION; WAIVER................................48
ARTICLE VIII ESCROW AND INDEMNIFICATION.....................................48
SECTION 8.1 ESCROW FUND......................................48
SECTION 8.2 INDEMNIFICATION..................................48
SECTION 8.3 ESCROW PERIOD....................................49
SECTION 8.4 CLAIMS UPON ESCROW FUND..........................50
SECTION 8.5 OBJECTIONS TO CLAIMS.............................51
SECTION 8.6 RESOLUTION OF CONFLICTS; ARBITRATION.............51
SECTION 8.7 STOCKHOLDERS' AGENT..............................52
SECTION 8.8 ACTIONS OF THE STOCKHOLDERS' AGENT...............52
SECTION 8.9 THIRD-PARTY CLAIMS...............................53
ARTICLE IX GENERAL PROVISIONS...............................................53
SECTION 9.1 SURVIVAL.........................................53
SECTION 9.2 NOTICES..........................................53
SECTION 9.3 INTERPRETATION...................................54
SECTION 9.4 COUNTERPARTS.....................................55
SECTION 9.5 ENTIRE AGREEMENT; NONASSIGNABILITY;
PARTIES IN INTEREST.............................55
SECTION 9.6 SEVERABILITY.....................................55
SECTION 9.7 SOLE REMEDY; MAXIMUM AGGREGATE LIABILITY.........56
SECTION 9.8 GOVERNING LAW....................................56
SECTION 9.9 RULES OF CONSTRUCTION............................56
SECTION 9.10 SPECIFIC PERFORMANCE.............................56
SECTION 9.11 DESCRIPTIVE HEADINGS.............................56
EXHIBITS
Exhibit C - Form of Stockholder Agreement
Exhibit D - Form of Escrow Agreement
Exhibit H - Form of Employee Agreement
Exhibit K - Form of Parent Tax Certificate
Exhibit L - Form of Company Tax Certificate
SCHEDULES
Schedule 2.2(b) Capitalization
Schedule 5.8 Employee Benefit Plans; Assumption of Options
Schedule 5.11 List of Employees Entering into Employee Agreements
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER (this "Agreement"),
dated as of, February 13, 2000, by and among XXXXX.XXX, INC., a Delaware
corporation ("Parent"), ONYX ACQUISITION CORP., a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), XXXXXX.XXX, INC., a
Delaware corporation (the "Company") and XXXXXXX XXXXX, as Stockholders'
Agent (the "Stockholders' Agent").
RECITALS
WHEREAS, the Board of Directors of Parent has approved,
and deems it advisable and in the best interests of its stockholders to
consummate, the merger (the "Merger") of Merger Sub with and into the
Company, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company, having
carefully considered the long-term prospects and interests of the Company
and the stockholders, has approved the transactions contemplated hereby and
has resolved to recommend to its stockholders the approval and adoption of
this Agreement and the consummation of the transactions contemplated hereby
upon the terms and subject to the conditions set forth herein; and
WHEREAS, as a condition and inducement to Parent to enter
into this Agreement and incur the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Parent and
the holders of at least a majority of the outstanding shares of Company
Common Stock (as defined in Section 1.7(a)) and the holders of at least
two-thirds of the outstanding shares of Company Preferred Stock (as defined
in Section 1.7(a)) have entered into Stockholder Agreements in the form of
Exhibits C attached hereto (the "Stockholder Agreements"), pursuant to
which, among other things, each such holder has agreed to vote shares of
Company Common Stock and/or Company Preferred Stock held by them in favor
of approval and adoption of this Agreement; and
WHEREAS, as a condition and inducement to Parent to enter
into this Agreement and incur the obligations set forth herein, as soon as
practicable after the date of this Agreement, (i) Parent, the Company and
the Stockholders' Agent are entering into an escrow agreement in the form
of Exhibit D attached hereto (the "Escrow Agreement"), pursuant to which
certain shares of Parent Common Stock issuable to the Company stockholders
are to be placed in an escrow account to secure certain indemnification
obligations of the Company to Parent; (ii) the Company will use its best
efforts to encourage the employees identified on Schedule 5.11 to enter
into confidential information and invention assignment agreements with
Parent in the form of Exhibit H attached hereto (the "Employee
Agreements"); and
WHEREAS, the Boards of Directors of each of Parent,
Merger Sub and the Company, and the sole stockholder of Merger Sub have
approved this Agreement and the transactions contemplated hereby in
accordance with the provisions of the Delaware General Corporation Law
("Delaware Law"); and
WHEREAS, it is intended that the Merger qualify as a
tax-free reorganization within the meaning of section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable
consideration, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER
At the Effective Time (as defined in Section 1.3) and
subject to and upon the terms and conditions of this Agreement and in
accordance with the applicable provisions of Delaware Law, Merger Sub shall
be merged with and into the Company, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation and a wholly owned subsidiary of Parent. The Company, as the
surviving corporation after the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation."
Section 1.2 CLOSING
The closing of the Merger (the "Closing") shall take
place at 10:00 a.m., Palo Alto, California time, on a date to be specified
by the parties, which shall be no later than the third business day after
satisfaction or waiver of all of the conditions set forth in Article VI of
this Agreement (the "Closing Date"), at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx,
Xxxxxxxxxx 00000, unless another time, date or place is agreed to in
writing by the parties hereto.
Section 1.3 EFFECTIVE TIME
Upon the terms and subject to the conditions set forth in
Article VI of this Agreement, the parties hereto shall file a certificate
of merger (the "Certificate of Merger") with the Secretary of State of the
State of Delaware in accordance with the relevant provisions of Delaware
Law. The Merger shall become effective at the time specified in the
Certificate of Merger which specified time shall be a time on the Closing
Date (the time at which the Merger becomes effective being the "Effective
Time").
Section 1.4 EFFECT OF THE MERGER
The Merger shall have the effects set forth in the
applicable provisions of Delaware Law.
Section 1.5 CERTIFICATE OF INCORPORATION; BYLAWS
At the Effective Time, the certificate of incorporation
and by-laws of Acquisition, as in effect immediately prior to the Effective
Time, shall become the certificate of incorporation and by-laws of the
Surviving Corporation, except that from and after the Effective Time,
Article I of the certificate of incorporation will read in its entirety as
follows:
"The name of the corporation is 'Xxxxxx.xxx, Inc.'"
Section 1.6 DIRECTORS; OFFICERS
(a) The directors of Merger Sub at the Effective Time of the Merger shall
be the directors of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. In furtherance thereof, the
Company shall secure, effective at the Effective Time of the Merger, such
resignations of its incumbent directors as is necessary to enable the
designees of Parent to be elected or appointed to the Board of Directors of
the Company (the "Company Board"), and the Company shall take all actions
available to the Company to cause such designees of Parent to be so elected
or appointed at the Effective Time. Concurrently, the Company shall, if
requested by Parent, also take all action necessary to cause persons
designated by Parent to constitute each committee of the Company Board.
(b) The officers of the Company at the Effective Time of the Merger shall
be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly
elected and qualified, as the case may be; provided, however, that this
would not cause any of such persons to be, or be deemed to be an
"affiliate" of Parent for purposes of Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
Section 1.7 EFFECT ON CAPITAL STOCK
By virtue of the Merger and without any action on the
part of Parent, Merger Sub, the Company or the holders of any of the
Company's securities:
(a) Conversion of Company Capital Stock. Notwithstanding any provision of
this Agreement to the contrary, the maximum number of shares of common
stock, $0.001 par value per share, of Parent (the "Parent Common Stock") to
be issued (including Parent Common Stock to be reserved for issuance upon
the exercise of options ("Company Options") to purchase shares of common
stock, $0.001 par value per share, of the Company ("Company Common Stock")
assumed by Parent (as provided in Section 5.8)) in exchange for the
acquisition by Parent of the Company Capital Stock and the assumption of
all unexpired and unexercised outstanding options, warrants and other
rights (whether vested, unvested or contingent upon the happening of some
future event) to acquire Company Capital Stock shall be equal to 6,469,413
(the "Total Parent Shares"), reduced by the number of shares of Parent
Common Stock that would otherwise be issuable to the holders of any
Dissenting Shares (as defined in Section 1.7(e)). No adjustment shall be
made in the number of shares of Parent Common Stock issued in the Merger,
including as a result of (x) any increase or decrease in the market price
of Parent Common Stock prior to the Effective Time not otherwise required
by this Section 1.7(a) or (y) any cash proceeds received by the Company
from the date hereof to the Closing Date pursuant to the exercise of
currently outstanding options to acquire Company Common Stock.
(b) For purposes of this Agreement, "Company Capital Stock" means,
collectively, all Company Common Stock; all shares of Series A Preferred
Stock, $0.001 par value per share, Series B Preferred Stock, $0.001 par
value per share and Series C Preferred Stock, $0.001 par value per share of
the Company (collectively "Company Preferred Stock"); and all Company
Warrants (as defined below).
Subject to the terms and conditions of this Agreement, as
of the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of Company Common Stock or Company
Preferred Stock:
(i) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares, if
any, which are Dissenting Shares shall be converted into and
exchanged for the right to receive that fraction of a share of
Parent Common Stock (the "Exchange Ratio" or the "Per Share Merger
Consideration") equal to the quotient obtained by dividing (x) the
Total Parent Shares by (y) the Fully Converted Number. Each share
of Company Common Stock issued and outstanding immediately prior
to the Effective Time that is restricted or not fully vested shall
upon such conversion and exchange have the same restrictions or
vesting arrangements applicable to such shares prior to the
conversion. "The Fully Converted Number" shall mean a number equal
to the aggregate number of shares of Company Capital Stock,
options, warrants and rights to purchase or otherwise acquire
equity interest in the Company, whether vested, unvested or
contingent upon the happening of some future event, in each case,
outstanding or committed to be issued as of the Effective Time.
(ii) it being acknowledged by the parties that the consideration to
which each share of Company Preferred Stock would otherwise be
entitled as a result of the Merger in accordance with the
Company's certificate of incorporation would be of lesser value
than the Per Share Merger Consideration to which such share of
Company Preferred Stock would have been entitled had the holder
thereof converted such share of Company Preferred Stock into
Company Common Stock in accordance with the Company's certificate
of incorporation, each share of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than
shares, if any, which are Dissenting Shares) shall be converted
into and exchanged for the right to receive the Per Share Merger
Consideration.
(iii) the Company's Stock Option Plan (the "Company Stock Option Plan")
and each Company Option granted thereunder and outstanding
immediately prior to the Effective Time shall be assumed by Parent
in accordance with Section 5.8 and thereafter each such Company
Option shall constitute the right to receive options to purchase
such number of shares of Parent Common Stock as shall be
determined in accordance with Section 5.8.
(iv) the Company will use commercially reasonable efforts to provide
that each holder of an outstanding warrant to purchase shares of
Company Preferred Stock (collectively, the "Company Warrants")
shall have the right to receive, in lieu of the shares of Company
Preferred Stock theretofore issuable upon the exercise of such
Company Warrant, the aggregate number of shares of Parent Common
Stock that the holder of such Company Warrant would have been
entitled to receive pursuant to this Section 1.7(a) had such
holder exercised the Company Warrant in full immediately prior to
the Closing, minus the number of shares of Parent Common Stock (or
fraction of a share of Parent Common Stock) equal to the quotient
of the aggregate exercise price of such Company Warrant divided by
$131.3875 (the "Parent Stock Price"). Any Company Warrant which,
nonetheless remains outstanding at the Effective Time shall become
exercisable for Parent Common Stock in accordance with the terms
of such Company Warrant.
(b) Capital Stock of Merger Sub. Each share of common stock, $.01 par value
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of
any such shares shall evidence ownership of such shares of capital stock of
the Surviving Corporation.
(c) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into
Parent Common Stock or Company Capital Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock
or Company Capital Stock occurring after the date hereof and prior to the
Effective Time.
(d) Fractional Shares. No fraction of a share of Parent Common Stock will
be issued, but in lieu thereof each holder of shares of Company Capital
Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent an amount of
cash (rounded up to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the Parent Stock Price.
(e) Dissenters' Rights. "Dissenting Shares" shall mean any shares of
Company Common Stock or Company Preferred Stock outstanding immediately
prior to the Effective Time and held by a holder who has not voted in favor
of the Merger or consented thereto in writing, and who has demanded
appraisal for such shares of Company Common Stock or Company Preferred
Stock in accordance with section 262 of Delaware Law, if such section 262
provides for appraisal rights for such shares in the Merger, and, if
Section 2115 of the California General Corporation Law ("California Law")
applies to the Company, such rights as may be granted to such holder under
Chapter 13 of California Law.
(1) Subject to (2) below, notwithstanding any provision of this
Agreement to the contrary, Dissenting Shares shall not be
converted into or represent a right to receive the Per Share
Merger Consideration or cash in lieu of fractional shares of
Parent Common Stock pursuant to this Section 1.7, but the holder
thereof shall be entitled to only such rights as are granted by
Delaware Law.
(2) Notwithstanding the provisions of Section 1.7(a)(i), if any holder
of shares of Company Common Stock or Company Preferred Stock who
demands appraisal of such holder's shares of Company Common Stock
or Company Preferred Stock under Delaware Law or California Law
effectively withdraws or loses (through failure to perfect or
otherwise) his/her/its right to appraisal, then as of the
Effective Time or the occurrence of such event, whichever later
occurs, such holder's shares of Company Common Stock or Company
Preferred Stock shall automatically be converted into and
represent only the right to receive the Per Share Merger
Consideration and cash in lieu of fractional shares of Parent
Common Stock as provided in this Section 1.7, without interest,
upon surrender of the certificate or certificates representing
such shares of Company Common Stock or Company Preferred Stock
(each such certificate, a "Company Certificate") pursuant to
Section 1.8.
(3) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any shares
of Company Common Stock or Company Preferred Stock, withdrawals of
such demands, and any other instruments served on the Company
pursuant to Delaware Law or California Law received by the
Company, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Delaware
Law or California Law. Except with the prior written consent of
Parent, the Company shall not voluntarily make any payment with
respect to any demands for appraisal or settle, or offer to
settle, any such demands.
(f) Cancellation of Company Capital Stock Owned by Parent. At the Effective
Time, all shares of Company Capital Stock that are owned by the Company as
treasury stock, and each share of Company Capital Stock owned by Parent or
any direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be cancelled and extinguished
without any conversion thereof.
