EXECUTION COPY
AGREEMENT
AND
PLAN OF REORGANIZATION
BY AND AMONG
KANA COMMUNICATIONS, INC.
KING ACQUISITION CORP.
AND
BUSINESS EVOLUTION, INC.
Dated as of December 3, 1999
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF REORGANIZATION 1
ARTICLE 1 THE MERGER 2
1.1 The Merger..................................................2
1.2 Effective Time..............................................2
1.3 Effect of the Merger on Constituent Corporations............2
1.4 Certificate of Incorporation and Bylaws of Surviving
Corporation.................................................2
1.5 Directors and Officers of Surviving Corporation.............3
1.6 Maximum Number of Shares of Parent Common Stock to be
Issued; Effect on Outstanding Securities of the Company.....3
1.7 Dissenting Shares...........................................6
1.8 Exchange Procedures.........................................6
1.9 No Further Ownership Rights in Company Capital Stock........7
1.10 Lost, Stolen or Destroyed Certificates......................8
1.11 Exemption from Registration.................................8
1.12 Further Action..............................................8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 8
2.1 Organization, Standing and Power............................8
2.2 Capital Structure...........................................9
2.3 Authority..................................................10
2.4 Company Financial Statements...............................10
2.5 Absence of Changes.........................................11
2.6 Absence of Undisclosed Liabilities.........................13
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2.7 Litigation.................................................13
2.8 Restrictions on Business Activities........................13
2.9 Governmental Authorization.................................13
2.10 Title to Property..........................................13
2.11 Intellectual Property......................................14
2.12 Manufacturing and Marketing Rights.........................15
2.13 Taxes......................................................15
2.14 Employee Benefit Plans.....................................15
2.15 Certain Agreements Affected by the Merger..................18
2.16 Employee Matters...........................................18
2.17 Affiliate Transactions.....................................19
2.18 Insurance..................................................19
2.19 Compliance With Laws.......................................19
2.20 Minute Books...............................................19
2.21 Complete Copies of Materials...............................19
2.22 Brokers' and Finders' Fees.................................19
2.23 Support Agreement; Irrevocable Proxies.....................20
2.24 Vote Required..............................................20
2.25 Board Approval.............................................20
2.26 Contracts..................................................20
2.27 No Breach of Contracts.....................................21
2.28 Material Third Party Consents..............................21
2.29 Product Releases...........................................21
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2.30 Pooling of Interests.......................................21
2.31 Representations Complete...................................21
2.32 Year 2000..................................................21
2.33 Products Liability.........................................22
2.34 Service Provider Agreements................................22
2.35 Foreign Corrupt Practices Act..............................23
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 23
3.1 Organization and Qualification.............................23
3.2 Authority Relative to this Agreement.......................23
3.3 SEC Documents; Parent Financial Statements.................24
3.4 No Conflicts...............................................24
3.5 Information to be Supplied by Parent.......................25
3.6 Ownership of Merger Sub; No Prior Activities...............25
3.7 Investment Advisors........................................25
3.8 Tax-Free Reorganization....................................25
3.9 Capitalization.............................................25
3.10 Third-Party Consents.......................................26
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME 26
4.1 Conduct of Business of the Company.........................26
4.2 No Solicitation............................................26
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ARTICLE 5 ADDITIONAL AGREEMENTS 27
5.1 Information Statement; Restricted Stock....................27
5.2 Stockholder Approval.......................................28
5.3 Access to Information......................................28
5.4 Confidentiality............................................28
5.5 Expenses...................................................29
5.6 Public Disclosure..........................................29
5.7 Approvals..................................................29
5.8 Notification of Certain Matters............................29
5.9 Pooling of Interests Accounting............................29
5.10 Company Affiliate Agreements...............................30
5.11 Parent Affiliate Agreements................................30
5.12 Additional Documents and Further Assurances................30
5.13 Form S-8...................................................30
5.14 Company's Auditors.........................................30
5.15 Additional Affiliate Agreements............................30
5.16 Directors'and Officers'Indemnification.....................31
5.17 Benefit Arrangements.......................................31
5.18 Treatment as Reorganization................................32
5.19 Registration of Parent Common Stock........................32
5.20 Personal Guarantees by Founder.............................32
ARTICLE 6 CONDITIONS TO THE MERGER 32
6.1 Conditions to Obligations of Each Party to Effect the
Merger.....................................................32
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6.2 Additional Conditions to Obligations of the Company........33
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub.................................................33
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS 36
7.1 Survival of Representations, Warranties, Covenants and
Agreements.................................................36
7.2 Escrow Provisions..........................................36
7.3 Exclusive Remedy...........................................43
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER 44
8.1 Termination................................................44
8.2 Effect of Termination......................................44
ARTICLE 9 MISCELLANEOUS PROVISIONS 44
9.1 Notices....................................................44
9.2 Entire Agreement...........................................46
9.3 Further Assurances; Post-Closing Cooperation...............46
9.4 Waiver.....................................................46
9.5 Third Party Beneficiaries..................................46
9.6 No Assignment; Binding Effect..............................46
9.7 Headings...................................................47
9.8 Invalid Provisions.........................................47
9.9 Governing Law..............................................47
9.10 Construction...............................................47
9.11 Counterparts...............................................47
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9.12 Specific Performance.......................................47
ARTICLE 10 DEFINITIONS 47
10.1 Definitions................................................48
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EXHIBITS & SCHEDULES
Exhibit A Form of Support Agreement
Exhibit B Form of Delaware Certificate of Merger
Exhibit C Form of Stockholder Certificate
Exhibit D-1 Form of Parent and Merger Sub Officer's Certificates
Exhibit D-2 Form of Parent and Merger Sub Secretary's Certificates
Exhibit E Matters to be Covered by Legal Opinion of Xxxxxxx,
Phleger & Xxxxxxxx LLP
Exhibit F-1 Form of Company Officer's Certificate
Exhibit F-2 Form of Company Secretary's Certificate
Exhibit G Matters to be Covered by Legal Opinion of Xxxxxx,
Xxxxxxxxxx & Xxxxxxxxx LLP
Exhibit H-1 Form of Non-Competition Agreement (3 year)
Exhibit H-2 Form of Non-Competition Agreement (18 month)
Exhibit I Form of Company Affiliate Agreement
Exhibit J Form of Lock-up Agreement
Exhibit K Form of Parent Affiliate Agreement
Exhibit L Depositary Agent Fee Schedule
Schedule A Identified Risks
Schedule 2.10 List of Real Property
Schedule 2.11 List of Patents, Trademarks, Tradenames, Copyrights and
Licenses
Schedule 2.14 Company Employee Plans
Schedule 2.15 Affected Agreements
Schedule 2.16 List of Employees with H-1 Visas/ Controversies
Schedule 2.26 List of Material Contracts
Schedule 2.28 List of Material Third Party Consents
Schedule 2.29 List of Product Releases
Schedule 5.10 List of Company Affiliates
Schedule 5.11 List of Parent Affiliates
Schedule 6.3(f) List of Parties to Sign Non-Compete Agreements
Schedule 6.3(l) List of Key Employees
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AGREEMENT AND
PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as
of December 3, 1999, by and among KANA COMMUNICATIONS, INC. a Delaware
corporation ("PARENT"), KING ACQUISITION CORP., a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), BUSINESS EVOLUTION, INC., a
Delaware corporation (the "Company"), and with respect to Section 2 only, P.V.
Kannan ("FOUNDER") and with respect to Section 7.2 only, ChaseMellon Stockholder
Services, L.L.C. as Depositary Agent (the "DEPOSITARY AGENT"), and Xxxx
Xxxxxxxx, as Stockholders' Agent. Capitalized terms used and not otherwise
defined herein have the meanings set forth in Article 10.
RECITALS
A. The respective Boards of Directors of each of Parent, Merger Sub and
the Company believe it is in the best interests of Parent, Merger Sub and the
Company and their respective stockholders that Parent acquire the Company
through the merger of Merger Sub with and into the Company (the "MERGER") and,
in furtherance thereof, have approved the Merger.
B. The Boards of Directors of each of Parent, Merger Sub and the
Company have approved the Merger and this Agreement and the transactions
contemplated hereby.
C. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the shares of capital stock of the
Company which are issued and outstanding immediately prior to the Effective Time
of the Merger shall be converted into the right to receive shares of Common
Stock of Parent ("PARENT COMMON STOCK") and (ii) all Company Options then
outstanding (whether vested or unvested) will become exercisable for Parent
Common Stock, on the terms and subject to the conditions set forth herein.