Section 1.8 SURRENDER OF CERTIFICATES
(a) Exchange Agent. U.S. Stock Transfer Corporation shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Promptly after the Effective
Time, Parent shall deliver to the Exchange Agent for exchange and payment
in accordance with this Article I, through such reasonable procedures as
Parent may adopt, (x) the shares of Parent Common Stock issuable pursuant
to Section 1.7(a) (provided that delivery of any shares that are subject to
vesting shall be in book entry form only until such vesting restrictions
have lapsed) in exchange for shares of Company Capital Stock outstanding
immediately prior to the Effective Time and (y) cash in lieu of fractional
shares pursuant to Section 1.7(d).
(c) Exchange Procedures. (A) Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of
a Company Certificate, whose shares were converted into the right to
receive the Per Share Merger Consideration and cash in lieu of fractional
shares of Parent Common Stock pursuant to Section 1.7, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Company Certificates shall pass, only upon receipt
of the Company Certificates by the Exchange Agent, and shall be in such
form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Company
Certificates in exchange for certificates (or book entries in the case of
shares that have not yet vested) representing shares of Parent Common Stock
and cash in lieu of fractional shares. Upon surrender of a Company
Certificate 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, subject to Section 1.8(c)(B) hereof, the holder of
such Company Certificate shall be entitled to receive in exchange therefor
(i) a certificate (or a book entry in the case of shares that have not yet
vested in full) representing the number of whole shares of Parent Common
Stock which such holder has the right to receive pursuant to Section 1.7(a)
(less the applicable proportion of the Escrow Shares (as defined below)
attributable to such holder) and (ii) payment in lieu of fractional shares
which such holder has the right to receive pursuant to Section 1.7(d), and
the Company Certificate so surrendered shall forthwith be canceled. Until
so surrendered, each outstanding Company Certificate that, prior to the
Effective Time, represented shares of Company Capital Stock will be deemed
from and after the Effective Time, for all corporate purposes, other than
the payment of dividends, to evidence (i) the ownership of the number of
full shares of Parent Common Stock into which such shares of Company
Capital Stock shall have been so converted and (ii) the right to receive an
amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.7(d). As soon as practicable after the Effective
Time, and subject to, and in accordance with, the provisions of Article
VIII, Parent shall cause to be distributed to the Escrow Agent (as defined
in Article VIII) a certificate or certificates representing ten percent
(10%) of the number of shares of Parent Common Stock to be issued in the
Merger (the "Escrow Shares"), which shall be registered in the name of the
Escrow Agent as nominee for the holders of Certificates cancelled pursuant
to Section 1.7. The Escrow Shares, as allocated among each stockholder of
the Company who is an employee of the Company, shall consist, to the extent
possible, of equal proportions of shares subject to a right of repurchase
and shares not subject to any repurchase rights, shall be beneficially
owned by the holders thereof and shall be held in escrow and shall be
available to compensate Parent for certain damages as provided in Article
VIII. The Escrow Shares shall be shown as issued and outstanding on
Parent's financial statement. To the extent not used for such purposes,
such shares shall be released, in accordance with the provisions of Article
VIII.
(B) Fifty percent (50%) of the shares of Parent Common
Stock that are not subject to repurchase rights on the part of the Company
at the Effective Time issued to each stockholder of the Company who is, at
the Effective Time, an employee of the Company, pursuant to Sections 1.7(a)
and 1.8(c)(A) hereof upon the surrender of a Company Certificate shall be
so issued subject, until the one-year anniversary of the Closing, to the
following restrictions:
(x) such shares of Parent Common Stock
may not be offered for sale, sold, transferred,
tendered, pledged, encumbered, assigned or
otherwise disposed of; and
(y) Parent shall instruct its transfer
agent to place on the certificates representing
such shares of Parent Common Stock a legend
indicating that the shares of Parent Common
Stock represented by such certificates are
subject to the transfer restrictions set forth
in clause (x) above; and
(z) Parent shall instruct its transfer
agent to issue stop transfer orders with respect
to such shares of Parent Common Stock.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Company Certificate shall
surrender such Company Certificate. Subject to applicable law, following
surrender of any such Company Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, at the time of
such surrender, the amount of any such dividends or other distributions
with a record date after the Effective Time theretofore payable (but for
the provisions of this Section 1.8(d)) with respect to such shares of
Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the Company
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Company Certificate so
surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to
Parent or any agent designated by it any transfer or other taxes required
by reason of the issuance of a certificate for shares of Parent Common
Stock in any name other than that of the registered holder of the Company
Certificate surrendered, or established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this Section
1.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(g) Dissenting Shares. The provisions of this Section 1.8 shall also apply
to Dissenting Shares that lose their status as such, except that the
obligations of Parent under this Section 1.8 shall commence on the date of
loss of such status and the holder of such shares shall be entitled to
receive in exchange for such shares the Per Share Merger Consideration and
cash in lieu of any fractional shares to which such holder is entitled
pursuant to Section 1.7.
Section 1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK
All shares of Parent Common Stock issued upon the
surrender for exchange of Company Certificates in accordance with the terms
hereof (including any cash paid in lieu of fractional shares) shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving
Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Company Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
Section 1.10 LOST, STOLEN OR DESTROYED CERTIFICATES
In the event that any Company Certificates shall have
been lost, stolen or destroyed, the Exchange Agent shall issue and pay in
exchange for such lost, stolen or destroyed Company Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock and payment of cash in lieu of fractional shares as may
be required pursuant to Section 1.7; 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 Company Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Exchange Agent with respect to the Company Certificates alleged to have
been lost, stolen or destroyed.
Section 1.11 TAX CONSEQUENCES
It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of section 368(a) of
the Code. The shares of Parent Common Stock to be issued in the Merger are
being delivered solely in exchange for Company Capital Stock, Company
Options, Company Warrants or rights to acquire Company Capital Stock, and
no portion thereof is to be allocated for tax purposes to any of the
covenants or undertakings of any party hereto.
Section 1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION
If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of the Company, the officers and directors of Parent, the
Company and the Surviving Corporation are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
event, change, condition or effect which (i) is material to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity
or group of entities, taken as a whole or (ii) would prevent or materially
alter or delay any of the transactions contemplated by this Agreement or
the Ancillary Agreements (as defined in Section 2.3). Any reference to a
"Material Adverse Effect" with respect to any entity or group of entities
means any event, change or effect that (x) is materially adverse to the
condition (financial or otherwise), properties, assets, liabilities,
business, operations or results of operations of such entity and its
subsidiaries, taken as a whole, or (y) would prevent or materially alter or
delay any of the transactions contemplated by this Agreement except, for
each of (x) and (y) above, to the extent that no such event, change,
condition or effect results from changes in general economic conditions, or
from changes affecting the industry generally in which the party operates.
Any reference to a party's "knowledge" means (i) with
respect to any natural person, the actual knowledge, of such person, or
(ii) with respect to any corporation or entity, the actual knowledge of
such party's officers and directors provided that such persons shall have
made due and diligent inquiry of those employees of such party whom such
officers and directors reasonably believe would have actual knowledge of
the matters represented.
Except as disclosed in that section of the document of
even date herewith delivered by the Company to Parent prior to the
execution and delivery of this Agreement (the "Company Disclosure
Schedule") corresponding to the Section of this Agreement to which any of
the following representations or warranties pertain (unless the application
to some other section is reasonably obvious), the Company represents and
warrants to Parent as follows:
Section 2.1 ORGANIZATION, STANDING AND POWER
The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. The Company has the corporate power to own its properties and
to carry on its business as now being conducted and as currently proposed
to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and
in good standing would have a Material Adverse Effect on the Company. The
Company has delivered true and correct copies of its certificate of
incorporation and by-laws, each as amended to date, to Parent, and as
further described in Section 2.1 of the Company Disclosure Schedule (which
does not constitute an exception). The Company is not in violation of any
of the provisions of its certificate of incorporation or bylaws or
equivalent charter documents, as applicable. Except for the entities
identified in Section 2.1 of the Company Disclosure Schedule, the Company
does not directly or indirectly own any equity or similar interest in, or
any interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
Section 2.2 CAPITALIZATION; TITLE TO THE SHARES
(a) Capitalization. As of February 9, 2000, the authorized capital stock of
the Company consists of (i) 45,000,000 shares of Company Common Stock, of
which 13,557,276 shares were issued and outstanding, (ii) 24,047,251 shares
of Company Preferred Stock, of which (x) 9,857,567 have been designated
Series A Preferred Stock, 9.776,250 shares of which are issued and
outstanding, (y) 7,064,684 have been designated Series B Preferred Stock,
7,064,684 shares of which are issued and outstanding, (z) 7,125,000 have
been designated Series C Preferred Stock, 1,856,374 shares of which are
issued and outstanding. (i) no shares of Company Common Stock or Company
Preferred Stock are issued and held in the treasury of the Company, (ii)
81,317 shares of Series B Preferred Stock are reserved for issuance
pursuant to outstanding Company Warrants, and (iii) except as described in
Section 2.2(a) of the Company Disclosure Schedule, 10,176,256 shares of
Company Common Stock are reserved for issuance pursuant to outstanding
Company Options. All of the outstanding shares of Company Capital Stock
are, and all shares of Company Capital Stock which may be issued pursuant
to the exercise of outstanding Company Options and Company Warrants will
be, when issued in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and non-assessable. The rights,
preferences and privileges of the Company Preferred Stock are as set forth
in the Company's certificate of incorporation. Since the date of the filing
of the Company's certificate of incorporation, there have not occurred any
events that would cause any adjustment or readjustment in the applicable
conversion prices of such Company Preferred Stock. Each share of Company
Preferred Stock is convertible into one share of Company Common Stock.
Except as set forth above, and in Schedule 2.2(b), as of
the date hereof, (i) there are no shares of capital stock of the Company
authorized, issued or outstanding; (ii) there are no existing options,
warrants, calls, preemptive rights, indebtedness having general voting
rights or debt convertible into securities having such rights ("Voting
Debt") or subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital
stock of the Company obligating the Company to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or
Voting Debt of, or other equity interest in, the Company or securities
convertible into or exchangeable for such shares or equity interests, or
obligating the Company to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment and (iii) there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any Company Capital
Stock, or other capital stock of the Company or to provide funds to make
any investment (in the form of a loan, capital contribution or otherwise)
in any other entity.
There are no voting trusts or other agreements or
understandings to which the Company is a party with respect to the voting
of the capital stock of the Company.
No Indebtedness of the Company contains any restriction
upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of
Indebtedness by the Company, or (iii) the ability of the Company to grant
any lien on its properties or assets. For purposes of this Agreement,
"Indebtedness" shall mean (i) all indebtedness for borrowed money or for
the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable
in accordance with customary practices), (ii) any other indebtedness that
is evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all obligations in respect of
acceptances issued or created, (v) all liabilities secured by any lien on
any property and (vi) all guarantee obligations.
(b) Title to the Shares. Schedule 2.2(b) sets forth a true, complete and
correct list of each legal and beneficial owner of Company securities and
the number and class of such securities owned by each such holder.
Section 2.3 AUTHORITY
The Company has the requisite power and authority to
enter into this Agreement and the other agreements set forth in the
exhibits hereto (the "Ancillary Agreements") to which the Company is a
party and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Ancillary Agreements
to which the Company is a party 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
of the Merger by the Company stockholders. This Agreement and each
Ancillary Agreement to which the Company is a party have been duly executed
and delivered by the Company and constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except to the extent that enforceability may be limited
by the effect, if any, of (i) any applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of
creditors' rights generally, (ii) general principles of equity, regardless
of whether such enforceability is considered in a proceeding at law or in
equity, and (iii) the enforceability of provisions requiring
indemnification. The execution and delivery of this Agreement or any
Ancillary Agreement by the Company does not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under
(i) any provision of the certificate of incorporation or by-laws of the
Company, or (ii) any Material Contract (as defined in Section 2.28) or any
material permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any of its properties or assets, except as set forth in Section 2.3 of the
Company Disclosure Schedule. Except for (i) applicable requirements of the
hearing (the "Fairness Hearing") to be held pursuant to section 25142 of
the California Corporate Securities Law of 1968, as amended (the "CSL"),
(ii) the filing of the Certificate of Merger in accordance with the
requirements of Delaware Law, (iii) such filings as may be required under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and, to the best of the Company's knowledge, any applicable
foreign antitrust law and (iv) if required pursuant to the provisions of
Section 5.18, the filing of a Registration Statement on Form S-4 or other
appropriate SEC Form, no notice to, filing with, and no permit,
authorization, consent or approval of, any arbitrator, court, nation,
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial regulatory or administrative
functions of, or pertaining to, government (a "Governmental Entity"), or
any private third party is necessary for the consummation by the Company of
the transactions contemplated by this Agreement.
Section 2.4 FINANCIAL STATEMENTS
The Company has previously provided Parent with its
audited balance sheet as of December 31, 1998 (the "Seller 1998 Balance
Sheet") and its unaudited balance sheet as of December 31, 1999 (the
"Seller 1999 Balance Sheet"), and the related statements of results of
operations and, with respect to the audited financial statements,
statements of cash flows for the fiscal year and the period then ended,
including, with respect to the audited financial statements, the notes
thereto (the "Financial Statements"). The Financial Statements for the year
ended December 31, 1998 have been audited by Ernst & Young LLP, the
Company's independent accountants. The Financial Statements fairly present,
in all material respects, in accordance with United States generally
accepted accounting principles ("U.S. GAAP") consistently applied, the
financial position of the Company as of such dates and its results of
operations and cash flows for such fiscal periods except, in the case of
such unaudited statements, for normal recurring year end adjustments which
adjustments will not be material, either individually or in the aggregate,
and footnotes.