D. As an inducement to Parent and Merger Sub to enter into this
Agreement, certain stockholders of the Company have concurrently herewith
entered into Support Agreements with Parent in substantially the form attached
hereto as EXHIBIT A ("SUPPORT AGREEMENTS") pursuant to which, among other
things, such stockholders have agreed to vote the shares of Company Capital
Stock owned by them in favor of the Merger.
E. Parent, Merger Sub and the Company intend that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, and in furtherance thereof intend that this Agreement shall be a
"Plan of Reorganization" within the meaning of Sections 354(a) and 361(a) of the
Internal Revenue Code.
F. Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
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G. A portion of the shares of Parent Common Stock otherwise issuable or
reserved for issuance by Parent in connection with the Merger shall be placed in
escrow by Parent, the release of which amount shall be contingent upon certain
events and conditions, all as set forth in ARTICLE 7 herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of the DGCL, 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 wholly-owned subsidiary of Parent. The Company is sometimes
referred to herein as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated pursuant to
SECTION 8.1, the closing of the Merger (the "CLOSING") will take place as
promptly as practicable, but no later than two (2) Business Days following
satisfaction or waiver of the conditions set forth in ARTICLE 6, at the offices
of Xxxxxxx, Phleger & Xxxxxxxx LLP, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, California, unless another place or time is agreed to by Parent and the
Company. The date upon which the Closing actually occurs is herein referred to
as the "CLOSING DATE." On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a Delaware Certificate of Merger (or like
instrument), in substantially the form attached hereto as EXHIBIT B (the
"DELAWARE CERTIFICATE OF MERGER"), with the Secretary of State of the State of
Delaware, in accordance with the relevant provisions of applicable law (the time
of acceptance by the Secretary of State of the State of Delaware of such filing,
or such later time agreed to by the parties and set forth in the Delaware
Certificate of Merger, being referred to herein as the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER ON CONSTITUENT CORPORATIONS. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Merger Sub and the Company shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION.
(a) At the Effective Time, the certificate of incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be amended
and restated in its entirety in the form set forth as Annex I to EXHIBIT B to
this Agreement, and, as so amended and restated, shall be the certificate of
incorporation of the Surviving Corporation from and after the Effective
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Time until thereafter amended as provided by law and such certificate of
incorporation and bylaws of the Surviving Corporation.
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the certificate of incorporation
and applicable law.
1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
1.6 MAXIMUM NUMBER OF SHARES OF PARENT COMMON STOCK TO BE ISSUED; EFFECT ON
OUTSTANDING SECURITIES OF THE COMPANY. The maximum number of shares of Parent
Common Stock to be issued (including Parent Common Stock to be reserved for
issuance upon exercise of any of the Company Options to be assumed by Parent as
provided herein) in exchange for the acquisition by Parent of all shares of
Company Capital Stock which are issued and outstanding immediately prior to the
Effective Time, all vested and unvested Company Options which are then
outstanding, all other Options of the Company which are then outstanding, any
other securities convertible into, or exchangeable for, Company Capital Stock
and any other right to acquire Company Capital Stock or securities convertible
into, or exchangeable for, Company Capital Stock, shall not exceed the Aggregate
Share Number. No adjustment shall be made in the number of shares of Parent
Common Stock issued in the Merger as a result of any consideration (in any form
whatsoever) received by the Company from the date hereof to the Effective Time
as a result of any exercise, conversion or exchange of Company Options or
Company Warrants. On the terms and subject to the conditions of this Agreement,
as of the Effective Time, by virtue of the Merger and without any action on the
part of Parent or Merger Sub, the Company or any holder of any Company security,
the following shall occur:
(a) CONVERSION OF COMPANY CAPITAL STOCK. At the Effective Time, each
share of Company Capital Stock, which is issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Capital Stock to
be canceled pursuant to SECTION 1.6(B) and any Dissenting Shares (as provided in
SECTION 1.7)) will be canceled and extinguished and each share of Company
Preferred Stock and Common Stock which is issued and outstanding immediately
prior to the Effective Time shall be converted automatically into the right to
receive that number of shares of Parent Common Stock equal to the Common Stock
Exchange Ratio or the Preferred Stock Exchange Ratio, as the case may be,
rounded down to the nearest whole share of Parent Common Stock. For purposes of
this Agreement:
(i) "AGGREGATE COMMON NUMBER" means the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time (including all shares of Company Common Stock issued or issuable upon
conversion of all shares of Company Preferred Stock and upon exercise,
conversion or exchange of all unvested and vested Company Options and Company
Warrants which are not exercised, converted, exchanged or expired as of the
Effective Time).
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(ii) "AGGREGATE SHARE NUMBER" means 967,602 shares, which is the
number of shares of Parent Common Stock equal to the quotient obtained by
dividing the sum of one hundred forty million (140,000,000) by $144.6875, which
is the average of the last sale prices of Parent Common Stock as traded on the
NNM for the four (4) trading days beginning on November 15, 1999 and ending on
November 18, 1999 (the "CLOSING PRICE").
(iii) "COMMON STOCK EXCHANGE RATIO" means the quotient obtained by
dividing (x) the Aggregate Share Number minus the Preferred Share Number by (y)
the Aggregate Common Number less the number of shares of Company Preferred Stock
outstanding as of the Effective Time.
(iv) "PREFERRED SHARE NUMBER" means the total number of shares of
Parent Common Stock issued in connection with the Merger to holders of Company
Preferred Stock.
(v) "PREFERRED STOCK EXCHANGE RATIO" means the quotient obtained
by dividing (i) the liquidation preference for Company Preferred Stock (as set
forth in and calculated according to the provisions of Article III, Section
B(2)(b) of the Company Restated Certificate), determined as of immediately prior
to the Effective Time, by (ii) the Closing Price.
(b) CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. Each share of
Company Capital Stock owned by Parent or the Company or any Subsidiary of Parent
or the Company immediately prior to the Effective Time shall be automatically
canceled and extinguished without any conversion thereof and without any further
action on the part of Parent, Merger Sub or the Company.
(c) COMPANY OPTIONS AND COMPANY STOCK PLAN. At the Effective Time all
unexpired and unexercised Company Options then outstanding, whether vested or
unvested, shall be assumed by Parent in accordance with provisions described
below.
(i) At the Effective Time, each unexpired and unexercised Company
Option issued pursuant to the Business Evolution, Inc. 1999 Stock Plan adopted
on September 17, 1999 (the "COMPANY STOCK PLAN") which is then outstanding,
whether or not exercisable, whether or not vested, shall by virtue of the Merger
be assumed by Parent together with the Company Stock Plan in such manner that
(i) Parent is "assuming a stock option in a transaction to which Section 424(a)
applied" within the meaning of Section 424 of the Internal Revenue Code, or (ii)
such transaction, to the extent that Section 424 of the Internal Revenue Code
does not apply to any such Company Options, would be a transaction within
Section 424 of the Internal Revenue Code. Each Company Option so assumed by
Parent under this Agreement shall continue to have, and be subject to, the same
terms and conditions as were applicable to such Company Option immediately prior
to the Effective Time (including, without limitation, any repurchase rights or
vesting provisions), PROVIDED THAT (A) such Company Option shall be exercisable
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares of Company Capital Stock that were issuable upon exercise
of such Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio applicable to the Company Capital Stock subject to such Company
Option (rounded down to the nearest whole
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number of shares of Parent Common Stock) and (B) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Option shall be equal to the quotient determined by dividing the
exercise price per share of Company Capital Stock at which such Company Option
was exercisable immediately prior to the Effective Time by the Exchange Ratio
applicable to the series of Company Capital Stock subject to such Company Option
(rounded up to the nearest whole cent). Parent shall, from and after the
Effective Time, upon exercise of the Company Options in accordance with the
terms thereof, make available for issuance all shares of Parent Common Stock
covered thereby and shall, as promptly as practicable after the Effective Time,
issue to each holder of an outstanding Company Option a document evidencing the
foregoing assumption by Parent.
(ii) It is the intention of the parties that the Company Options
assumed by Parent shall qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Internal Revenue Code to the same
extent the Company Options qualified as incentive stock options immediately
prior to the Effective Time and the provisions of this SECTION 1.6(C) shall be
applied consistent with this intent.
(iii) At the Effective Time, Parent shall assume the Company's
obligations, and shall be assigned the Company's repurchase rights and purchase
options, under any Restricted Stock Purchase Agreements entered into pursuant to
the Company Stock Plan. Any and all restrictions on the Company Restricted Stock
issued pursuant to the Company Stock Plan or such other agreements which do not
lapse in accordance with their terms (as such terms were in effect on the date
of this Agreement) shall continue in full force and effect until such
restrictions lapse pursuant to the terms of such agreements, and any repurchase
rights or purchase options which the Company has with respect to the Company
Restricted Stock shall also continue in full force and effect.