Section 2.5 ABSENCE OF CERTAIN CHANGES
Except as and to the extent set forth in the Financial
Statements or in Section 2.5 of the Company Disclosure Schedule, from
December 31, 1999 (the "Balance Sheet Date") to the date of this Agreement
the Company has not:
(a) suffered any Material Adverse Effect;
(b) incurred any liabilities or obligations (absolute, accrued, contingent
or otherwise), except items incurred in the ordinary course of business and
consistent with past practice;
(c) paid, discharged or satisfied any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent
with past practice of liabilities and obligations reflected or reserved
against in the Seller 1999 Balance Sheet or incurred in the ordinary course
of business and consistent with past practice since the Balance Sheet Date;
(d) permitted or allowed any of their properties or assets (real, personal
or mixed, tangible or intangible) to be subjected to any liens, except for
liens for current taxes not yet due or liens the incurrence of which would
not have a Material Adverse Effect on the Company;
(e) cancelled any debts or waived any claims or rights of substantial
value;
(f) sold, transferred, or otherwise disposed of any of their material
properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of business, consistent with past practice;
(g) granted any increase in the compensation or benefits of any director,
officer, employee or consultant of the Company (including any such increase
pursuant to any bonus, pension, profit sharing or other plan or commitment)
or any increase in the compensation or benefits payable or to become
payable to any director, officer, employee or consultant of the Company,
except in the case of employees other than officers of the Company, for
such increases in compensation or benefits made in the ordinary course of
business, consistent with past practice;
(h) made any change in severance policy or practices;
(i) made any capital expenditure or acquired any property, plant and
equipment other than in the ordinary course of business, consistent
with past practice;
(j) declared, paid or set aside for payment any dividend or other
distribution in respect of their respective capital stock or redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of
capital stock or other securities of the Company;
(k) made any change in any method of tax or financial accounting or
accounting practice or made or changed any election for Federal, state,
local or foreign tax purposes;
(l) made any tax election, settled or compromised any Federal, state, local
or foreign income tax liability, or waived or extended the statute of
limitations in respect of any such taxes;
(m) paid, loaned or advanced any amount to, or sold, transferred or leased
any material properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of
their respective officers, directors or stockholders or any affiliate or
associate of any of their officers, directors or stockholders except for
directors' fees, and compensation to officers at rates not inconsistent
with the Company's past practice; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 2.5.
Section 2.6 ABSENCE OF UNDISCLOSED LIABILITIES
Except as and to the extent provided in the Seller 1999
Balance Sheet, the Company did not have at the Balance Sheet Date any
material liabilities (whether contingent or absolute, direct or indirect,
known or unknown to the Company or matured or unmatured or otherwise) that
were not fully reflected or fully reserved against in the Seller 1999
Balance Sheet, respectively, or incurred other than in the ordinary course
of business, consistent with past practice.
Section 2.7 LITIGATION
There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of the
Company, threatened against the Company any of its properties or any of
their officers or directors (in their capacities as such). There is no
judgment, decree or order against the Company or, to the knowledge of the
Company, any of its directors or officers (in their capacities as such),
that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that would reasonably be
expected to have a Material Adverse Effect on the Company. There is no
litigation that the Company has pending against other parties.
Section 2.8 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no agreement, judgment, injunction, order or
decree binding upon the Company which has or could reasonably be expected
to have the effect of prohibiting or impairing any current business
practice of the Company, any acquisition of property by the Company or the
conduct of business by the Company as currently conducted.
Section 2.9 GOVERNMENTAL AUTHORIZATION
The Company have obtained each federal, state, county,
local or foreign governmental consent, license, permit, grant, or other
authorization of a Governmental Entity (i) pursuant to which the Company
currently operates or holds any interest in any of its properties or (ii)
that is required for the operation of the business of the Company or the
holding of any such interest ((i) and (ii) are herein collectively called
"Company Authorizations"), and all of such Company Authorizations are in
full force and effect, except where the failure to obtain or have any such
Company Authorizations would not reasonably be expected to have a Material
Adverse Effect on the Company. Section 2.9 of the Company Disclosure
Schedule, which does not constitute an exception, provides disclosure
concerning certifications that may, to the Company's knowledge, be required
in the future.
Section 2.10 [Intentionally Left Blank]
Section 2.11 TITLE TO PROPERTY
The Company has good and marketable title to all of its
properties, interests in properties and assets, real and personal,
reflected in the Seller 1999 Balance Sheet or acquired after the Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of since the Balance Sheet Date in the ordinary course
of business, consistent with past practice), or with respect to leased
properties and assets, valid leasehold interests in, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) liens for current taxes not yet due and payable, (ii)
such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use or value of the
properties subject thereto or affected thereby, or otherwise materially
impair business operations involving such properties and (iii) liens
securing debt which are reflected on the Seller 1999 Balance Sheet,
including security interest disclosed on Section 2.11 of the Company's
Disclosure Schedule. The property and equipment of the Company that are
used in the operations of business are in good operating condition and
repair, subject to normal wear and tear. All properties used in the
operations of the Company are reflected in the Seller 1999 Balance Sheet to
the extent U.S. GAAP requires the same to be reflected.
Section 2.12 INTELLECTUAL PROPERTY
(a) To the best knowledge of the Company and except as disclosed in Section
2.12 of the Company Disclosure Schedule, the Company owns, or is licensed
or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, Internet domain names, copyrights,
mask works, and any applications therefor, trade secrets, know-how,
technology, inventions, ideas, algorithms, processes, computer software
programs or applications (in source code and/or object code form), net
lists, schematics, and tangible or intangible proprietary information or
material ("Intellectual Property") that are used in or necessary for the
conduct of the business of the Company as currently conducted. The Company
has not, directly or indirectly (i) licensed any of its Intellectual
Property to any party, (ii) entered into any agreement requiring the
Company to license or otherwise provide future versions, upgrades or
enhancements of its Intellectual Property, or (iii) entered into any
exclusive agreements relating to its Intellectual Property with any party.
(b) Section 2.12 of the Company Disclosure Schedule sets forth a complete
and accurate listing of: (i) all patents and patent applications and all
registered and unregistered trademarks, service marks, and trade names, and
registered Internet domain names, copyrights and mask works, included in
the Intellectual Property owned by the Company including the jurisdictions
in which each such Intellectual Property right subsists, has been issued or
registered or in which any application for such issuance and registration
has been filed, (ii) all material licenses, sublicenses and other
agreements as to which the Company is a party and pursuant to which any
person is authorized to use any Intellectual Property, and (iii) all
material licenses, sublicenses and other agreements as to which the Company
is a party and pursuant to which the Company is authorized to use any third
party patents, trademarks, service marks or copyrights, or software ("Third
Party Intellectual Property Rights") in connection with the manufacture,
sale, licensing or other distribution of any product of the Company or the
performance of any service by the Company, other than commercially
available, off-the-shelf software.
(c) To the Company's knowledge, and except as disclosed in Section 2.12 of
the Company Disclosure Schedule there is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property right of the
Company, or any Intellectual Property right of any third party to the
extent licensed by or through the Company, by any third party, including
any employee or former employee of the Company. The Company has not entered
into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification
provisions contained in purchase orders, license agreements or other
agreements arising in the ordinary course of business.
(d) The Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the Ancillary Agreements or the performance
of its obligations under this Agreement or the Ancillary Agreements, in
breach of any license, sublicense or other agreement relating to the
Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, and all registered trademarks, service marks trade names,
Internet domain names and copyrights, held by the Company are valid and
subsisting and there is no pending, or to the Company's knowledge,
threatened judicial or administrative proceeding involving the validity,
enforceability or scope thereof. The Company has not received any opinion
of counsel other than as disclosed in Section 2.12 to the Company
Disclosure Schedule concerning the patentability, registrability, validity,
enforceability or scope of any of Intellectual Property owned by or
licensed to the Company or the infringement of any Intellectual Property of
any third party by the Company. The Company has not (i) received notice of
any claim of infringement of any Intellectual Property right of any third
party, (ii) been sued in any suit, action or proceeding which involves a
claim of infringement of any Intellectual Property right of any third
party, or (iii) brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. The manufacturing,
marketing, licensing and sale of the Company's products or the performance
of services by the Company does not infringe any patent, trademark, service
xxxx, copyright, trade secret or other proprietary right of any third
party.
(f) The Company has secured valid written assignments from all consultants
and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that the Company
do not already own by operation of law. The Intellectual Property owned by
the Company is free and clear of all liens and other encumbrances, and the
Company is listed in the records of the appropriate United States, state,
or foreign agency except as set forth in Section 2.12 of the Company
Disclosure Schedule, as the sole owner of record for each patent,
trademark, service xxxx, trade name, Internet domain name, copyright and
mask work, and application therefor, listed in Section 2.12 of the Company
Disclosure Schedule.
(g) The Company has taken reasonable measures consistent with industry
practice to protect and preserve the confidentiality of all Intellectual
Property not otherwise protected by patents, patent applications or
copyright ("Confidential Information"). All authorized use, disclosure or
appropriation of Confidential Information owned by the Company ("Company
Confidential Information") by or to a third party has been pursuant to the
terms of a written agreement between the Company, on the one hand, and such
third party, on the other hand, pursuant to which the third party
undertakes to protect and not disclose the Company Confidential
Information. All use, disclosure or appropriation of Confidential
Information not owned by the Company has been pursuant to the terms of a
written agreement between the Company and the owner of such Confidential
Information, or is otherwise lawful.
Section 2.13 ENVIRONMENTAL MATTERS
(a) The Company is in full compliance with all Environmental Laws (as
hereinafter defined), which compliance includes, but is not limited to, the
possession by the Company of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance
in all respects with the terms and conditions thereof. The Company has not
received any communication, whether from a governmental authority, citizens
group, employee or otherwise, that alleges that the Company is not in full
compliance, and, to the knowledge of the Company, there are no material
circumstances that may prevent or interfere with such compliance in the
future. All of the permits the Company has pursuant to Environmental Laws
are listed on Section 2.13 (a) of the Company Disclosure Schedule.
(b) There are no Environmental Claims pending, alleged or, to the knowledge
of the Company, threatened against the Company, or, to the knowledge of the
Company, against any person or entity whose liability for any Environmental
Claim the Company have retained or assumed either contractually or by
operation of law.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the
release, emission, discharge, presence or disposal of any Material of
Environmental Concern by or attributable to the Company, that could form
the basis of any Environmental Claim against the Company or, to the
knowledge of the Company, against any person or entity whose liability for
any Environmental Claim the Company has retained or assumed either
contractually or by operation of law.
(d) Without in any way limiting the generality of the foregoing, (i) all
on-site and off-site locations where the Company has stored Materials of
Environmental Concern are identified in Section 2.13(d)(i) of the Company
Disclosure Schedule, (ii) any underground storage tanks, and the capacity
and contents of such tanks, if known to the Company, located on property
owned or leased by the Company are identified in Section 2.13(d)(ii) of the
Company Disclosure Schedule, (iii) except as set forth in Section
2.13(d)(iii) of the Company Disclosure Schedule, there is no asbestos
contained in or forming part of any building, building component, structure
or office space owned or leased by the Company, and (iv) no polychlorinated
biphenyls (PCB's) or PCB-containing items are used or stored at any
property owned, leased or operated by the Company.
(e) The Company has provided to Parent all assessments, reports, data,
results of investigations or audits, and other information that is in the
possession of or reasonably available to the Company regarding
environmental matters pertaining to or the environmental condition of the
business of the Company, or the compliance (or noncompliance) by the
Company with any Environmental Laws.
For purposes of this Agreement:
(1) "Environmental Claim" means any material claim, action, cause of
action, investigation or notice (written or oral) by any person or
entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of,
based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any
location, whether or not owned or operated by the Company or (b)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(2) "Environmental Laws" means all Federal, state, local and foreign
laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface
strata), including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of
Environmental Concern.
"Materials of Environmental Concern" means chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products, but excluding materials commonly employed
or wastes commonly generated in office operations and/or janitorial
operations.
Section 2.14 TAXES
(a) The Company has(i) properly completed and timely filed (taking into
account extensions granted without penalty and described in Section 2.14 of
the Company Disclosure Schedule) all Tax Returns required to be filed by it
on or before the Closing Date and (ii) paid, or where payment is not yet
due, has provided adequate accruals in accordance with U.S. GAAP in the
Financial Statements for all material Taxes due with respect to any period
ending on or before the Closing Date. Other than Taxes accrued in the
ordinary course of the Company's business and for which adequate accruals
in accordance with U.S. GAAP have been made on the books and records of the
Company, the Company has no material liability for unpaid Taxes accruing
after the date of the latest Financial Statements. There is (i) no material
claim for Taxes that is a lien against the property of the Company or is
being asserted against the Company other than liens for Taxes not yet due
and payable, (ii) no audit of any Tax Return of the Company being conducted
by a Tax Authority, (iii) no extension of the statute of limitations on the
assessment of any Taxes granted by the Company and currently in effect, and
(iv) except as disclosed in Section 2.14 of the Company Disclosure
Schedule, no agreement, contract or arrangement to which the Company is a
party that may result in the payment of any amount that would not be
deductible by reason of section 280G or section 404 of the Code (or
comparable provisions under foreign or state Tax laws). The Company has not
filed nor will file any consent to have the provisions of paragraph
341(f)(2) of the Code (or comparable provisions of any foreign or state Tax
laws) apply to the Company. The Company is not a party to any Tax sharing
or Tax allocation agreement nor does the Company have any liability or
potential liability to another party under any such agreement. The Company
has never been a member of a consolidated, combined or unitary group of
which the Company was not the ultimate parent corporation. The Company has
never been a "United States real property holding corporation" within the
meaning of section 897 of the Code.
(b) For purposes of this Agreement, the following terms have the following
meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental entity (a
"Tax Authority") responsible for the imposition of any such tax (domestic
or foreign), (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period, and (iii)
any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of being a transferee of or successor to any person or
as a result of any express or implied obligation to indemnify any other
person. As used herein, "Tax Return" shall mean any return, statement,
report or form (including, without limitation, estimated tax returns and
reports, withholding tax returns and reports and information reports and
returns) required to be filed with respect to Taxes.
Section 2.15 EMPLOYEE BENEFIT PLANS
(a) Section 2.15 of the Company Disclosure Schedule lists, with respect to
the Company and any trade or business (whether or not incorporated) which
is treated as a single employer with the Company (an "ERISA Affiliate")
within the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all
material employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) each
loan to a non-officer employee in excess of $10,000, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria
benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit
plans, programs or arrangements that apply to senior management of the
Company and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of
the Company of greater than $10,000 remain for the benefit of, or relating
to, any present or former employee, consultant or director of the Company
(together, the "Company Employee Plans").