(d) ADJUSTMENTS TO EXCHANGE RATIOS. The Exchange Ratios shall be equitably
adjusted to reflect fully the effect of any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, reclassification, 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.
(e) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock will
be issued in the Merger, 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 be entitled to receive from Parent an amount
of cash (rounded to the nearest whole cent) equal to the product of (a) such
fraction, multiplied by (b) the Closing Price.
(f) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of Common Stock of the Surviving Corporation. From and
after the Effective Time, each share certificate of Merger Sub theretofore
evidencing ownership of any such shares shall evidence ownership of such shares
of capital stock of the Surviving Corporation.
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1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected dissenters' rights for such shares in accordance with the DGCL and
who, as of the Effective Time, has not effectively withdrawn or lost such
dissenters' rights ("DISSENTING SHARES") shall not be converted into or
represent a right to receive Parent Common Stock pursuant to SECTION 1.6, but
the holder thereof shall only be entitled to such rights as are granted by the
DGCL.
(b) Notwithstanding the provisions of SECTION 1.7(A) above, if any
holder of shares of Company Capital Stock who demands purchase of such shares
under the DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) such holder's dissenters' rights, then, as of the later of (i) the
Effective Time or (ii) the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock as provided in SECTION 1.6, without interest thereon, upon
surrender to the Company of the certificate representing such shares in
accordance with SECTION 1.8 of this Agreement.
(c) The Company shall give Parent (i) prompt notice of its receipt of
any written demands for purchase of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to the DGCL and received by the Company and (ii) the opportunity
to participate in all negotiations and proceedings with respect to demands for
purchase of any shares of Company Capital Stock under the DGCL. The Company
shall not, except with the prior written consent of Parent or as may be required
under applicable law, voluntarily make any payment with respect to any demands
for purchase of Company Capital Stock or offer to settle or settle any such
demands.
1.8 EXCHANGE PROCEDURES.
(a) PARENT COMMON STOCK. On the Closing Date, Parent shall deposit
with the Exchange Agent for exchange in accordance with this ARTICLE 1, the
aggregate number of shares of Parent Common Stock issuable in exchange for
outstanding shares of Company Capital Stock and cash in an amount sufficient to
permit the payment of cash in lieu of fractional shares pursuant to SECTION
1.6(E); PROVIDED, HOWEVER, that, on behalf of the holders of Company Capital
Stock, Parent shall deposit into an escrow account a number of shares of Parent
Common Stock equal to the Escrow Amount. The portion of the Escrow Amount
contributed on behalf of each holder of Company Capital Stock shall be in
proportion to the aggregate number of shares of Parent Common Stock which such
holder would otherwise be entitled to receive by virtue of ownership of
outstanding shares of Company Capital Stock.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time (and in any event no later than ten (10) Business Days after the Effective
Time), the Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Capital Stock (the
"CERTIFICATES") and which shares were converted into the right to receive shares
of Parent Common Stock pursuant to SECTION 1.6, (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates
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shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock and cash in lieu of fractional shares. Upon surrender of a 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, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock to be deposited in the Escrow Fund on such
holder's behalf pursuant to ARTICLE 7 hereof), to which such holder is entitled
pursuant to SECTION 1.6 and cash in lieu of fractional shares, and the
Certificate so surrendered shall be canceled. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of ARTICLE
7 hereof, Parent shall cause to be distributed to the Depositary Agent a
certificate or certificates (in such denominations as may be requested by the
Depositary Agent) representing that number of shares of Parent Common Stock
equal to the Escrow Amount, which certificate shall be registered in the name of
the Depositary Agent. Such shares shall be beneficially owned by the holders on
whose behalf such shares were deposited in the Escrow Fund and shall be
available to compensate Parent as provided in ARTICLE 7. Until surrendered, each
outstanding 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 to evidence 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 cash in lieu of fractional shares.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF COMPANY
CAPITAL STOCK. No dividends or other distributions with respect to Parent Common
Stock declared or made after the Effective Time and with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this SECTION 1.8(C)) with respect to such whole shares of Parent Common Stock.
(d) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock is to be issued pursuant to the Merger in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital
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Stock in accordance with the terms hereof (including any cash in lieu of
fractional shares) shall be deemed to have been issued 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 Company of shares
of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this ARTICLE 1.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall
have been lost, stolen or destroyed, the Exchange Agent shall issue certificates
representing such shares of Parent Common Stock and cash in lieu of fractional
shares in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof; PROVIDED, HOWEVER,
that Parent or the Exchange Agent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to provide an indemnity or deliver a bond in such sum as
it may reasonably direct as indemnity against any claim that may be made against
Parent or the Exchange Agent with respect to the Certificates alleged to have
been lost, stolen or destroyed.
1.11 EXEMPTION FROM REGISTRATION. The shares of Parent Common Stock to be
issued pursuant to SECTION 1.6 in connection with the Merger will be issued in a
transaction exempt from registration under the Securities Act, by reason of
Section 4(2) of the Securities Act and SEC rules and regulations promulgated
thereunder. The shares of Parent Common Stock to be issued pursuant to SECTION
1.6 in connection with the Merger and the assumption by Parent of all Company
Options pursuant to Section 1.6 hereof will be qualified under the California
Corporations Code, pursuant to Section 25102(f) thereof.
1.12 FURTHER ACTION. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company, the officers and directors of the Surviving Corporation are fully
authorized to take, and will take, all such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Company Disclosure Schedule, the Company
and Founder represent and warrant to Parent and the Surviving Corporation as
follows:
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 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 a
true and correct copy of the certificate of incorporation and bylaws or other
charter documents, as applicable, of the Company as amended to date, to Parent.
The Company is not in violation of any of the provisions of its certificate of
incorporation or bylaws. The Company does not own
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and never has owned directly or indirectly any equity or similar interest in, or
any interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, subsidiary, partnership, joint venture or
other business association or entity.
2.2 CAPITAL STRUCTURE. The authorized capital stock of the Company consists
of 20,000,000 shares of Common Stock (the "COMPANY COMMON STOCK") and 10,000,000
shares of Preferred Stock, 5,000,000 of which are designated Series A Preferred
Stock (the "COMPANY PREFERRED STOCK"), of which there were issued and
outstanding as of the date hereof and immediately prior to the conversion of the
Company Preferred Stock, 13,264,658 shares of Company Common Stock and 4,443,758
shares of Company Preferred Stock. As of the Closing, there will be 0 shares of
the Company's capital stock outstanding unvested and subject to the Company's
right of repurchase. There are no other outstanding shares of Company Capital
Stock or voting securities and no outstanding commitments to issue any shares of
Company Capital Stock or voting securities after September 30, 1999 other than
pursuant to the exercise of options outstanding as of such date under the
Company Stock Plan. Section 2.2 of the Company Disclosure Schedule sets forth a
complete capitalization table of the Company, including the names, numbers and
types of securities held by all holders of Company Capital Stock, securities
convertible into, or exchangeable for, Company Capital Stock (including, without
limitation, Company Options and Company Warrants) and other rights to acquire
Company Capital Stock or securities convertible into, or exchangeable for,
Company Capital Stock. Section 2.2 of the Company Disclosure Schedule also sets
forth, with respect to any Company Options or Company Capital Stock subject to
repurchase prior to vesting, the vesting commencement date and the schedule of
vesting, and with respect to all Company Capital Stock, the holding period
commencement period date for purposes of SEC Rule 144. All outstanding shares of
the Company Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and are not subject
to preemptive rights or rights of first refusal created by statute, the
certificate of incorporation or bylaws of the Company or any agreement to which
the Company is a party or by which it is bound. As of the close of business on
the date hereof, the Company has reserved (i) sufficient shares of Company
Common Stock for issuance upon conversion of the outstanding Company Preferred
Stock and warrants, and (ii) 3,172,794 shares of Company Common Stock for
issuance to employees and consultants pursuant to the Company Stock Plan, of
which 421,500 shares are subject to outstanding, unexercised options, and no
shares are subject to outstanding stock purchase rights. The Company will not
issue or grant additional options under the Company Stock Plan. Each share of
Company Preferred Stock converts into one (1) share of Company Common Stock.
Except for (i) the rights created pursuant to this Agreement and (ii) the
Company's right to repurchase any unvested shares under the Company Stock Plan,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Company is a party or by which it is bound obligating
the Company to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital stock of
the Company or obligating the Company to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend, modify or enter into any such
option, warrant, call, right, commitment or agreement. The consummation of the
Merger shall not cause an acceleration in the vesting or lapse of any
restriction or right of any of the Company's securities. Except as set forth on
the Company Disclosure Schedule, there are no contracts, commitments or
agreements relating to voting, purchase or sale of Company Capital Stock (i)
between or among the Company and any of its stockholders and (ii) to the
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Company's knowledge, between or among any of the Company's stockholders. The
terms of the Company Stock Plan and the applicable stock option agreements and
the warrants and warrant agreements permit the assumption or substitution of
options or warrants, as applicable, to purchase Parent Capital Stock as provided
in this Agreement, without the consent or approval of the holders of such
securities, the Company stockholders, or otherwise. True and complete copies of
all agreements and instruments relating to or issued under the Company Stock
Plan have been provided to Parent and such agreements and instruments have not
been amended, modified or supplemented, and there are no agreements to amend,
modify or supplement such agreements or instruments in any case from the form
provided to Parent. All outstanding shares of Company Common Stock and Company
Preferred Stock were issued in compliance with all applicable federal and state
securities laws.
2.3 AUTHORITY. The Company has all requisite corporate power and authority
to enter into this Agreement and the other agreements attached as exhibits
hereto (the "ANCILLARY AGREEMENTS"), and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger by the Company's stockholders as contemplated by
Section 6.1(d). This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and is
subject to general principles of equity. The execution and delivery of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby 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 bylaws of the Company's, as amended, or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its properties or assets, except where such
conflicts, violations, defaults or termination, cancellation or acceleration of
an obligation or loss of a benefit would not have a Material Adverse Effect on
the Company. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental or Regulatory Authority is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Delaware Certificate of Merger as provided in
Section 1.2; (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; and (iii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on the Company
and would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
2.4 COMPANY FINANCIAL STATEMENTS. The Company has delivered to Parent its
unaudited financial statements on a consolidated basis for the year ended
December 31, 1998 and its unaudited financial statements (balance sheet,
statement of operations and statement of cash flows) on a consolidated basis as
at, and for the nine months ended on the Company Balance Sheet Date
(collectively, the "COMPANY FINANCIAL STATEMENTS"). To the Company's
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knowledge, the Company Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other. The Company Financial
Statements fairly present in all material respects the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein (except that the unaudited financial statements do not have notes
thereto), subject to audit adjustments. The Company maintains and will continue
to maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.5 ABSENCE OF CHANGES. Since the Company Balance Sheet Date, the Company
has conducted its business in the ordinary course consistent with past practice.
In addition, since the Company Balance Sheet Date, there has not occurred:
(i) any change, event or condition (whether or not covered
by insurance) that shall result in, or might reasonably be expected to
result in, a Material Adverse Effect to the Company;
(ii) any acquisition, sale or transfer of any material asset
of the Company;
(iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or
rates) by the Company or any revaluation by the Company of any of its
assets, any change in any material election in respect of Taxes,
adopted or changed any accounting method in respect of Taxes, entered
into any tax allocation agreement, tax sharing agreement, tax
indemnity agreement or closing agreement, settlement or compromise of
any claim or assessment in respect of Taxes, or consented to any
extension or waiver of the limitation period applicable to any claim
or assessment in respect of Taxes with any Taxing Authority or
otherwise;
(iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of the
Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of any of its shares of capital stock,
except repurchases of its capital stock pursuant to agreements
existing on November 12, 1999 with the Company's employees and
consultants upon their departure from the Company;
(v) any issuance or sale, or contract to issue or sell, of
any shares of Company Capital Stock or securities convertible into or
exchangeable for Company Capital Stock, except for shares of Company
Capital Stock issued upon the exercise of options, warrants or other
rights to purchase Company Capital Stock existing on November 12,
1999;
(vi) any agreement entered into by the Company with respect
to the Intellectual Property of the Company or any third party, other
than licenses by the Company to its customers entered into in the
ordinary course of the Company's business and purchases of
off-the-shelf software for employee use;
(vii) any contract entered into by the Company with respect
to a Business Combination;
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(viii) any indebtedness or any other liability in excess of
$10,000 incurred or guaranteed by the Company;
(ix) any material contract entered into by the Company, or any
material amendment or termination of, or default under, any material
contract to which the Company is a party or by which it is bound;
(x) any termination by the Company of any its employees;
(xi) any amendment or change to the Company Restated
Certificate or the Bylaws of the Company;
(xii) other than in the ordinary course of business consistent
with past practice, any increase in or modification of the compensation
or benefits payable or to become payable by the Company to any of its
directors or employees;
(xiii) any transaction with any officer, director, Affiliate
or Associate of the Company, other than pursuant to any Contract
disclosed to Parent pursuant to (and so identified in) Section
2.5(xiii) or 2.17 of the Company Disclosure Schedule;
(xiv) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the real or
personal property or equipment of the Company or in an amount exceeding
fifty thousand dollars ($50,000) individually or one hundred fifty
thousand dollars ($150,000) in the aggregate;
(xv) any failure to pay or otherwise satisfy any Liabilities
presently due and payable of the Company except such Liabilities which
are being contested in good faith by appropriate means or proceedings
and which are immaterial in amount;
(xvi) any failure to renew any insurance policy, any
cancellation or material amendment of any insurance policy of the
Company or any failure to give any required notice or make any claim
(if any) under all such policies in a timely fashion;
(xvii) any failure to procure, maintain, renew, extend or
enforce any Intellectual Property, including submission of required
documents or fees during the prosecution of patent, trademark or other
applications for Registered Intellectual Property rights;
(xviii) any Action or Proceeding commenced or, to the
knowledge of the Company, threatened by or against the Company;
(xix) any transfer (by way of a License or otherwise) to any
Person of rights to any Intellectual Property (including, without
limitation, source code licenses) other than non-exclusive transfers of
object code to the Company's customers, distributors or other licensees
in the ordinary course of business consistent with past practice;
(xx) any other action outside the ordinary course of the
Company's business that would reasonably be expected to be materially
detrimental to the Company's business prospects; or
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(xxi) any discussion, negotiation or agreement or any
acquiescence in respect of any arrangement or understanding, to do,
engage in or cause or having the effect of any of the foregoing (other
than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no obligations or
liabilities of any nature (matured or unmatured, fixed or contingent) other than
(i) those set forth or adequately provided for in the Company Balance Sheet,
(ii) those not required to be set forth in the Company Balance Sheet under
generally accepted accounting principles and (iii) those incurred in the
ordinary course of business since the Company Balance Sheet Date and consistent
with past practice.
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 or any of its properties or any of its 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 could reasonably be expected to have a Material Adverse
Effect on the Company. The Company Disclosure Schedule also lists all litigation
that the Company has pending against other parties.
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 or future business practice of the Company, any acquisition of property
by the Company or the conduct of business by the Company as currently conducted
or as currently proposed to be conducted by the Company.
2.9 GOVERNMENTAL AUTHORIZATION. The Company has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental or Regulatory Authority (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 Company's business
or the holding of any such interest (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 could not reasonably be expected to have a Material Adverse
Effect on the Company.
2.10 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 Company Balance Sheet or acquired after the Company Balance Sheet Date
(except properties, interests in properties and assets sold or otherwise
disposed of since the Company Balance Sheet Date in the ordinary course of
business), 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) the lien of 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 of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected on the
-13-
Company Balance Sheet. The plants, property and equipment of the Company that
are used in the operations of its 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 Company Balance Sheet to the extent
generally accepted accounting principles require the same to be reflected.
SCHEDULE 2.10 identifies each parcel of real property owned or leased by the
Company.
2.11 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property that is used or currently
proposed to be used in the business of the Company as currently conducted or as
currently proposed to be conducted by the Company. The Company has not (i)
licensed any of its Intellectual Property in source code form to any party or
(ii) entered into any exclusive agreements relating to its Intellectual Property
with any party.
(b) SCHEDULE 2.11 lists (i) all patents and patent applications and
all registered trademarks, trade names and service marks, registered copyrights,
and maskworks, included in the Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) all 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 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 or copyrights, including
software ("THIRD PARTY INTELLECTUAL PROPERTY RIGHTS") which are incorporated in,
are, or form a part of any Company product.
(c) There is no unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property rights 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 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 performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks and copyrights
held by the Company are valid and subsisting. The Company (i) has not been sued
in any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party; (ii) has no knowledge that the
manufacturing, marketing, licensing or sale of its products infringes any
patent, trademark, service xxxx, copyright, trade secret or other proprietary
right of any third party and (iii) has not brought any action, suit or
proceeding for infringement of Intellectual
-14-
Property or breach of any license or agreement involving Intellectual Property
against any third party.
(f) The Company has taken all necessary and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("CONFIDENTIAL
INFORMATION"). All use, disclosure or appropriation of Confidential Information
owned by the Company by or to a third party has been pursuant to the terms of a
written agreement between the Company and such third party. 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.
(g) The Company does not believe it is or will be necessary to use any
inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company other than those which have been
assigned to the Company.