(b) The Company has furnished or made available to Parent a copy of each of
the Company Employee Plans and related material plan documents (including
trust documents, insurance policies or contracts, employee booklets,
summary plan descriptions and other authorizing documents, and any material
employee communications relating thereto) and has, with respect to each
Company Employee Plan which is subject to ERISA reporting requirements,
provided copies of the Form 5500 reports filed for the last three (3) plan
years. Any Company Employee Plan intended to be qualified under Section
401(a) of the Code has either obtained from the IRS a favorable
determination letter as to its qualified status under the Code, including
all amendments to the Code effected by the Tax Reform Act of 1986, or has
applied to the IRS for such a determination letter prior to the expiration
of the requisite period under applicable Treasury Regulations or IRS
pronouncements in which to apply for such determination letter and to make
any amendments necessary to obtain a favorable determination or has been
established under a standardized prototype plan for which an IRS opinion
letter has been obtained by the plan sponsor and is valid as to the
adopting employer. The Company has also furnished or made available to
Parent the most recent IRS determination, notification, advisory, or
opinion letter issued with respect to each such Company Employee Plan, and,
to the Company's knowledge, nothing has occurred since the issuance of each
such letter which could reasonably be expected to cause the loss of the
tax-qualified status of any Company Employee Plan subject to Code Section
401(a).
(c) None of the Company Employee Plans promises or provides retiree medical
or other retiree welfare benefits to any person, except as required by
applicable law. There has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect
to any Company Employee Plan, which could reasonably be expected to have,
in the aggregate, a Material Adverse Effect on the Company. Each Company
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules
and regulations (including ERISA and the Code), except as would not have,
in the aggregate, a Material Adverse Effect on the Company, and the Company
or ERISA Affiliates have performed all obligations required to be performed
by them under, are not in any material respect in default under or
violation of, and have no knowledge of any material default or violation by
any other party to, any of the Company Employee Plans. Neither the Company
nor any of its ERISA Affiliates is subject to any material liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA
with respect to any of the Company Employee Plans. All material
contributions required to be made by the Company or ERISA Affiliates to any
Company Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Company
Employee Plan for the current plan years. With respect to each Company
Employee Plan, no "reportable event" within the meaning of Section 4043 of
ERISA (excluding any such event for which the thirty (30) day notice
requirement has been waived under the regulations to Section 4043 of ERISA)
nor any event described in Section 4062, 4063 or 4041 or ERISA has
occurred. Each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Closing Date in accordance with its terms,
without material liability to Parent (other than ordinary administrative
expenses typically incurred in a termination event). With respect to each
Company Employee Plan subject to ERISA as either an employee pension plan
within the meaning of Section 3(2) of ERISA or an employee welfare benefit
plan within the meaning of Section 3(1) of ERISA, the Company has prepared
in good faith and timely filed all requisite material governmental reports
(which, to the Company's knowledge, were true and correct as of the date
filed) and has properly and timely filed and distributed or posted all
material notices and reports to employees required to be filed, distributed
or posted with respect to each such Company Employee Plan. No suit,
administrative proceeding, action or other litigation has been brought, or
to the best knowledge of the Company is threatened, against or with respect
to any such Company Employee Plan, including any audit or inquiry by the
Internal Revenue Service (the "IRS") or United States Department of Labor
other than requests for payments in the ordinary course or requests for
qualified domestic relations orders.
(d) With respect to each Company Employee Plan, the Company has complied
with (i) the applicable health care continuation and notice provisions of
the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and
the regulations (including proposed regulations) thereunder, except to the
extent that such failure to comply would not in the aggregate has a
Material Adverse Effect on the Company (ii) the applicable requirements of
the Family Medical and Leave Act of 1993 and the regulations thereunder,
except to the extent that such failure to comply would not, in the
aggregate, have a Material Adverse Effect on the Company and (iii) the
applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations (including proposed
regulations) thereunder, except to the extent that such failure to comply
would not, in the aggregate, have a Material Adverse Effect on the Company.
(e) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or other service
provider of the Company or any ERISA Affiliates to severance benefits or
any other payment, except as expressly provided in this Agreement, or (ii)
except as disclosed in Section 2.15 of the Company Disclosure Schedule,
accelerate the time of payment or vesting of Company Options, or increase
the amount of compensation due any such employee or service provider,
except, as contemplated by the Employee Agreements or any other similar
agreements entered into with employees, directors, former employees or
former directors of the Company with the knowledge of Parent.
(f) There has been no amendment to, written interpretation or announcement
(whether or not written) by the Company or any ERISA Affiliates relating
to, or change in participation or coverage under, any Company Employee Plan
which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in the Financial Statements.
(g) The Company does not currently maintain, sponsor, participate in or
contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I
of ERISA, Title IV of ERISA or Section 412 of the Code.
(h) Neither the Company nor any ERISA Affiliates is a party to, or has made
any contribution to or otherwise incurred any obligation to contribute to,
any "multi-employer plan" as defined in Section 3(37) of ERISA.
Section 2.16 CERTAIN AGREEMENTS AFFECTED BY THE MERGER
Neither the execution and delivery of this Agreement or
the Ancillary Agreements nor the consummation of the transaction
contemplated hereby or thereby will, except as disclosed in Section 2.16 of
the Company Disclosure Schedule, (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of the
Company, (ii) materially increase any benefits otherwise payable by the
Company or (iii) result in the acceleration of the time of payment or
vesting of any such benefits except as set forth in Section 2.16 of the
Company Disclosure Schedule or as contemplated by the Employee Agreements
or any other similar agreement entered into with any employee, former
employee, director or former director of the Company with the knowledge of
Parent. Subject to stockholder approval, no payment which will or may be
made by the Company to any employee will be characterized as an "excess
parachute payment" within the meaning of section 280G(b)(1) of the Code.
Section 2.17 EMPLOYEE MATTERS
The Company is in compliance in all material respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages,
hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice. The Company has in all material
respects withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to employees; and is
not liable for any material arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing. The Company 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 claims against the
Company under any workers compensation plan or policy or for long term
disability. There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company, on the one hand, and any of its
respective employees, on the other hand, which controversies have or could
reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any agency, court or tribunal, foreign
or domestic. The Company is not a party to any collective bargaining
agreement or other labor union contract nor does the Company know of any
activities or proceedings of any labor union or organize any such
employees. To the Company's knowledge, no employees of the Company are in
violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a
former employer relating to the right of any such employee to be employed
by the Company because of the nature of the business conducted by the
Company or to the use of trade secrets or proprietary information of
others. No key employees or officers of the Company have given notice to
the Company, nor is the Company otherwise aware, that any such key employee
or officer intends to terminate his or her employment with the Company.
Section 2.18 INTERESTED PARTY TRANSACTIONS
The Company is not indebted to any director, officer,
employee or agent of the Company (except for amounts due as normal salaries
and bonuses and in reimbursement of ordinary expenses), and except as set
forth in Section 2.18 to the Company Disclosure Schedule, no such person is
indebted to the Company.
Section 2.19 INSURANCE
The Company has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of the Company. Section 2.19 of the Company
Disclosure Schedule contains a complete list of the policies and contracts
of insurance maintained by the Company. There is no material claim pending
under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable to date under all such policies and
bonds have been paid and the Company is otherwise in compliance in all
material respects with the terms of such policies and bonds. The Company
has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
Section 2.20 COMPLIANCE WITH LAWS
Each of the Company has complied with, is not in
violation of, and has not received any notices of violation with respect
to, any federal, state, local or foreign statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of
its business, except for such violations or failures to comply as could not
be reasonably expected to have a Material Adverse Effect on the Company.
Section 2.21 MINUTE BOOKS
The minute books of the Company made available to Parent
contain a complete and accurate summary in all material respects of all
meetings of directors and stockholders or actions by written consent since
the time of incorporation of the Company through the date of this
Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
Section 2.22 COMPLETE COPIES OF MATERIALS
The Company has delivered or made available true and
complete copies of each document which has been requested by Parent or its
counsel in connection with their legal and accounting review of the
Company.
Section 2.23 STOCKHOLDER AGREEMENTS; IRREVOCABLE PROXIES
Holders of more than (i )a majority of the outstanding
shares of Company Common Stock and (ii) two-thirds of the outstanding
shares of Company Preferred Stock, have agreed in writing to vote for
approval of the Merger pursuant to irrevocable proxies attached as exhibits
to the Stockholder Agreements.
Section 2.24 VOTE REQUIRED
The affirmative vote of the holders of at least a
majority of the outstanding shares of Company Common Stock and two-thirds
of the outstanding shares of the Company Preferred Stock (all series voting
together as a single class on an as-if converted basis) is the only vote of
the holders of any of the Company's capital stock necessary to approve this
Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby.
Section 2.25 BROKERS' AND FINDERS' FEES
Except as disclosed in Section 2.25 of the Company
Disclosure Schedule, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
Section 2.26 BOARD APPROVAL
The Company Board has unanimously (i) approved this
Agreement, the Ancillary Agreements and the Merger, (ii) determined that
the transactions contemplated herein and therein are advisable and in the
best interests of the stockholders of the Company and on terms that are
fair to such stockholders and (iii) recommended that the stockholders of
the Company approve the Merger.
Section 2.27 CUSTOMERS AND SUPPLIERS
No customer which individually accounted for more than 1%
of the Company's gross revenues during the 12-month period preceding the
date hereof, and no supplier of the Company, has canceled or otherwise
terminated, or made any written threat to the Company to cancel or
otherwise terminate its relationship with the Company, or has decreased
materially its services or supplies to the Company in the case of any such
supplier, or its usage of the services or products of the Company in the
case of such customer, and to the Company's knowledge, no such supplier or
customer intends to cancel or otherwise terminate its relationship with the
Company or to decrease materially its services or supplies to the Company
or its usage of the services or products of the Company. The Company has
not breached, so as to provide a benefit to the Company that was not
intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of the Company.
Section 2.28 MATERIAL CONTRACTS
Except for the contracts and agreements described in
Section 2.28 of the Company Disclosure Schedule, and in Section 2.28 of the
Company Disclosure Schedule (collectively, the "Material Contracts"), the
Company is not a party to or bound by any material contract, including
without limitation:
(a) any distributor, sales, advertising, agency or manufacturer's
representative contract;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$50,000 over the life of the contract;
(c) any contract that expires or may be renewed at the option of any person
other than the Company so as to expire more than one (1) year after the
date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities
or other hedging arrangement or any leasing transaction of the type required
to be capitalized in accordance with U.S. GAAP;
(e) any contract for capital expenditures in excess of $50,000 in
the aggregate;
(f) any contract limiting the freedom of the Company to engage in any line
of business or to compete with any other "person" as that term is defined
in the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or, other than those entered into in the ordinary course of business,
consistent with past practice, any confidentiality, secrecy or
non-disclosure contract; (g) any material contract pursuant to which the
Company is a lessor of any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property;
(h) any contract with any affiliate of the Company; or
(i) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other person.
Section 2.29 NO BREACH OF MATERIAL CONTRACTS
All Material Contracts are in written form. The Company
has in all material respects performed the obligations required to be
performed by it and is entitled to all benefits under, and to its
knowledge, is not alleged to be in default in respect of, any Material
Contract. Each of the Material Contracts is in full force and effect, and
there exists no default or event of default or event, occurrence, condition
or act, with respect to the Company or, to the knowledge of the Company,
with respect to the other contracting party, which, with the giving of
notice, the lapse of time or the happening of any other event or
conditions, would reasonably be expected to become a default or event of
default under the terms of any Material Contract. True, correct and
complete copies of all Material Contracts have been delivered to the
Parent.
Section 2.30 THIRD PARTY CONSENTS
Section 2.30 of the Company Disclosure Schedule lists all
contracts that require a novation or consent to assignment as a result of
the announcement or consummation of the transactions contemplated by this
Agreement in order to remain in full force an effect.
Section 2.31 MATERIAL THIRD PARTY CONSENTS
Section 2.31 of the Company Disclosure Schedule lists
every contract which, if no novation occurs to make Parent a party thereto
or if no consent to assignment is obtained, would have a Material Adverse
Effect on Parent's ability to operate the business of the Company in the
same manner as the business was operated by the Company prior to the
Closing Date.
Section 2.32 [Intentionally Left Blank]
Section 2.33 YEAR 2000
All computer hardware, firmware, software, systems,
databases, devices, machinery, equipment and related items (a) process
calendar dates using a four-digit year format to remove chances for
errors;(b) correctly process calendar dates for the leap year; and (c)
perform the same during and after the year 2000 as it performed before the
year 2000. The foregoing does not constitute a warranty or representation
that the Company's software will be capable of recording, storing,
processing, calculating and displaying correct calendar dates based on
software supplied by any party other than the Company, or that the
Company's software will properly interact with such third party software.
Section 2.34 TAX MATTERS
As of the date hereof, neither the Company nor, to the
Company's knowledge, any of its affiliates has taken or agreed to take any
action, nor does the Company have knowledge of any fact or circumstance,
that would prevent the Merger from qualifying as a reorganization within
the meaning of section 368(a) of the Code.
Section 2.35 [Intentionally Left Blank]
Section 2.36 [Intentionally Left Blank]
Section 2.37 STATE TAKEOVER STATUTES
The Board of Directors of the Company has taken all
action necessary so that the provisions of section 203 of Delaware Law will
not apply to the Merger, this Agreement or the other transactions
contemplated hereby and no other anti-takeover statute of Delaware or any
other state applies to or purports to apply to the Merger and the other
transactions contemplated hereby.
Section 2.38 ACCOUNTS RECEIVABLE
Subject to any reserves set forth in the Financial
Statements, the accounts receivable shown on the Financial Statements
represent and will represent bona fide claims against debtors for sales and
other charges, and are not subject to discount except for normal cash and
immaterial trade discounts. The amount carried for doubtful accounts and
allowances disclosed in the Financial Statements is sufficient to provide
for any losses which may be sustained on realization of the receivables.
Section 2.39 REPRESENTATIONS COMPLETE
None of the representations or warranties made by the
Company herein or in any Schedule hereto, including the Company Disclosure
Schedule, or certificate furnished by the Company pursuant to this
Agreement, when all such documents are read together in their entirety,
contains or will contain at the Closing Date any untrue statement of a
material fact, or omits or will omit at the Closing Date to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in a document of even date herewith
and delivered by Parent to the Company prior to the execution and delivery
of this Agreement and referring to the representations and warranties in
this Agreement (the "Parent Disclosure Schedule"), Parent represents and
warrants to the Company as follows:
Section 3.1 ORGANIZATION, STANDING AND POWER
Parent is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization.