(h) Pursuant to various agreements, the Company acquired the exclusive
right, title and interest in and to any and all technology marketed, offered,
sold or licensed by the Company (whether currently, in the past or currently
proposed). The Company has secured all third party consents and assignments
required to be obtained in connection with such transfer to the Company.
2.12 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted rights
to manufacture, produce, assemble, license, market, or sell its products to any
other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
2.13 TAXES. The Company and any consolidated, combined, unitary or
aggregate group for Tax (as defined below) purposes of which the Company is or
has been a member, have timely filed all Tax Returns required to be filed by
them and have paid all Taxes shown thereon to be due. The Company has provided
adequate accruals in accordance with generally accepted accounting principles in
its financial statements for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns. There is (i) no material claim for Taxes
that is a lien against the property of the Company is currently 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) 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 Sections 280G (other than
agreements or arrangements for which stockholder approval meeting the
requirements of Section 280G(b)(5)(B) will be obtained prior to the Closing) or
404 of the Code.
2.14 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 2.14 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
-15-
material employee benefit plans (as defined in Section 3(3) of 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 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 since inception. Any Company Employee Plan intended to
be qualified under Section 401(a) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter, opinion, advisory or
notification as to its qualified status under the Code, including all amendments
to the Code effected by the Tax Reform Act of 1986 and subsequent legislation,
or has applied to the Internal Revenue Service for such a determination letter,
opinion, advisory or notification (or has time remaining in which to apply for
such a determination letter, opinion, advisory or notification) prior to the
expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such determination
letter, opinion, advisory or notification and to make any amendments necessary
to obtain a favorable determination. The Company has also furnished Parent with
the most recent Internal Revenue Service determination letter, opinion, advisory
or notification issued with respect to each such Company Employee Plan, and
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) (i) None of the Company Employee Plans promise or provide retiree
medical or other retiree welfare benefits to any person (except as may be
required by the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"); (ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code (except with
respect to a prohibited transaction exempt under Section 4975 of the Code or
Section 408 of ERISA, with respect to any Company Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect;
(iii) 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 and each ERISA Affiliate 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
-16-
knowledge of any material default or violation by any other party to, any of the
Company Employee Plans; (iv) neither the Company nor any ERISA Affiliate is
subject to any 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; (v) all
material contributions required to be made by the Company or ERISA Affiliate 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; (vi) 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; (vii) no Company
Employee Plan is covered by, and neither the Company nor any ERISA Affiliate has
incurred or expects to incur any liability under Title IV of ERISA or Section
412 of the Code; and (viii) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without 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 governmental reports (which were true and correct as
of the date filed) and has properly and timely filed and distributed or posted
all notices and reports to employees required to be filed, distributed or posted
with respect to each such Company Employee Plan except as would not have in the
aggregate a Material Adverse Effect on the Company. No suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
the Company is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS or United States Department of
Labor (other than routine benefits claims). No payment or benefit 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.
(d) With respect to each Company Employee Plan, the Company has
complied with (i) the applicable health care continuation and notice provisions
of COBRA and the regulations (including proposed regulations) thereunder (to the
knowledge of the Company and through the services of a third party
administrator), except to the extent that such failure to comply would not, in
the aggregate, have a Material Adverse Effect, (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, 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.
(e) Except as listed on Schedule 2.14, 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 Affiliate
to severance benefits or any other payment or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or service provider (except as required under Section 411(d)(3) of the Code).
-17-
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company, or other ERISA Affiliate
relating to, or change in participation or coverage under, any Company Employee
Plan which would materially increase the per capita expense of maintaining such
Plan above the level of per capita expense incurred with respect to that Plan
for the most recent fiscal year included in the Company 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 Affiliate is a party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
2.15 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Except as set forth in
Schedule 2.15, neither the execution and delivery of this Agreement nor the
consummation of the transaction contemplated hereby will (i) result in any
payment (including, without limitation, severance, 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.
2.16 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 material respect in any unfair labor practice. The Company
has 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
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 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). The Company is in
compliance with the Immigration Control and Reform Act of 1986 and has verified
employment eligibility and obtained completed I-9 forms for each of its
employees. Set forth on Schedule 2.16 is a list of all Company's employees
requiring H-1 visas. There are no pending claims against the Company under any
workers compensation plan or policy or for long term disability. Except as noted
on Schedule 2.16, there are no controversies pending or, to the knowledge of the
Company, threatened, between the Company and any of their respective employees,
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 unions contract nor does the Company know of
any activities or proceedings of any labor union or efforts to organize any such
employees. No employees of the Company have given notice to the Company, nor is
the Company otherwise aware, that any such employee intends to terminate his or
her employment with the Company. There are no written employment or separation
agreements, or
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oral employment or separation agreements other than those establishing an
"at-will" employment relationship between the Company and any of its employees.
The Company does not have any obligation (a) to provide any particular form or
period of notice prior to termination except such obligations as are imposed by
law generally or (b) to pay any of such employees any severance benefits in
connection with their termination of employment service.
2.17 AFFILIATE TRANSACTIONS. Except as disclosed in Section 2.5(xiii) or
2.17 of the Company Disclosure Schedule, (i) there are no Contracts or
Liabilities between the Company, on the one hand, and (A) any current or former
officer, director, stockholder, or to the Company's knowledge, any Affiliate or
Associate of the Company or (B) any Person who, to the Company's knowledge, is
an Associate of any such officer, director, stockholder or Affiliate, on the
other hand, (ii) the Company does not provide or cause to be provided any
assets, services or facilities to any such current or former officer, director,
stockholder, Affiliate or Associate, (iii) neither the Company nor any such
current or former officer, director, stockholder, Affiliate or Associate
provides or causes to be provided any assets, services or facilities to the
Company and (iv) the Company does not beneficially own, directly or indirectly,
any Investment Assets of any such current or former officer, director,
stockholder, Affiliate or Associate.
2.18 INSURANCE. The Company has policies of insurance and bonds of the type
and in amounts which the Company believes are adequate given the business or
assets of 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
under all such policies and bonds have been paid and the Company is otherwise in
compliance 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.
2.19 COMPLIANCE WITH LAWS. To the best of its knowledge, 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.
2.20 MINUTE BOOKS. The minute books of the Company made available to Parent
contain a complete and accurate summary 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.
2.21 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.
2.22 BROKERS' AND FINDERS' FEES. 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.
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2.23 SUPPORT AGREEMENT; IRREVOCABLE PROXIES. All holders of Company Capital
Stock issued and outstanding have agreed in writing to approve the Merger
pursuant to the Support Agreements, and pursuant to Irrevocable Proxies attached
thereto as EXHIBIT A ("IRREVOCABLE PROXIES").
2.24 VOTE REQUIRED. The affirmative vote of holders of a majority of the
Company Capital Stock outstanding on the record date set for the Company
Stockholder Meeting is necessary to approve this Agreement and the transactions
contemplated hereby.
2.25 BOARD APPROVAL. The Board of Directors of the Company has unanimously
(i) approved this Agreement and the Merger, (ii) determined that in its opinion
the Merger is in the best interests of the stockholders of the Company and is on
terms that are fair to such stockholders and (iii) recommended that the
stockholders of the Company approve this Agreement and the Merger.
2.26 CONTRACTS. Except for the Contracts described in SCHEDULE 2.26, the
Company is not a party to or bound by any material contract (each a "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
$20,000 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 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 generally accepted accounting principles;
(e) any contract for capital expenditures in excess of $20,000 in the
aggregate;
(f) which requires the Company to maintain the confidentiality of any
proprietary information of any third party or any other material
confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property involving in the case of any such contract more than $50,000
over the life of the contract;
(h) any contract with any person with whom the Company does not deal
at arm's length within the meaning of the Internal Revenue Code; or
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(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.
2.27 NO BREACH OF CONTRACTS. The Company has performed all of the
obligations required to be performed by it and is entitled to all benefits
under, and is not alleged to be in default in respect of any Contract. Each of
the Contracts is in full force and effect, unamended, and there exists no
default or event of default or event, occurrence, condition or act, with respect
to the Company or to the Company's knowledge with respect to the other
contracting party, which, with the giving of notice, the lapse of the time or
the happening of any other event or conditions, would become a default or event
of default under any Contract. True, correct and complete copies of all
Contracts have been delivered to Parent.
2.28 MATERIAL THIRD PARTY CONSENTS. SCHEDULE 2.28 includes 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 in the same manner as the business was operated by the
Company prior to the Effective Time.
2.29 PRODUCT RELEASES. The Company has provided Parent a Schedule of
Product Releases, which Schedule is attached hereto as SCHEDULE 2.29. The
Company believes there is a reasonable basis for achieving the release of
products on the schedule described in SCHEDULE 2.29 and is not aware of any
change in its circumstances or other fact that has occurred that would cause it
to believe that it will be unable to meet such release schedule.