Parent has the corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a
Material Adverse Effect on Parent. Parent is not in violation of any of the
provisions of its certificate of incorporation or by-laws.
Section 3.2 CAPITAL STRUCTURE
As of the date hereof, the authorized capital stock of
Parent consists of 250,000,000 shares of Parent Common Stock and 5,000,000
shares of Preferred Stock, $0.001 par value per share, of which there were
issued and outstanding as of the close of business on September 30, 1999,
62,583,964 shares of Common Stock and no shares of Preferred Stock. The
shares of Parent Common Stock to be issued pursuant to the Merger, when so
issued, will be duly authorized, validly issued, fully paid, and
non-assessable.
Section 3.3 AUTHORITY
Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and the Ancillary Agreements and
to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of
Parent and Merger Sub. This Agreement and each Ancillary Agreement has been
duly executed and delivered by Parent and Merger Sub and constitutes the
valid and binding obligations of Parent and Merger Sub enforceable against
each of Parent and Merger Sub in accordance with its terms except to the
extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding at law or in equity. The execution and delivery of this
Agreement and the Ancillary Agreements do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under
(i) any provision of the certificate of incorporation or by-laws of Parent
or Merger Sub or (ii) any material mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license,
judgment, order or decree applicable to Parent or Merger Sub or the
properties or assets of Parent or Merger Sub. Except for (i) the
requirements of the Fairness Hearing, (ii) the filing of a Certificate of
Merger, in accordance with the requirements of Delaware Law, (iii) such
filings as may be required under the HSR Act and any applicable foreign
antitrust law and (iv) if required pursuant to the provisions of Section
5.18, the filing of a Registration Statement on Form S-4, neither the
execution, delivery or performance of this Agreement by Parent and Merger
Sub, the consummation by Parent and Merger Sub of the transactions
contemplated hereby, nor compliance by Parent with any of the provisions
hereof will (i) require any notice to, filing with, or permit,
authorization, consent or approval of, any Governmental Entity or any
private third party, (ii) conflict with or result in any breach of any
provision of the charter or by-laws of Parent or Merger Sub, (iii) result
in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or result in the creation of any lien) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
to which Parent or Merger Sub is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, treaty, rule or regulation applicable to
Parent, Merger Sub or any of their properties or assets except, in the case
of clauses (i), (iii) and (iv), where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings, or where
such violations, breaches or defaults would not, individually or in the
aggregate, materially impair the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement.
Section 3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS
Parent has timely filed and made available to the Company
each required statement, report, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act,
definitive proxy statement, and other filings filed with the Securities and
Exchange Commission (the "SEC") by Parent since July 31, 1998, and prior to
the Effective Time, Parent will have furnished the Company with true and
complete copies of any additional documents filed with the SEC by Parent
prior to the Effective Time (collectively, the "Parent SEC Documents"). In
addition, Parent has made available to the Company all exhibits to the
Parent SEC Documents filed prior to the date hereof, and will promptly make
available to the Company all exhibits to any additional Parent SEC
Documents filed prior to the Effective Time. As of their respective filing
dates, the Parent SEC Documents complied (or will comply) in all material
respects with the requirements of the Exchange Act and the Securities Act,
and none of the Parent SEC Documents contained (or will contain) any untrue
statement of a material fact or omitted (or will omit) to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading, except to the extent corrected by a subsequently filed Parent
SEC Document. The financial statements of Parent, including the notes and
schedules thereto, included in the Parent SEC Documents (the "Parent
Financial Statements") were complete and correct in all material respects
as of their respective dates, complied as to form in all material respects
with applicable accounting requirements and with the rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with U.S. GAAP applied on a basis consistent
throughout the periods indicated and consistent with each other (except as
may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Q, as permitted by Form
10-Q of the SEC). The Parent Financial Statements fairly present the
consolidated financial condition and operating results of Parent at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments which were
not and are not expected to be, individually or in the aggregate, material
in amount).
Section 3.5 ABSENCE OF UNDISCLOSED LIABILITIES
Parent has no material obligations or liabilities of any
nature (matured or unmatured, fixed, or contingent or otherwise) other than
(i) those set forth or adequately provided for in the Balance Sheet
included in Parent's Quarterly Report on Form 10-Q for the period ended at
the most recent quarter end prior to the date of this Agreement (the
"Parent Balance Sheet"), (ii) those incurred in the ordinary course of
business and not required to be set forth in the Parent Balance Sheet under
U.S. GAAP and (iii) those incurred in the ordinary course of business since
the date of Parent Balance Sheet and consistent with past practice.
Section 3.6 BROKER'S AND FINDERS' FEES
Except for the fees and expenses of CS First Boston,
Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
Section 3.7 STOCKHOLDER APPROVAL
Approval of the stockholders of Parent is not required
for this Agreement, the Ancillary Agreements or the Merger. The Board of
Directors and sole stockholder of Merger Sub have approved this Agreement
and the Merger.
Section 3.8 APPROVAL
The Board of Directors of Parent has approved this
Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby.
Section 3.9 TAX MATTERS
As of the date hereof, neither Parent nor, to Parent's
knowledge, any of its affiliates has taken or agreed to take any action,
nor does Parent have knowledge of any fact or circumstance that would
prevent the Merger from qualifying as a reorganization within the meaning
of section 368(a) of the Code.
Section 3.10 ABSENCE OF CERTAIN CHANGES
Since the date of the Parent's Registration Statement on
Form S-1 filed on October 28, 1999, as amended by Parent's Registration
Statements on Form S-1/A filed on November 4, 1999 and November 12, 1999
through the date hereof, there has not been a Material Adverse Effect on
Parent. Without limiting the foregoing, during such period, except as
disclosed in Parent SEC Documents filed by Parent or as contemplated by
this Agreement, (i) Parent has conducted its business in the ordinary
course of business and (ii) there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, Parent;
(b) any amendment of any provision of the certificate of incorporation
or by-laws of, or of any material term of any outstanding security issued by,
Parent.
(c) any incurrence, assumption or guarantee by Parent of any indebtedness
for borrowed money other than borrowings under existing short term credit
facilities not in excess of $50,000 in the aggregate;
(d) any material change in any method of accounting or accounting
practice by Parent except for any such change required by reason of a
change in U.S. GAAP;
(e) issuance of Parent Common Stock other than pursuant to options
outstanding as of the date of Parent's S-1 and the issuance of options
after such date in the ordinary course of business (and the issuance of
securities pursuant thereto);
(f) any authorization of, or commitment or agreement to take any of,
the foregoing actions except as otherwise permitted by this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE
Section 4.1 CONDUCT OF BUSINESS OF THE COMPANY
During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, the Company shall (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Parent),
carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and as proposed to be
conducted. The Company agrees to pay to pay debts and Taxes when due
subject to good faith disputes over such debts or Taxes, to pay or perform
other obligations when due subject to good faith disputes over whether
payment or performance is owing, and to use all reasonable efforts
consistent with past practice and policies to preserve its present business
organizations, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings
with it, to the end that its goodwill and ongoing businesses shall not be
substantially impaired at the Effective Time. The Company shall promptly
notify Parent of any event or occurrence not in the ordinary course of its
business or consistent with past practice, and of any event which could
have a Material Adverse Effect on the Company.
Section 4.2 RESTRICTION ON CONDUCT OF BUSINESS OF THE COMPANY
During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, except as set forth in the Company Disclosure Schedule or
except as expressly contemplated by this Agreement, the Company shall not
do or cause any of the following, without the prior written consent of
Parent which may include E-mail correspondence:
(a) Charter Documents. Cause any amendments to the Company's certificate
of incorporation or the Company's by-laws or form any subsidiaries other
than for the sole purpose of facilitating the transactions described herein;
(b) Dividends; Changes in Capital Stock. Declare or pay any dividends on or
make any other distributions (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of
shares in connection with any termination of service to it;
(c) Stock Option Plans, Etc. Accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its stock
plans or authorize cash payments in exchange for any options or other rights
granted under any of such plans;
(d) Material Contracts. Enter into any material contract or commitment,
or violate, amend or otherwise modify or waive any of the terms of any of its
material contracts other than in the ordinary course of business, consistent
with past practice;
(e) Issuance of Securities. Issue, deliver or sell or authorize or propose
the issuance, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or
other convertible securities, other than the issuance of shares of Company
Common Stock or Company Preferred Stock pursuant to the exercise of stock
options, warrants or other rights therefor outstanding as of the date of
this Agreement;
(f) Intellectual Property. Transfer to any person or entity any rights
to its Intellectual Property other than pursuant to non-exclusive license
arrangements in the ordinary course of business, consistent with past
practice;
(g) Exclusive Rights. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of the Company's products
or technology;
(h) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually
or in the aggregate, to its business, taken as a whole except in the
ordinary course of business, consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed money, guarantee
any such indebtedness, issue or sell any debt securities or guarantee any
debt securities of others except in the ordinary course of business,
consistent with past practice;
(j) Leases. Enter into any material lease;
(k) Payment of Obligations. Pay, discharge or satisfy in an amount in
excess of $100,000, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise) other than ordinary course
payment, discharge or satisfaction of liabilities reflected or reserved
against in the Financial Statements;
(l) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements in excess of $100,000;
(m) Insurance. Materially reduce the amount of any insurance coverage
provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of substantial
value;
(o) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend any
employee benefit or stock purchase or option plan, hire any new officer
level employee, incur, pay or provide any special bonus or special
remuneration to any employee or director (except as disclosed in the
Company Disclosure Schedule) or increase the salaries or wage rates of its
employees or grant stock options to its employees other than in the normal
course of business and consistent with past practice when hiring new
employees, providing additional grants to current employees, and adding
additional shares to the Company's option plan, all following discussion
with Parent;
(p) Severance Arrangements. Grant any severance or termination pay
(i) to any director or officer or (ii) to any other employee except
payments made pursuant to standard written agreements outstanding on the
date hereof and heretofore furnished to Parent;
(q) Initiating Lawsuits. Commence legal action other than (i) for the
routine collection of bills, (ii) in such cases where the Company in good
faith determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it consults
with Parent prior to the commencement of such a suit, or (iii) for a breach
of this Agreement;
(r) Acquisitions. Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial 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, in each such case which are material,
individually or in the aggregate, to the Company's business, taken as a
whole;
(s) Taxes. Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, file any material Tax
Return other than those for which extensions have been received as set
forth in the Company Disclosure Schedule or any amendment to a material Tax
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes;
(t) Accounting Policies and Procedures. Make any change to its
accounting methods, principles, policies, procedures or practices, except
as may be required by U.S. GAAP, or applicable statutory accounting
principles;
(u) Revaluation. Except as disclosed in the Company Disclosure Schedule,
revalue any of its assets, including writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course
of business, consistent with past practice;
(v) Year 2000 Compliance. Fail to continue in all material respects the
Company's Year 2000 assessment and compliance activities, as described to
Parent by the Company;
(w) Other. Agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through (v) above.
Section 4.3 SOLICITATION
Until the earlier of the Effective Time or the
termination of this Agreement, the Company and the officers, directors,
employees or other agents of the Company will not, directly or indirectly,
take any action to solicit, initiate or encourage any Takeover Proposal.
Upon execution of this Agreement, the Company will immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company will promptly
notify Parent after receipt of any Takeover Proposal or any notice that any
person is considering making a Takeover Proposal or any request for
nonpublic information relating to the Company or for access to the
properties, books or records of the Company by any person that has advised
the Company that it may be considering making, or that has made, a Takeover
Proposal and will keep Parent timely informed of the status and details of
any such Takeover Proposal notice, request or any correspondence or
communications related thereto and shall provide Parent with a true and
complete copy of such Takeover Proposal notice or request or correspondence
or communications related thereto, if it is in writing, or a written
summary thereof, if it is not in writing. The Company will promptly provide
to Parent any non-public information concerning the Company provided to any
other party which was not previously provided to Parent. Neither the
Company Board nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Merger Sub,
the approval or recommendation by the Company Board or any such committee
of this Agreement or the Merger, or (ii) approve or recommend or propose to
approve or recommend, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal; provided, however, that
nothing contained in this Agreement shall prohibit the Company Board from
(A) furnishing information to, or engaging in discussions or negotiations
with any person or entity in response to an unsolicited bona fide written
Takeover Proposal; or (B) recommending such an unsolicited bona fide
written Takeover Proposal to the stockholders of the Company, if (i) the
Company Board concludes that such Takeover Proposal would constitute a
Superior Proposal, and (ii) the Company Board determines in good faith that
the failure to take such action would result in a breach by the Company
Board of its fiduciary duties to the Company stockholders, and (iii) prior
to furnishing such information to such person or entity, the Company
provides written notice to Parent that the Company is furnishing
information to, or entering into discussions or negotiations with, such
person or entity.
For purposes of this Agreement, "Takeover Proposal" means
any offer or proposal for, or any indication of interest in, a merger or
other business combination involving the Company or the acquisition of 20%
or more of the outstanding shares of capital stock of the Company, or a
significant portion of the assets of, the Company, other than the
transactions contemplated by this Agreement.
For purposes of this Agreement, "Superior Proposal" means
(i) a bona fide Takeover Proposal made by a third party that the Company
Board determines in its good faith judgment to be more favorable to the
Company stockholders than the Merger and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the
Company's Board is reasonably capable of being obtained by such third
party.
Section 4.4 STOCKHOLDER APPROVAL
The Company shall take all action necessary, in
accordance with Delaware Law and the Company's certificate of incorporation
and the Company's bylaws, to cause its stockholders to consider and act
upon this Agreement and the Merger as soon as practicable; provided,
however, that the Company Board may withhold, withdraw, amend, or modify
any recommendation made in favor of the Merger if a Superior Proposal is
made to the Company and not withdrawn.
Nothing contained in Section 4.3 or this Section 4.4
shall prohibit the Company from complying with any applicable law, rule, or
regulation.