2.30 POOLING OF INTERESTS. To the knowledge of the Company, neither the
Company, nor any of its directors, officers or stockholders has taken any action
which would interfere with Parent's ability to account for the Merger as a
pooling.
2.31 REPRESENTATIONS COMPLETE. The Company has provided Parent with all the
information reasonably available to it that Parent has requested for deciding
whether to enter into this Agreement and all information that the Company
believes is necessary to enable Parent to make such decision. 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 Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
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.
2.32 YEAR 2000. All computer software products that are owned by the
Company, exclusively licensed to the Company, licensed, sold or otherwise
distributed to others by the Company or are otherwise required for the conduct
of its business ("SOFTWARE") are Year 2000 Compliant. As used herein, "Year 2000
Compliant" shall mean, with respect to any such Software, the ability of such
Software to perform the following date-related functions:
(a) consistently handle date information before, during and after
January 1, 2000, including, but not limited to, accepting date input, providing
date output and
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performing calculations on dates or portions of dates;
(b) function accurately in accordance with the documentation relating
to the applicable software and without interruption before, during and after
January 1, 2000, without any change in operations associated with the advent of
the new century;
(c) respond to two-digit date input in a way that resolves any
ambiguity as to the century; and
(d) store and provide output of date information in ways that are
unambiguous as to century.
2.33 PRODUCTS LIABILITY. There are no claims against the Company, fixed or
contingent, asserting (a) any damage, loss or injury caused by any product or
(b) any breach of any express or implied product warranty or any other similar
claim with respect to any product other than standard warranty obligations (to
replace, repair or refund) made by the Company in the ordinary course of
business, except for those claims that, if adversely determined against the
Company, would not have a material adverse effect on the business condition of
the Company. As used herein, "product" shall mean any products manufactured,
designed, developed, distributed, sold, re-sold, customized or serviced by the
Company.
2.34 SERVICE PROVIDER AGREEMENTS. To the Company's knowledge, no service
provider of the Company is in violation of any term of any employment agreement
(whether written or verbal), patent or trademark disclosure agreement, or any
other contract or agreement relating to the relationship of any such service
provider with the Company or any other party (including prior employers), or any
term of any judgment, decree or order, because of the nature of, and resulting
in a Material Adverse Effect on the Company. Each current service provider of
the Company has executed a proprietary information and inventions agreement (or
similar agreement) with the Company in the form then being used by the Company,
which forms have been previously delivered to Parent by the Company. No former
service provider of the Company has executed such an agreement but, the Company
has the rights to any and all Intellectual Property Rights developed by each
such person while providing services to the Company. Each employee or
consultant-inventor has executed a written agreement validly assigning his or
her rights to the Company on all inventions, pending patent applications, all
patents issued, and all other intellectual property rights developed by such
service provider while working for or on behalf of the Company to the extent
that the failure to obtain such written agreements is material to the business
condition or future prospects of the Company. To the extent the Company has ever
utilized consultants or independent contractors, each consultant or independent
contractor has executed a written agreement, validly assigning to the Company
his or her rights in and to all copyrights and works of authorship relating to
products, services or technology designed, developed, manufactured, licensed,
sold, marketed or serviced by the Company and its business to the extent that
the failure to obtain such written agreements is material to the business
condition or future prospects of the Company. None of the Company's service
providers is in violation thereof. None of the Company's service providers is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the
-22-
Company or that would materially conflict with the Company's business as
conducted or as proposed to be conducted or that would prevent any such service
provider from assigning inventions to the Company. It is not now and the Company
is not aware that it will be necessary for the Company to utilize any inventions
material to the business condition or future prospects of the Company of any of
its service providers (or people it currently intends to hire) made prior to
their employment by or relationship with the Company, that are material to the
business condition or future prospects of the Company.
2.35 FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor to the
knowledge of the Company, any agent, employee or other Person acting on behalf
of the Company has, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company, subject
to such exceptions as specifically disclosed with respect to specific sections
of this ARTICLE 3 in the Parent Disclosure Schedule delivered herewith and dated
as of the date hereof, as follows:
3.1 ORGANIZATION AND QUALIFICATION. Parent is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware,
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware. Each of Parent and Merger Sub
has all requisite corporate power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use and lease
its Assets and Properties. Each of Parent and Merger Sub is duly qualified,
licensed or admitted to do business and is in good standing in each jurisdiction
in which the ownership, use, licensing or leasing of its Assets and Properties,
or the conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that could not reasonably be expected to have a
Material Adverse Effect on Parent.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Merger Sub has
full corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements, to perform its respective obligations hereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Parent and Merger Sub of this Agreement and the Ancillary Agreements
and the consummation by Parent and Merger Sub of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate and stockholder action of Parent and Merger Sub, and no other
corporate action on the part of either Parent or Merger Sub is required to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation by Parent and Merger Sub of the
transactions contemplated hereby and thereby. This Agreement
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and the Ancillary Agreements to which Parent or Merger Sub is a party has been
duly and validly executed and delivered by Parent and Merger Sub and, assuming
the due authorization and the valid execution and delivery hereof by the
Company, constitutes a legal, valid and binding obligation of Parent and Merger
Sub enforceable against Parent and Merger Sub in accordance with its respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
Laws relating to the enforcement of creditors' rights generally and by general
principles of equity.
3.3 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has furnished or
made available to the Company true and complete copies of all SEC Documents
filed by it with the SEC since September 21, 1999, all in the form so filed. As
of their respective filing dates, such SEC Documents filed by Parent and all SEC
Documents filed after the date hereof but before the Closing complied or will
comply in all material respects with the requirements of the Securities Act and
the Exchange Act and the rules and regulations of the SEC thereunder, as the
case may be, and none of the SEC Documents contained or will contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent such
SEC Documents have been corrected, updated or superseded by a document
subsequently filed with the SEC. The financial statements of Parent, including
the notes thereto, included in the SEC Documents (the "PARENT FINANCIAL
STATEMENTS") comply as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
under the Exchange Act) and present fairly the consolidated financial position
of Parent at the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended (subject, in the case of unaudited
financial statements, to audit adjustments). There has been no change in
Parent's accounting policies except as described in the notes to the Parent
Financial Statements. Except as reflected or reserved against in the Parent
Financial Statements, Parent has no material Liabilities, except for Liabilities
and obligations (i) incurred in the ordinary course of business since the date
of the most recent Parent Financial Statements or (ii) that would not be
required to be reflected or reserved against in the balance sheet of Parent
prepared in accordance with GAAP.
3.4 NO CONFLICTS. The execution and delivery by Parent and Merger Sub of
this Agreement does not, and the performance by Parent of its obligations under
this Agreement and the consummation of the transactions contemplated hereby do
not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
Parent or Merger Sub;
(b) conflict with or result in a violation or breach of any Law or
Order applicable to Parent or Merger Sub or their respective Assets or
Properties;
(c) except as would not have a Material Adverse Effect on Parent, (i)
conflict with or result in a violation or breach of, (ii) constitute a default
(or an event that, with or without notice or lapse of time or both, would
constitute a default) under, (iii) require Parent to obtain
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any consent, approval or action of, make any filing with or give any notice to
any Person as a result of the terms of, (iv) result in or give to any Person any
right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon Parent or Merger Sub or any of
their respective Assets or Properties, or (vii) result in the loss of a material
benefit under, any of the terms, conditions or provisions of any Contract or
License to which Parent or Merger Sub is a party or by which any of their Assets
and Properties are bound.
3.5 INFORMATION TO BE SUPPLIED BY PARENT. The information supplied by
Parent for inclusion in the Information Statement shall not, on the date the
Information Statement is first mailed to the Company's stockholders, at the time
of the Parent stockholders Meeting and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which it is made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the company stockholders action to be taken which has become false
or misleading. Notwithstanding the foregoing, Parent and Merger Sub make no
representation, warranty or covenant with respect to any information supplied by
the Company which is contained in any of the foregoing documents.
3.6 OWNERSHIP OF MERGER SUB; NO PRIOR ACTIVITIES. As of the date hereof and
the Effective Time, except for obligations or Liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Merger Sub has not and will not have incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
3.7 INVESTMENT ADVISORS. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of Parent.
3.8 TAX-FREE REORGANIZATION. To the knowledge of Parent after Good Faith
Consultation with Parent's independent accountants, neither Parent nor any of
its directors, officers or stockholders has taken any action which could
reasonably be expected to jeopardize the status of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
3.9 CAPITALIZATION. The authorized capital stock of Parent consists of
100,000,000 shares of Common Stock, $0.001 par value per share, 5,000,000 shares
of Preferred Stock, $0.001 par value per share, of which 27,074,948 shares of
Common Stock, and no shares of Preferred Stock were issued and outstanding as of
December 1, 1999. The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, and non-assessable.
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3.10 THIRD-PARTY CONSENTS. Neither Parent nor Merger Sub is required to
obtain from any third party any consent, waiver or approval for the consummation
of the Merger (other than consents which will be obtained at or prior to the
Closing and consents, the absence of which could not reasonably be expected to
have a Material Adverse Effect on Parent or to prevent the consummation of the
transactions contemplated by this Agreement).
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
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 and the Effective Time, the Company agrees (unless Parent shall give
its prior consent in writing, which consent shall not be unreasonably withheld)
to carry on its business in the ordinary course consistent with the Company's
fiscal year 2000 budget provided prior to the date of this Agreement to Parent,
to pay its Liabilities and Taxes consistent with the Company's past practices
(and in any event when due), to pay or perform other obligations when due
consistent with the Company's past practices (other than Liabilities, Taxes and
other obligations, if any, contested in good faith through appropriate
proceedings), and, to the extent consistent with such business, to use
reasonable efforts and institute all policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, independent contractors and other Persons
having business dealings with it, all with the express purpose and intent of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
Except as expressly contemplated by this Agreement, the Company shall not,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld, take, or agree in writing or otherwise to take, any of
the actions described in SECTION 2.5 of this Agreement, or any other action that
would make any of its representations or warranties contained in this Agreement
untrue or incorrect in any material respect or prevent the Company from
performing or cause the Company not to perform its agreements and covenants
hereunder.
4.2 NO SOLICITATION. Until the earlier of the Effective Time and the date
of termination of this Agreement pursuant to the provisions of SECTION 8.1
hereof, the Company will not take, nor will the Company permit any of its
directors, officers, agents, employees, affiliates, attorneys, accountants,
financial advisers or other representatives (collectively, "REPRESENTATIVES") to
(directly or indirectly): (i) solicit, encourage, initiate, entertain, review or
participate in any negotiations or discussions with respect to an offer or
proposal, oral, written, or otherwise, formal or informal to acquire all or any
part of Company, whether by purchase of assets, exclusive license, joint venture
formation, purchase of stock, business combination or otherwise, (ii) disclose
any information not customarily disclosed to any Person concerning Company and
which Company believes would be used for the purposes of formulating any such
offer or proposal, (iii) assist, cooperate with, facilitate or encourage any
Person to make any offer or proposal to acquire all or any part of Company
(directly or indirectly) (a "COMPETING PROPOSED TRANSACTION"), (iv) other than
affiliates, agree to, enter into a contract regarding, approve, recommend or
endorse any transaction involving a Competing Proposed Transaction, or (v)
authorize or permit any of Company's Representatives to take any such action.
Company shall notify Parent as promptly as practical if any proposal or offer
(formal or informal, oral,
-26-
written or otherwise), or any inquiry or contact with any Person with respect
thereto, regarding a Competing Proposed Transaction is made or is outstanding on
the date hereof, such notice to include the identity of the Person proposing
such Competing Proposed Transaction and the terms thereof, and shall keep Parent
apprised, on a current basis of the status of any such Competing Proposed
Transaction and of any modifications to the terms thereof. Company immediately
shall cease and cause to be terminated all existing discussions or negotiations
with any parties other than Parent conducted heretofore with respect to any
Competing Proposed Transaction.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 INFORMATION STATEMENT; RESTRICTED STOCK.
(a) The Company has prepared, with the cooperation of Parent, the
Information Statement for the stockholders of the Company to approve this
Agreement, the Delaware Certificate of Merger and the transactions contemplated
hereby and thereby. The Information Statement constitutes a disclosure document
for the offer and issuance of the shares of Parent Common Stock to be received
by the holders of Company Capital Stock in the Merger. Parent and the Company
shall have used reasonable commercial efforts to cause the Information Statement
to comply with applicable federal and state securities laws requirements. Each
of Parent and the Company has provided to the other such information concerning
its business and financial statements and affairs as, in the reasonable judgment
of the providing party or its counsel, may be required or appropriate for
inclusion in the Information Statement, and in any amendments or supplements
thereto, and has caused its counsel and auditors to cooperate with the other's
counsel and auditors in the preparation of the Information Statement. The
Company will promptly advise Parent, and Parent will promptly advise the
Company, in writing if at any time prior to the Effective Time either the
Company or Parent shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. The Information Statement contains
the recommendation of the Board of Directors of the Company that the Company
stockholders approve the Merger and this Agreement and the conclusion of the
Board of Directors that the terms and conditions of the Merger are advisable and
fair and reasonable to the stockholders of the Company. Anything to the contrary
contained herein notwithstanding, the Company has not included in (and shall not
include in any amendment to) the Information Statement any information with
respect to Parent or its affiliates or associates, the form and content of which
information shall not have been approved by Parent prior to such inclusion.
(b) Parent and the Company shall use commercially reasonable efforts
to effect the issuance of the shares of Parent Common Stock to be issued
pursuant to SECTION 1.6 in a private placement pursuant to Section 4(2) of the
Securities Act and SEC rules and regulations promulgated thereunder, on terms
and conditions that are reasonably satisfactory to Parent. The parties hereto
acknowledge and agree that: (i) as a condition to effecting such issuance as a
private placement pursuant to Section 4(2) of the Securities Act, Parent shall
be entitled to obtain from each stockholder of the Company a Stockholder
Certificate in the form attached hereto as EXHIBIT C (or such other form as
shall be reasonably satisfactory to Parent) and that Parent will
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be relying upon the representations made by each stockholder of the Company in
the applicable Stockholder Certificate in connection with the issuance of Parent
Common Stock to such stockholder, (ii) the shares of Parent Common Stock so
issued pursuant to SECTION 1.6 will not be registered under the Securities Act
at the Effective Time and will constitute "restricted securities" within the
meaning of the Securities Act until such time as they are subsequently
registered under the Securities Act or are otherwise transferable pursuant to an
exemption from the registration requirements thereof; and (iii) the certificates
representing the shares of Parent Common Stock shall bear appropriate legends to
identify such privately placed shares as being restricted under the Securities
Act, to comply with applicable state securities laws and, if applicable, to
notice the restrictions on transfer of such shares.
5.2 STOCKHOLDER APPROVAL. The Company has received waivers of written
notice of this Agreement and has used its best efforts to take all other action
necessary in accordance with Delaware Law and its certificate of incorporation
and bylaws to secure the written consent of all of its stockholders. The Company
shall not take any action to encourage the withdrawal of any such consent prior
to the Effective Time. The materials which have been submitted to the
stockholders of the Company in respect of the Merger have been subject to prior
review and comment by Parent and have included information regarding the
Company, the terms of the Merger and this Agreement, the unanimous
recommendation of the Board of Directors of the Company in favor of the Merger,
this Agreement and the transactions contemplated hereby and such other documents
(including the Stockholder Certificate) in order to satisfy the applicable the
requirements of the Securities Act and SEC rules and regulations promulgated
thereunder in connection with the issuance and sale of Parent Common Stock in
the Merger.
5.3 ACCESS TO INFORMATION. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (i) give Parent, Merger Sub and their
respective officers, employees, accountants and counsel full access to all
buildings, offices, and other facilities and to all Books and Records of the
Company, whether located on the premises of the Company or at another location;
(ii) permit Parent and Merger Sub to make such inspections as they may
reasonably require; (iii) cause its officers to furnish Parent and Merger Sub
such financial, operating, technical and product data and other information with
respect to the business and Assets and Properties of the Company as Parent and
Merger Sub from time to time may request, including financial statements and
schedules; (iv) allow Parent and Merger Sub the opportunity to interview such
employees and other personnel and Affiliates of the Company with the Company's
prior written consent, which consent shall not be unreasonably withheld or
delayed; and (v) assist and cooperate with Parent and Merger Sub in the
development of integration plans for implementation by Parent and the Surviving
Corporation following the Effective Time; PROVIDED, HOWEVER, that no
investigation pursuant to this SECTION 5.3 shall affect or be deemed to modify
any representation or warranty made by the Company herein.
5.4 CONFIDENTIALITY. The parties acknowledge that Parent and the Company
have previously executed a non-disclosure agreement (the "CONFIDENTIALITY
AGREEMENT"), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms. Without limiting the foregoing, all
information furnished to Parent, Merger Sub and their respective officers,
employees, accountants and counsel by the Company, and all information
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furnished to the Company by Parent and its respective officers, employees,
accountants and counsel, shall be covered by the Confidentiality Agreement, and
Parent and the Company shall be fully liable and responsible under the
Confidentiality Agreement for any breach of the terms and conditions thereof by
their respective subsidiaries, officers, employees, accountants and counsel.