Section 4.5 FURTHER INFORMATION
As soon as such information becomes available, and in any
event not later than thirty (30) days after the end of each fiscal month,
the Company shall provide to Parent an unaudited balance sheet as of the
end of such month and the related statements of results of operations and
statements of cash flows for such period together with a list of the ages
and amounts of all accounts and notes due and uncollected as of the end of
such month.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 PREPARATION OF PERMIT APPLICATION, HEARING REQUEST,
HEARING NOTICE AND INFORMATION STATEMENT
As promptly as practicable after the date hereof, Parent
shall prepare, with the reasonable cooperation of the Company, and file
with the Commissioner (as defined in Section 5.17) the documents required
by the CSL including, but not limited to, any required Permit Application
(as defined in Section 5.17), request for a hearing ("Hearing Request") or
notice of a hearing ("Hearing Notice") pursuant to Sections 25121 and 25142
of the CSL (collectively, the "Notice Materials"), in connection with the
Merger and the issuance of Parent Common Stock, in order to perfect the
exemption from registration provided by Section 3(a)(10) of the Securities
Act. Each of Parent and the Company shall use reasonable efforts to have
the Permit Application, Hearing Request, and Hearing Notice declared
effective under the CSL as promptly as practicable after such filing. In
addition, Parent and the Company will prepare, and the Company will
distribute, an information statement or proxy statement (the "Information
Statement") along with the Notice Materials, as may be required by Delaware
Law or California Law, at the earliest practicable date to submit this
Agreement, the Merger, and the transactions contemplated hereby, to the
Company stockholders. Each of the Parent and the Company will promptly
provide all information relating to their respective business and
operations necessary for inclusion in the Notice Materials to satisfy all
requirements of applicable state and federal securities laws. Each of
Parent and the Company shall be solely responsible for any statement,
information, or omission, in the Notice Materials relating to it or its
affiliates based upon the written information furnished by it or its
representatives.
Section 5.2 ACCESS TO INFORMATION
(a) The Company shall afford Parent and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of the Company's properties,
books, contracts, commitments and records, and (ii) all other information
concerning the business, properties and personnel of the Company as Parent
may reasonably request. The Company agrees to provide to Parent and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof until
the Effective Time, each of Parent and the Company shall confer on a
regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status
of ongoing operations.
(c) No information or knowledge obtained in any investigation pursuant to
this Section 5.2 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the
parties to consummate the transactions contemplated hereby.
(d) The Company shall provide the following information to Parent at least
two weeks after the date of this Agreement: (i) a complete list of the
types of Tax Returns being filed by the Company in each taxing
jurisdiction, (ii) the year of the commencement of the filing of each such
type of Tax Return, (iii) all closed years with respect to each such type
of Tax Return filed in each jurisdiction, (iv) all material Tax elections
filed in each jurisdiction by the Company, (v) the tax basis of the assets
of the Company, (vi) any deferred intercompany gain with respect to
transactions to which the Company has been a party, (vii) the accumulated
earnings and profits and any loss carryovers of the Company, and (ix)
receipts for any Taxes paid to foreign Tax authorities. The Company shall
provide Parent and its accountants, counsel and other representatives
reasonable access, during normal business hours during the period prior to
the Effective Time, to all of the Company's Tax Returns and other records
and workpapers relating to Taxes.
Section 5.3 CONFIDENTIALITY
The parties hereto acknowledge that Parent and the
Company have previously executed a non-disclosure agreement dated February
8, 2000 (the "Confidentiality Agreement") which Confidentiality Agreement
shall continue in full force and effect in accordance with its terms. In
addition, the parties hereto agree that the terms and conditions of the
transactions contemplated hereby, and information exchanged in connection
with the execution hereof and the consummation of the transactions
contemplated hereby shall be subject to the Confidentiality Agreement.
Section 5.4 PUBLIC DISCLOSURE
Unless otherwise permitted by this Agreement, Parent and
the Company shall consult with each other before issuing any press release
or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement or the Ancillary Agreements and the
transactions contemplated hereby and thereby, and neither shall issue any
such press release or make any such statement or disclosure without the
prior approval of the other (which approval shall not be unreasonably
withheld), except as may be required by law or by obligations pursuant to
any listing agreement with any national securities exchange or with the
National Association of Securities Dealers.
Section 5.5 CONSENTS; COOPERATION
(a) Each of Parent and the Company shall promptly apply for or otherwise
seek, and use its reasonable best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the
transactions contemplated hereby, including those required under the HSR
Act and any applicable foreign antitrust laws. The Company shall use
reasonable best efforts to obtain all necessary consents, waivers and
approvals under any of its material contracts for the assignment thereof or
otherwise. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or
any other applicable antitrust or fair trade law.
(b) Each of Parent and the Company shall use all reasonable best efforts to
resolve such objections, if any, as may be asserted by any Governmental
Entity with respect to the transactions contemplated by this Agreement
under the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the Federal Trade Commission Act, as amended, and any other
Federal, state or foreign statutes, rules, regulations, orders or decrees
that are designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade (collectively,
"Antitrust Laws"). In connection therewith, if any administrative or
judicial action or proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, each of Parent and the Company shall
cooperate and use all commercially reasonable efforts vigorously to contest
and resist any such action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent (each an "Order"), that is in
effect and that prohibits, prevents, or restricts consummation of the
transactions contemplated hereby or any such other transactions, unless by
mutual agreement Parent and the Company decide that litigation is not in
their respective best interests. Notwithstanding the provisions of the
immediately preceding sentence, it is expressly understood and agreed that
neither Parent nor the Company shall have any obligation to litigate or
contest any administrative or judicial action or proceeding or any Order
beyond the date of a ruling preliminarily enjoining the Merger issued by a
court of competent jurisdiction. Each of Parent and the Company shall use
reasonable best efforts to take such action as may be required to cause the
expiration of the notice periods under the HSR Act or other Antitrust Laws
with respect to such transactions as promptly as possible after the
execution of this Agreement.
(c) Notwithstanding anything to the contrary in this Agreement, (i) Parent
shall not be required to divest any of its businesses, product lines or
assets, or to take or agree to take any other action or agree to any
limitation that could reasonably be expected to have a Material Adverse
Effect on Parent and (ii) the Company shall not be required to divest any
of its businesses, product lines or assets, or to take or agree to take any
other action or agree to any limitation that could reasonably be expected
to have a Material Adverse Effect on the Company.
Section 5.6 LEGAL REQUIREMENTS
Each of Parent and the Company will, and Parent will
cause its subsidiaries to, take all reasonable actions necessary to comply
in all material respects promptly with all legal requirements which may be
imposed on them with respect to the consummation of the transactions
contemplated by this Agreement and will take all reasonable actions
necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made by them in connection with the
taking of any action contemplated by this Agreement.
Section 5.7 BLUE SKY LAWS
Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with
the Merger. The Company shall use its reasonable best efforts to assist
Parent as may be necessary to comply with the securities and blue sky laws
of all jurisdictions which are applicable in connection with the issuance
of Parent Common Stock in connection with the Merger.
Section 5.8 EMPLOYEE BENEFIT PLANS; ASSUMPTION OF OPTIONS
(a) At the Effective Time, the Company Stock Option Plan, and each
outstanding option to purchase shares of Company Common Stock under the
Company Stock Option Plan, whether vested or unvested, will be assumed by
Parent. Schedule 5.8 sets forth a true and complete list as of the date
hereof of all holders of outstanding options under the Company Stock Option
Plan including the number of shares of Company Common Stock subject to each
such option, the exercise or vesting schedule, the exercise price per share
and the term of each such option. On the Closing Date, the Company shall
deliver to Parent an updated Schedule 5.8 current as of such date. Each
such option so assumed by Parent under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the
Company Stock Option Plan and the applicable stock option agreement
immediately prior to the Effective Time, except that (i) such option will
be exercisable for that number of whole shares of Parent Common Stock equal
to the product of the number of shares of Company Common Stock that were
issuable upon exercise of such option immediately prior to the Effective
Time multiplied by the Exchange Ratio and 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 option will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Exchange Ratio
rounded up to the nearest whole cent. Consistent with the terms of the
Company Stock Option Plan and the documents governing the outstanding
options under such Plans, the transactions contemplated hereby will not
terminate any of the outstanding options under the Company Stock Option
Plan or accelerate the exercisability or vesting of such options or the
shares of Parent Common Stock which will be subject to those options upon
the Parent's assumption of the options hereunder, except as otherwise
contemplated by the Employee Agreements and other similar agreements
entered into with employees, former employees, directors or former
directors with the knowledge of Parent. As soon as practicable after the
Effective Time, Parent will issue to each person who, immediately prior to
the Effective Time was a holder of an outstanding option under the Company
Stock Option Plan a document in form and substance satisfactory to the
Company evidencing the foregoing assumption of such option by Parent.
(b) Assignment of Repurchase Options. All outstanding rights of the Company
which it may hold immediately prior to the Effective Time to repurchase
unvested shares of Company Capital Stock (the "Repurchase Options") shall
be assigned to Parent automatically in the Merger and shall thereafter be
exercisable by Parent upon the same terms and conditions in effect
immediately prior to the Effective Time, except that the shares purchasable
pursuant to the Repurchase Options and the purchase price per share shall
be adjusted to reflect the Exchange Ratio.
Section 5.9 FORM S-8
Parent shall file a registration statement on Form S-8
(or any successor or other appropriate forms that Parent is eligible to
use) under the Securities Act with respect to the shares of Parent Common
Stock subject to Company Options as soon as practicable but, in any event,
within ten (10) business days following the Closing Date.
Section 5.10 LISTING OF ADDITIONAL SHARES
Prior to the Effective Time, Parent shall cause the
shares of Parent Common Stock issuable to the stockholders of the Company
pursuant to Sections 1.7 and 5.8, including shares of Parent Common Stock
issuable upon exercise of Company Options, to be authorized for listing on
the Nasdaq National Market.
Section 5.11 EMPLOYEES
Set forth on Schedule 5.11 is a list of employees of the
Company to whom Parent will require to sign the Employee Agreements
substantially in the form of Exhibit J hereto. The Company shall cooperate
with Parent to assist Parent in entering into the Employee Agreements with
such employees.
Section 5.12 EXPENSES
Each party will bear its own fees, costs and expenses
incurred by it in connection with the Merger and the other transactions
contemplated hereby, except that such fees, costs and expenses incurred by
the Company shall not exceed $12,300,000 and any amount in excess of such
$12,300,000 shall be the responsibility of the stockholders of the Company
out of their personal funds. In the event the Company has incurred any such
fees, costs and expenses in excess of $12,300,000 and such excess amount of
such costs, fees and expenses has not been paid by the stockholders of the
Company as contemplated by this Section 5.12 on or before the Closing Date,
then the Total Parent shares shall be reduced by a number of shares equal
to the quotient of (x) the amount of such excess divided by (y) the Parent
Stock Price.
Section 5.13 REASONABLE BEST EFFORTS AND FURTHER ASSURANCES
Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Parent, Merger Sub and the Company agree to
use reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable
(subject to any applicable laws) to consummate and make effective the
Merger as promptly as practicable including, but not limited to (i) the
prompt preparation by Parent, with cooperation from the Company, and filing
with the Commissioner of a Permit Application and the preparation and
filing of all other forms, registrations and notices required to be filed
to consummate the Merger and the taking of such actions as are necessary to
obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity, and (ii) the satisfaction of the
other parties' conditions to Closing.
Section 5.14 INDEMNIFICATION
The provisions of this Section 5.14 are intended to be
for the benefit of, and will be enforceable by, each director and officer
of the Company entitled to indemnification from the Company. Parent will
not permit the Company to merge or consolidate with any other entity,
dissolve, or otherwise cease its corporate existence unless Parent makes
adequate provisions for the assumption of the obligations imposed by this
Section 5.14. Any amendment, repeal, or modification of the provisions with
respect to indemnification that are set forth in Delaware Law, the
Company's certificate of incorporation and the Company's by-laws shall not
in any manner affect adversely the rights thereunder of individuals who at,
or at any time prior to, the Effective Time, were directors or officers of
the Company. From and after the Effective Time, Parent will, for a period
of four (4) years after the Closing, to the fullest extent permitted by
law, cause the Company 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 and any indemnification provisions
under Delaware Law, the Company's certificate of incorporation or the
Company's bylaws as in effect immediately prior to the Effective Time.
Section 5.15 TERMINATION OF PENSION PLAN
If required by Parent in writing, the Company shall,
immediately prior to and contingent upon the Closing Date, have terminated
the Company 401(k) Plan (the "Plan") and no further contributions shall be
made to the Plan. The Company shall provide to Parent (i) executed
resolutions by the Company Board authorizing the termination and (ii) an
executed amendment to the Plan , which in the Parent's reasonable judgment
is sufficient to assure compliance with all applicable requirements of the
Code and regulations thereunder.
Section 5.16 INFORMATION SUPPLIED
(a) None of the information supplied in writing by the Company for
inclusion or incorporation by reference in (i) the application for a permit
to issue securities to be filed with the Commissioner of Corporations of
the State of California (the "Commissioner") pursuant to Section 25121 of
the CSL, in connection with the issuance of shares of Parent Common Stock
pursuant to the transactions contemplated hereby, including the disclosure
documents relating thereto (the "Permit Application") will, at the time the
Permit Application is filed with the Commissioner and at the time the
Fairness Hearing is held, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the
Information Statement provided to Company stockholders in connection with
obtaining stockholder approval of the Merger will, at the time it is mailed
to the stockholders and at all times during which stockholder consents are
solicited in connection with the Merger, 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 Permit
Application will comply in all material respects with the provisions of the
CSL, and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made
therein based on information supplied by Parent or Merger Sub in writing
for inclusion or incorporation by reference therein.
(b) None of the information supplied in writing by Parent for inclusion or
incorporation by reference in (i) the Permit Application will, at the time
the Permit Application is filed with the Commissioner and at the time the
Fairness Hearing is held, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the
Information Statement will, at the time it is mailed to the Company
stockholders and at all times that stockholder consents are being solicited
in connection with the Merger, 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 Permit
Application will comply in all material respects with the provisions of the
CSL and the rules and regulations thereunder, except that no representation
is made by Parent with respect to statements made therein based on
information supplied by the Company in writing for inclusion or
incorporation by reference in the Permit Application or the Information
Statement.
Section 5.17 ESTABLISHMENT OF OPTION POOL
As soon as practicable following the Closing, Parent
shall authorize the grant of options to acquire 250,000 shares of Parent
Common Stock. Parent agrees to grant, within five days following the
Closing, such options to former employees of the Company who remain
employees of the Surviving Corporation or become employees of Parent,
pursuant to Parent's option plans, at exercise prices at the fair market
value of Parent Common Stock at the date of grant. Parent agrees to decide
the amount of the grant to each such former employee of the Company in
consultation with employees of the Surviving Corporation who were, prior to
the Closing, members of senior management of the Company.
Section 5.18 REGISTRATION STATEMENT
If, following the Fairness Hearing, a permit is not
issued pursuant to the Permit Application and if required by applicable
securities laws for the issuance of Parent Common Stock to holders of
Company Capital Stock in the Merger in accordance with the terms and
provisions of this Agreement, Parent and the Company shall cooperate
either, at Parent's option, (i) to register the issuance of shares of
Parent Common Stock by means of the preparation and filing with the SEC of
a Registration Statement on Form S-4 or any other appropriate form to
effect registration of such issuance and use best efforts to have such
Registration Statement declared effective as soon as practicable after such
filing or (ii) to qualify the issuance of Parent Common Stock under any
available exemption from registration legally available for such issuance
and then promptly to register such shares for resale on any available
registration statement.
ARTICLE VI
CONDITIONS TO THE CLOSING
Section 6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO
EFFECT THE MERGER
The respective obligations of each party to this
Agreement to consummate and effect the Merger and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be
waived, in writing, by agreement of all the parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company under Delaware Law and any agreements or arrangements that may
result in the payment of any amount that would not be deductible by reason
of section 280G of the Code shall have been approved by such number of
stockholders of the Company as is required by the terms of section
280G(b)(5)(B) and shall be obtained in a manner which satisfies all
applicable requirements of such Code section 280(G)(b)(5)(B) and the
proposed Treasury Regulations thereunder, including (without limitation)
Q-7 of section 1.280G-1 of such proposed regulations.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect,
nor shall any proceeding brought by an administrative agency or commission
or other Governmental Entity or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered or
enforced, which makes the consummation of the Merger illegal. In the event
an injunction or other order shall have been issued, each party agrees to
use its reasonable efforts to have such injunction or other order lifted.
(c) Governmental Approval. Parent, the Company and Parent's subsidiaries
shall have timely obtained from each Governmental Entity all approvals,
waivers and consents, if any, necessary for consummation of, or in
connection with, the several transactions contemplated hereby, and the
applicable waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have expired or been terminated.
(d) Escrow Agreement. Parent, the Company, Escrow Agent, and the
Stockholders' Agent shall have entered into an Escrow Agreement
substantially in the form attached hereto as Exhibit D.
(e) Permit to Issue Securities; Registration Statement. Either (i) the
Commissioner shall have issued the CSL Permit and the qualification
thereunder shall not be the subject of any stop order or proceedings
seeking a stop order and if not so issued or if issued and subject to a
stop order then, in the alternative either (i) Parent's Registration
Statement on Form S-4 shall have been declared effective by the SEC and the
issuance of Parent Common Stock in the Merger shall not be the subject of
any stop order or proceedings seeking a stop order or (ii) the issuance of
Parent Common Stock pursuant to the Merger shall, in the opinion of Parent,
be exempt from registration.
Section 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations to consummate and effect the Merger and
the transactions contemplated hereby shall be subject to the satisfaction
at or prior to the Effective Time of each of the following conditions, any
of which may be waived, in writing, by the Company:
(a) Representations, Warranties and Covenants. The representations and
warranties of Parent in this Agreement shall be true and correct in all
respects (except for such representations and warranties that are qualified
by their terms by a reference to materiality or Material Adverse Effect
which representations and warranties shall be read as if such reference to
materiality or Material Adverse Effect were not contained therein) on and
as of the Closing Date as though such representations and warranties were
made on and as of such date (except for such representations and warranties
which speak as of a particular time which representations and warranties
need be true and correct only as of such time) (it being understood that,
for purposes of determining the accuracy of such representations and
warranties, (i) any inaccuracy that does not have a Material Adverse Effect
on Parent shall be disregarded and (ii) any inaccuracy that results from or
relates to the taking of any action, or the failure to act, as required by
this Agreement shall be disregarded) and (iii) Parent shall in all material
respects have performed and complied with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by
it as of the Effective Time.
(b) No Material Adverse Change. There shall have occurred no material
adverse change in the assets, financial condition, business or results of
operations of Parent since the date hereof; provided, however, that for
purposes of this Section 6.2(b), a change in the assets, financial
condition, business or results of operations of Parent which is
attributable to or results from changes in general economic conditions or
changes affecting the industry generally in which Parent operates shall
not, in and of themselves, constitute a material adverse change in the
assets, financial condition, business or results of operations of Parent.
(c) Certificate of Parent. The Company shall have received from Parent an
officer's certificate certifying to the fulfillment of the conditions
specified in Sections 6.2(a) and 6.2(b).
(d) Listing of Additional Shares. Parent shall have fulfilled its
obligations pursuant to Section 5.10.
(e) Tax Opinion. The Company shall have received a written opinion of its
counsel substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
Federal income tax purposes, the Merger will constitute a reorganization
within the meaning of Section 368 of the Code; provided, however, that if
counsel to the Company does not render such opinion, this condition shall
nonetheless be deemed satisfied with respect to the Company if counsel to
Parent renders such opinion to such party. In preparing such Company tax
opinion, counsel may rely on reasonable assumptions and may also rely on
(and to the extent reasonably required, the parties shall make) reasonable
representations related thereto, including without limitation
representations contained in the Parent Tax Certificate and the Company Tax
Certificate, substantially in the forms attached as Exhibit K and Exhibit
L.
Section 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 and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of
the following conditions, any of which may be waived, in writing, by Parent
or Merger Sub:
(a) Representations, Warranties and Covenants. Except as disclosed in the
Company Disclosure Schedule, (i) the representations and warranties of the
Company in this Agreement shall be true and correct in all respects (except
for such representations and warranties that are qualified by their terms
by a reference to materiality or Material Adverse Effect which
representations and warranties shall be read as if such reference to
materiality or Material Adverse Effect were not contained therein) on and
as of the Closing Date as though such representations and warranties were
made on and as of such date (except for such representations and warranties
which speak as of a particular time which representations and warranties
need be true and correct only as of such time) (it being understood that,
for purposes of determining the accuracy of such representations and
warranties, (i) any inaccuracy that does not have a Material Adverse Effect
on the Company shall be disregarded and (ii) any inaccuracy that results
from or relates to the taking of any action, or the failure to act, as
required by this Agreement shall be disregarded) and (iii) the Company
shall in all material respects have performed and complied with all
covenants, obligations and conditions of this Agreement required to be
performed and complied with by it as of the Effective Time.
(b) Certificate of the Company. Parent shall have received a certificate of
the Company executed by an officer certifying fulfillment of the conditions
set forth in Sections 6.3(a), 6.3(e) 6.3(f), 6.3(i) and 6.3(j).
(c) Third Party Consents.
(1) Parent shall have been furnished with evidence reasonably
satisfactory of the consent or approval of those persons whose
consent or approval shall be required in connection with the
transactions contemplated hereby under the contracts of the
Company set forth on Section 2.30 of the Company Disclosure
Schedule, except where failure to receive such consents or
approvals would not have a Material Adverse Effect.
(2) All of the consents and approvals set forth on Section 6.3(c) of the
Company Disclosure Schedule shall have been obtained.
(d) Legal Opinion. Parent shall have received a legal opinion from the
Company's legal counsel, in such form as is reasonably satisfactory to
Parent.
(e) No Material Adverse Changes. There shall have occurred no material
adverse change in the assets, financial condition, business or results of
operations of the Company since the date hereof; provided, however, that
for purposes of this Section 6.3(d), a change in the assets, financial
condition, business or results of operations of the Company which is
attributable to or results from changes in general economic conditions or
changes affecting the industry generally in which the Company operates
shall not, in and of themselves, constitute a material adverse change in
the assets, financial condition, business or results of operations of the
Company.
(f) Resignation of Directors. The directors of the Company in office
immediately prior to the Effective Time shall have resigned as directors of
the Company effective as of the Effective Time, and Parent shall have
received letters of resignation from such persons.
(g) Employee Agreements. The employees of the Company set forth on
Schedule 5.11 shall have entered into Employee Agreements with Parent and
such Employee Agreements shall be in full force and effect.
(h) Dissenting Shares. Holders of Company Common Stock and Company
Preferred Stock representing 90% of the aggregate number of shares of
Company Common Stock on an, as-converted basis (excluding shares issuable
upon the exercise of Company Options and Warrants) shall have executed a
written consent to approval and adoption of the Merger Agreement and
approval of the Merger or waived their rights under section 262 of Delaware
Law.
(i) Submission of Expenses. Parent shall have received a statement of fees,
costs and expenses (including, without limitation, fees and expenses of
legal counsel and financial advisors and accountants, if any) incurred by
the Company in connection with the transactions contemplated hereby.
(j) Termination of Pension Plan. If so required by Parent in writing
pursuant to Section 5.15, the Company shall have terminated the Plan and
Parent shall have received (i) executed resolutions by the Company Board
authorizing the termination of the Plan and (ii) an executed amendment to
the Plan sufficient to assure compliance with all applicable requirements
of the Code and regulations thereunder so that the tax-qualified status of
the Plan shall have been maintained at the time of termination.
Section 6.4 FRUSTRATION OF CONDITIONS
Neither Parent nor the Company may rely on the failure of
any condition set forth in this Article VI to be satisfied if such failure
was caused by such party's failure to comply with or perform any of its
covenants or obligations set forth in this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION
At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger to
the stockholders of the Company, this Agreement may be terminated:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if the Closing shall not have occurred
on or before May 31, 2000; provided, however, that in the event Parent has
exercised its option, pursuant to Section 5.18, to file a Registration
Statement on Form S-4 or any other appropriate SEC Form, this Agreement may
not be terminated by the Company pursuant to this Section 7.1(b) so long as
Parent is using its best efforts to prepare, file and have declared
effective such Registration Statement; and provided, further, 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 the cause or
resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by Parent, if the Company shall breach any representation, warranty,
obligation or agreement hereunder and such breach shall not have been cured
within ten (10) business days of receipt by the Company of written notice
of such breach; provided, however, that such uncured breach results in or
is reasonably likely to result in a Material Adverse Effect on the Company.
(d) by Parent, if (i) the Company's Board shall have withdrawn or modified
its recommendation of this Agreement in a manner adverse to Parent; (ii)
the Company Board shall approve or recommend any Superior Proposal; (iii)
the Company shall enter into any letter of intent (binding or otherwise),
arrangement or agreement pursuant to which the Company accepts any Superior
Proposal; or (iv) the Company or the Company Board shall have resolved to
do any of the foregoing;
(e) by the Company, if Parent or Merger Sub shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within ten (10) business days following receipt
by Parent of written notice of such breach; provided, however, that such
uncured breach results in or is reasonably likely to result in a Material
Adverse Effect on Parent; and
(f) by Parent, Merger Sub or the Company if (i) any permanent injunction or
other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable or
(ii) if any required approval of the stockholders of the Company shall not
have been obtained.
Section 7.2 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided
in Section 7.1, this Agreement shall forthwith become void, and except as
provided in Section 7.3, there shall be no liability or obligation on the
part of Parent, Merger Sub or the Company or their respective officers,
directors, stockholders, stockholders or affiliates, except to the extent
that such termination results from the breach by a party hereto of any of
its representations, warranties or covenants set forth in this Agreement;
provided that the provisions of Section 5.3 (Confidentiality), Section 7.3
(Expenses), this Section 7.2 and Article IX shall remain in full force and
effect and survive any termination of this Agreement.
Section 7.3 EXPENSES
Subject to Sections 5.12, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense which means
that, except as set forth in Section 5.12, the fees, costs and expenses of
the Company shall become obligations of the Surviving Corporation from and
after the Effective Time.
Section 7.4 AMENDMENT
The parties hereto may cause this Agreement to be amended
at any time by execution of an instrument in writing signed on behalf of
each of the parties hereto; provided, that an amendment made subsequent to
adoption of this Agreement by the stockholders of the Company shall not (i)
alter or change the amount or kind of consideration to be received on
conversion of the Company Capital Stock, (ii) alter or change any term of
the Certificate of incorporation of the Surviving Corporation to be
effected by the Merger, or (iii) alter or change any of the terms and
conditions of the Agreement if such alteration or change would materially
adversely affect the holders of Company Capital Stock.
Section 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.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
Section 8.1 ESCROW FUND
Within five (5) business days after the Effective Time,
the Escrow Shares shall be registered in the name of, and be deposited
with, State Street Bank and Trust Company of California, N.A. (its
successor in interest or other institution selected by Parent with the
reasonable consent of the Company) as escrow agent (the "Escrow Agent"),
such deposit (together with interest and other income thereon) to
constitute the escrow fund (the "Escrow Fund") and to be governed by the
terms set forth herein and in the Escrow Agreement attached hereto as
Exhibit D. The Escrow Fund shall consist of ten percent (10%) of the shares
to be issued in the Merger and shall be available to compensate Parent
pursuant to the indemnification obligations of the Company for Damages.
Section 8.2 INDEMNIFICATION
(a) Subject to the limitations set forth in this Article VIII, the
stockholders of the Company will indemnify and hold harmless Parent and its
officers, directors, agents and employees, and each person, if any, who
controls or may control Parent within the meaning of the Securities Act
(hereinafter referred to individually as an "Indemnified Person" and
collectively as "Indemnified Persons") from and against any and all losses,
costs, damages, liabilities and expenses arising from claims, demands,
actions, causes of action, including, without limitation, reasonable legal
fees, (collectively, "Damages") arising out of (i) any misrepresentation or
breach of, or default in connection with, any of the representations,
warranties, covenants and agreements given or made by the Company in this
Agreement, the Company Disclosure Schedule or any exhibit or schedule to
this Agreement or (ii) except as contemplated by the Employee Agreements
and other similar agreements entered into with employees, former employees,
directors or former directors of the Company with the knowledge of Parent
or as described in the Company Disclosure Schedules, any acceleration of
vesting or lapsing of any repurchase right with respect to any stock option
or share of stock held by any employee, director or other person or entity
having a relationship with the Company or former employee, director or
other person or entity having had a relationship with the Company,
occurring as a result of the consummation of the Merger or any of the other
transactions contemplated by this Agreement, or otherwise (whether or not
such acceleration or lapsing is triggered by the termination of employment
or any other relationship). The Escrow Fund allocated shall be the security
for this indemnity obligation subject to the limitations in this Agreement.
(b) Parent and the Company each acknowledge that such Damages, if any,
would relate to unresolved contingencies existing at the Effective Time,
which if resolved at the Effective Time would have led to a reduction in
the total number of shares of Parent Common Stock that Parent would have
agreed to issue in connection with the Merger. The right to obtain
indemnification from, and only from, the Escrow Fund, pursuant to the
indemnification provisions of this Section 8.2 and the Escrow Agreement
shall be Parent's exclusive remedy for any breach by the Company hereof or
Damages described in Section 8.2(a); provided, however, that there shall be
no indemnification for any breach of any representation, warranty or
covenant if the Merger does not become effective; provided, further, that
the foregoing shall not limit liability for breach of this Agreement in
accordance with Section 7.2.
(c) Except for Damages arising pursuant to Section 8.2(a)(ii) which shall
not be subject to any indemnity threshold, Parent may not receive any
shares of Parent Common Stock from the Escrow Fund unless and until one or
more Officer's Certificates identifying Damages the aggregate amount of
which exceeds $500,000 (the "Indemnity Threshold") have been delivered to
the Escrow Agent as provided in Section 8.4 and such amount is determined
pursuant to this Article VIII to be payable, in which case, Parent shall
receive shares equal in value at the Parent Stock Price to the full amount
of Damages. In determining the amount of any Damage attributable to a
breach, any materiality standard contained in a representation, warranty or
covenant of the Company shall be disregarded.
(d) Prior to asserting any claim for indemnification under this Agreement,
the party seeking such indemnification must first seek reimbursement for
any and all Damages from any applicable insurance coverage. The parties
agree that any indemnification provided by this Agreement is not to be
deemed insurance (whether primary, excess, or otherwise) for purposes of
seeking reimbursement from the applicable insurance coverage.
(e) The parties agree that there shall not be any multiple recovery for
any Damage.
Section 8.3 ESCROW PERIOD
The escrow period (the "Escrow Period") shall terminate
at 11:59 p.m. Pacific Standard Time on the one-year anniversary of the
Closing Date; provided, however, that a portion of the Escrow Fund, which
is necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate theretofore delivered to the Escrow Agent prior to termination
of the Escrow Period with respect to facts and circumstances existing prior
to expiration of the Escrow Period, shall remain in the Escrow Fund until
such claims have been resolved. Parent shall deliver to the Escrow Agent a
certificate specifying the Closing Date.
Section 8.4 CLAIMS UPON ESCROW FUND
(a) Upon receipt by the Escrow Agent on or before the last day of the
Escrow Period of a certificate signed by any officer of Parent (an
"Officer's Certificate"):
(1) stating that Damages exist in an aggregate amount greater than the
Indemnity Threshold for claims against the Escrow Fund; and
(2) specifying in reasonable detail the individual items included in
the amount of Damages in such claim, the date each such item was
paid, properly accrued or arose and the nature of the
misrepresentation, breach of warranty or claim to which such item
is related, the Escrow Agent shall set aside such Parent Common
Stock or other assets held in the Escrow Fund, as applicable,
having a value (at the Parent Stock Price) equal to such Damages;
provided, however, that each Officer's Certificate shall state
Damages of not less than $250,000, except for the Officer's
Certificates which Parent reasonably believes will be the final
Officer's Certificate to be delivered pursuant to this Agreement
(whether or not such Officer's Certificate actually is the final
Officer's Certificate to be so delivered) which may be for Damages
of any amount.
(b) Upon the earliest of: (i) receipt of written authorization from the
Stockholders' Agent or from the Stockholders' Agent jointly with Parent to
make such delivery, (ii) receipt of written notice of a final decision in
arbitration of the claim, or (iii) in the event the claim set forth in the
Officer's Certificate is uncontested by the Stockholders' Agent as of the
close of business on the next business day following the forty-fifth (45th)
day following receipt by the Escrow Agent of the Officer's Certificate; on
the next business day the Escrow Agent shall deliver Parent Common Stock or
other assets from the Escrow Fund to Parent.
(c) For the purpose of compensating Parent for its Damages pursuant to this
Agreement, the Parent Common Stock in the Escrow Fund shall be valued at
the Parent Stock Price.
Section 8.5 OBJECTIONS TO CLAIMS
At the time of delivery of any Officer's Certificate to
the Escrow Agent, a duplicate copy of such Officer's Certificate shall be
delivered to the Stockholders' Agent and for a period of forty-five (45)
days after such delivery to the Escrow Agent of such Officer's Certificate,
the Escrow Agent shall make no delivery of Parent Common Stock pursuant to
Section 8.4 unless the Escrow Agent shall have received written
authorization from the Stockholders' Agent to make such delivery. After the
expiration of such forty-five (45) day period, the Escrow Agent shall make
delivery of Parent Common Stock then in the Escrow Fund in accordance with
Section 8.4, provided that no such payment or delivery may be made if the
Stockholders' Agent shall object in a written statement to the claim made
in the Officer's Certificate, and such statement shall have been delivered
to the Escrow Agent and to Parent prior to the expiration of such
forty-five (45) day period.
Section 8.6 RESOLUTION OF CONFLICTS; ARBITRATION
(a) In case the Stockholders' Agent shall so object in writing to any claim
or claims by Parent made in any Officer's Certificate, Parent shall have
forty-five (45) days after receipt by the Escrow Agent of an objection by
the Stockholders' Agent to respond in a written statement to the objection
of the Stockholders' Agent. If after such forty-five (45) day period there
remains a dispute as to any claims, the Stockholders' Agent and Parent
shall attempt in good faith for sixty (60) days to agree upon the rights of
the respective parties with respect to each of such claims. If the
Stockholders' Agent and Parent should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely
on any such memorandum and shall distribute the Parent Common Stock from
the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith negotiation,
either Parent or the Stockholders' Agent may, by written notice to the
other, demand arbitration of the matter unless the amount of the damage or
loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Within fifteen (15)
days after such written notice is sent, Parent and the Stockholders' Agent
shall each select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The decision of the arbitrators as to the
validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in this Section 8.6, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may be entered in
any court having jurisdiction. Any such arbitration shall be held in Santa
Xxxxx or San Mateo County, California under the commercial rules then in
effect of the American Arbitration Association. Parent, on the one hand,
and the Company stockholders, on the other hand, shall each bear its/their
own expenses (including, attorneys' fees and expenses) incurred in
connection with any such arbitration. The Company stockholders' expenses
and reasonable attorneys' fees will be paid by the Stockholders' Agent from
the Escrow Fund, as provided in Section 8.7(c). In the event the arbitrator
or arbitrators find in favor of Parent as to the claim in dispute, all
fees, costs, and the reasonable expenses of legal counsel incurred by
Parent will be charged against the Escrow Fund in addition to the amount of
the disputed claim. The fees and expenses of each arbitrator and the
administrative fee of the American Arbitration Association shall be
allocated by the arbitrator or arbitrators, as the case may be (or, if not
so allocated, shall be borne equally by Parent, on the one hand, and the
Company stockholders, out of the Escrow Fund on the other hand).
Section 8.7 STOCKHOLDERS' AGENT
(a) Xxxxxxx Xxxxx shall be constituted and appointed as the Stockholders'
Agent for and on behalf of the stockholders of the Company to give and
receive notices and communications, to authorize delivery to Parent of the
Parent Common Stock from the Escrow Fund in satisfaction of claims by
Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and
to take all actions necessary or appropriate in the judgment of the
Stockholders' Agent for the accomplishment of the foregoing. Such agency
may be changed by the holders of a majority in interest of the Escrow Fund
from time to time upon not less than ten (10) days' prior written notice to
all of the Company stockholders and to Parent. No bond shall be required of
the Stockholders' Agent, and the Stockholders' Agent shall receive no
compensation for his services. Notices or communications to or from the
Stockholders' Agent shall constitute notice to or from each of the Company
stockholders.
(b) The Stockholders' Agent shall not be liable for any act done or omitted
hereunder as Stockholders' Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to
the advice of counsel shall be conclusive evidence of such good faith. The
Company stockholders shall severally indemnify the Stockholders' Agent and
hold him harmless against any loss, liability or expense incurred without
gross negligence or bad faith on the part of the Stockholders' Agent and
arising out of or in connection with the acceptance or administration of
his duties hereunder.
(c) The Stockholders' Agent will serve without compensation but will be
reimbursed from the Escrow Fund for all out of pocket expenses reasonably
incurred, including expenses for lawyers and accountants employed on behalf
of the Company stockholders' interests in the Escrow Fund. The
Stockholders' Agent may cause the Escrow Agent, at his request, to exchange
shares of Parent Common Stock held, with Parent, for cash for each
reimbursement. Parent will deliver such cash at a per share price equal to
the price of such shares at the close of market on the next trading day
preceding such exchange. In no event will the Stockholders' Agent be
entitled to incur expenses reimbursable by the Escrow Fund in excess of
$250,000 without the approval of Company stockholders holding a majority of
the shares of the Escrow Fund and Parent which consent cannot unreasonably
be withheld.
Section 8.8 ACTIONS OF THE STOCKHOLDERS' AGENT
A decision, act, consent or instruction of the
Stockholders' Agent shall constitute a decision of all of the Company
stockholders and shall be final, binding and conclusive upon each and every
Company stockholder, and the Escrow Agent and Parent may rely upon any
decision, act, consent or instruction of the Stockholders' Agent as being
the decision, act, consent or instruction of each and every Company
stockholder. The Escrow Agent and Parent are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Stockholders' Agent.
Section 8.9 THIRD-PARTY CLAIMS
In the event that Parent becomes aware of a third-party
claim which Parent believes may result in a demand against the Escrow Fund,
Parent shall promptly notify the Stockholders' Agent of such claim, and the
Stockholders' Agent and the Company stockholders shall be entitled, at
their expense, to participate in any defense of such claim. Parent shall
have the right in its sole discretion to settle any such claim; provided,
however, that Parent may not effect the settlement of any such claim
without the consent of the Stockholders' Agent, which consent shall not be
unreasonably withheld. In the event that the Stockholders' Agent has
consented to any such settlement, the Stockholders' Agent shall have no
power or authority to object under Section 8.5 or any other provision of
this Article VIII to any claim by Parent against the Escrow Fund for
indemnity in the amount of such settlement.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 SURVIVAL
The representations and warranties of the Company
contained herein shall survive until the first anniversary of the Closing
Date, and the agreements set forth in this Agreement shall terminate at the
Effective Time except to the extent certain agreements set forth herein by
their terms call for action after the Effective Time.
Section 9.2 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 mailed by registered or certified mail
(return receipt requested) to the parties at the following address (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent, to:
Xxxxx.xxx, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx - Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Xxxxxx.xxx, Inc.
0000 Xxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxx Xxxx
Facsimile No.: (000) 000-0000
with a copy to (not notice):
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
(c) if to the Stockholders' Agent, to:
Xxxxxxx Xxxxx
Redpoint Ventures
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
with a copy (not notice) to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
Section 9.3 INTERPRETATION
When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to 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 phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the
party to whom such information is to be made available. 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.
Section 9.4 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 9.5 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST
This Agreement, the Ancillary Agreements and the
documents and instruments and other agreements specifically referred to
herein or therein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent
Disclosure Schedule (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, except for the Confidentiality
Agreement, which shall continue in full force and effect, and shall survive
any termination of this Agreement or the Closing, in accordance with its
terms, (b) except as specifically stated in a particular section of the
transaction documents referred to above, are not intended to confer upon
any other person any rights or remedies hereunder, (c) except by operation
of the Merger, shall not be assigned by operation of law or otherwise
except as otherwise specifically provided, and (d) shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 9.6 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.
Section 9.7 SOLE REMEDY; MAXIMUM AGGREGATE LIABILITY
Other than rights to equitable relief provided under the
Confidentiality Agreement to the extent available, Parent's, Merger Sub's,
and any and all Indemnified Person's, sole remedy for any and all matters
arising out of, related to, or in connection with this Agreement, the other
agreements, certificates, and documents delivered pursuant to this
Agreement, or the transactions contemplated hereby, shall be limited to (i)
the indemnification rights set forth in Article VIII (subject to the
limitations contained therein), pursuant to which the only recourse for
such indemnification is from the Escrow Fund, or (ii) in the case of
termination of this Agreement, the effects set forth in Section 7.2.
Parent, Merger Sub, and any and all Indemnified Person's, shall have no
remedy against any Company stockholder or any member of the Company Board,
except for fraud with intent, in which case only the person perpetrating
such fraud shall be personally liable.
Section 9.8 GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to such
state's principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any court located
within the State of California, in connection with any matter based upon or
arising out of this Agreement or the matters contemplated herein, and
agrees that process may be served upon them in any manner authorized by the
laws of the State of California for such persons and waives and covenants
not to assert or plead any objection which they might otherwise have to
such jurisdiction and such process.
Section 9.9 RULES OF CONSTRUCTION
The parties hereto agree that they have been represented
by counsel during the negotiation, preparation 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.
Section 9.10 SPECIFIC PERFORMANCE
The parties hereto agree that if any of the provisions of
this Agreement were not performed in accordance with their specific terms
or were otherwise breached, irreparable damage would occur, no adequate
remedy at law would exist and damages would be difficult to determine, and
that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 9.11 DESCRIPTIVE HEADINGS
The descriptive headings herein are inserted for
convenience only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company, Parent, Merger Sub, and
the Stockholders' Agent have caused this Agreement to be executed and
delivered by their respective officers thereunto duly authorized, all as of
the date first written above.
XXXXXX.XXX, INC.
By: /s/ Xxxx Xxxx
---------------------------------------
Name: Xxxx Xxxx
Title: President & CEO
XXXXX.XXX, INC.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chairman & CEO
ONYX ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxx
Title: VP Corp. Dev.
XXXXXXX XXXXX
/s/ Xxxxxxx X. Xxxxx
------------------------------------------
As Stockholders' Agent
Name: Xxxxxxx X. Xxxxx
Title: Managing Director VP