5.5 EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger as of the Closing Date including
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses; PROVIDED, that, if the
Merger is consummated, Parent agrees to pay Third Party Expenses of up to
$50,000 incurred by the Company and the Company agrees that Parent will have
full recourse to the Escrow Fund for payment of Third Party Expenses in excess
of $50,000 whether such Third Party Expenses have been paid by the Company,
accrued by the Company or incurred (and not accrued and paid) by the Company.
5.6 PUBLIC DISCLOSURE. Unless otherwise required by Law (including federal
and state securities laws) or, as to Parent, by the rules and regulations of the
NASD, prior to the Effective Time, no public disclosure (whether or not in
response to any inquiry) of the existence of any subject matter of, or the terms
and conditions of, this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release; PROVIDED, HOWEVER, that
such approval shall not be unreasonably withheld or delayed.
5.7 APPROVALS. Parent and the Company shall use all commercially reasonable
efforts required to obtain all Approvals from Governmental or Regulatory
Authorities or under any of the Contracts or other agreements as may be required
in connection with the Merger (all of which Approvals are set forth in the
Disclosure Schedule) so as to preserve all rights of and benefits to the Company
thereunder and Parent and the Company shall provide each other with such
assistance and information as is reasonably required to obtain such Approvals.
5.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company, Parent
or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (ii) any
failure of the Company, Parent or Merger Sub, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this SECTION 5.8 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.9 POOLING OF INTERESTS ACCOUNTING. The Company shall continue to use its
best efforts (i) to allow the business combination to be effected by the Merger
to be accounted for as a Pooling of Interests from and after the Effective Time,
and (ii) to cause its employees, directors, stockholders, Affiliates and
Associates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
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Pooling of Interests from and after the Effective Time.
5.10 COMPANY AFFILIATE AGREEMENTS. SCHEDULE 5.10 sets forth those persons
who, in the Company's reasonable judgment, after consultation with legal counsel
and accounting advisors, are or could reasonably be expected to be deemed to be
Affiliates of the Company. Company shall use its commercially reasonable efforts
to deliver or cause to be delivered to Company prior to the Closing an executed
Company Affiliate Agreement, in the form attached hereto as EXHIBIT I from each
of the Company Affiliates contemporaneously with the execution and delivery of
this Agreement.
5.11 PARENT AFFILIATE AGREEMENTS. SCHEDULE 5.11 sets forth those persons
who, in Parent's reasonable judgment, after consultation with legal counsel and
accounting advisors, are or could reasonably be expected to be deemed to be
Affiliates of Parent. Parent shall use its commercially reasonable efforts to
deliver or cause to be delivered to Parent prior to the Closing from each of the
Parent Affiliates, an executed Parent Affiliate Agreement, in the form attached
hereto as EXHIBIT K from each of the Parent Affiliates contemporaneously with
the execution and delivery of this Agreement.
5.12 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at the
request of the other party hereto, has used and shall use all requisite
commercially reasonable efforts to execute and deliver such other instruments
(including the execution by Company of the resolution and amendment to terminate
Company's 401(k) Plan prior to Closing) and do and perform such other acts and
things (including all action reasonably necessary to seek and obtain any and all
consents and approvals of any Government or Regulatory Authority or Person
required in connection with the Merger; PROVIDED, HOWEVER, that Parent shall not
be obligated to consent to any divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such condition or approval) as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.13 FORM S-8. Parent shall file a registration statement on Form S-8 for
the shares of Parent Common Stock issuable with respect to assumed Company
Options promptly after the Effective Time to the extent the shares of Parent
Common Stock issuable upon exercise of such Company Options qualify for
registration on Form S-8.
5.14 COMPANY'S AUDITORS. The Company will use commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) as required by Parent to comply with
applicable SEC regulations, (ii) the review of any Company audit or review work
papers including the examination of selected audited financial statements and
data, and (iii) the delivery of such representations from the Company's
independent accountants as may be reasonably requested by Parent or its
accountants.
5.15 ADDITIONAL AFFILIATE AGREEMENTS. Each of the Company and Parent agrees
that if any Person would have been a Company Affiliate or Parent Affiliate had
such Person been a stockholder of the Company or Parent, respectively, as of the
date of this Agreement, the Company or Parent, as appropriate, shall use
commercially reasonable efforts to cause such
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person to execute and deliver to the Company or Parent a Company Affiliate
Agreement or Parent Affiliate Agreement, as appropriate, promptly upon such
Person attaining such status.
5.16 DIRECTORS' AND OFFICERS' INDEMNIFICATION. From and after the Effective
Time, Parent will cause the Surviving Corporation to fulfill and honor in all
respects the obligations of the Company pursuant to any indemnification
agreements between the Company and its directors and officers existing prior to
the date hereof (copies of which have been provided to Parent).
(a) Parent (i) shall assume, as of the Effective Time, and shall
perform, for a period of three (3) years from and after the Effective Time, all
obligations of the Company under Article VI of the Company Restated Certificate
and Article VI of the Bylaws of the Company, in each case as such instruments
were in effect on the date hereof and whether or not such instruments have
thereafter been amended or repealed, and (ii) shall pay all amounts that become
due and payable under such provisions (or would become due under such provisions
if such provisions had remained in force during such three-year period).
(b) This SECTION 5.16 shall survive the consummation of the Merger, is
intended to benefit the Company, the Surviving Corporation and each indemnified
party, shall be binding, jointly and severally, on all successors and assigns of
the Surviving Corporation and Parent, and shall be enforceable by the
indemnified persons.
(c) Notwithstanding anything to the contrary in this SECTION 5.16,
Parent and the Surviving Corporation shall not be liable for any amounts payable
to an indemnified person resulting from any claim or action against Parent or
the Surviving Corporation brought by such indemnified person; provided, however,
that nothing in this Section 5.16(c) shall be construed as limiting the right of
any such indemnified person to enforce their rights under this Section 5.16.
(d) The Company hereby represents and warrants to Parent that no claim
for indemnification has been made by any director or officer of the Company and,
to the knowledge of the Company, no basis exists for any such claim for
indemnification.
5.17 BENEFIT ARRANGEMENTS. Parent and the Company agree that, following the
Effective Time, Parent will provide (or will cause the Company to provide)
benefits to the Company's employees as of the Effective Time (other than with
respect to contributions by the Company to the Company 401(k) Plan, as to which
no comparable contributions are made by Parent) that are at least as favorable,
taken as a whole, as the benefits currently provided to employees of Parent
performing functions similar to those to be performed by such Company employees
after the Effective Time. From and after the Effective Time, Parent shall grant
Company employees as of the Effective Time credit for all service (to the same
extent as service with Parent is taken into account with respect to similarly
situated employees of Parent) with the Company prior to the Effective Time for
(i) eligibility and vesting purposes and (ii) for purposes of vacation accrual
after the Effective Time as if such service with the Company was service with
Parent. Parent and the Company agree that where applicable with respect to any
medical or dental benefit plan of Parent, Parent shall provide that any covered
expenses incurred on or before the Effective Time by a Company employee or a
Company employee's covered dependents shall be taken into account for purposes
of satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time to the same extent
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as such expenses are taken into account for the benefit of similarly situated
employees of Parent.
5.18 TREATMENT AS REORGANIZATION. Neither Parent nor Merger Sub nor the
Company shall take any action prior to or following the Closing that would cause
the merger to fail to qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
5.19 REGISTRATION OF PARENT COMMON STOCK. Parent shall prepare and file a
registration statement covering the non-underwritten resale of the shares of
Parent Common Stock issued in the Merger and shall use commercially reasonable
efforts to cause such registration statement to become effective not later than
August 13, 2000 and to remain effective until the first anniversary of the
Closing Date. Any such registration shall be subject to the normal terms and
conditions used in connection with resale prospectuses.
5.20 PERSONAL GUARANTEES BY FOUNDER. As soon as practicable after the
Closing, Parent and the Company shall take all actions reasonably necessary to
cause Founder to be removed as a guarantor with respect to any obligations of
the Company, up to a maximum of $100,000.00.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated by this Agreement shall have been timely obtained
(other than with respect to the receipt of Parent Common Stock by a stockholder
of the Company) shall have expired or been terminated.
(b) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or Governmental or Regulatory Authority or
other legal or regulatory restraint or prohibition preventing the consummation
of the Merger shall be in effect; nor shall there be any action taken, or any
Law or Order enacted, entered, enforced or deemed applicable to the Merger or
the other transactions contemplated by the terms of this Agreement that would
prohibit the consummation of the Merger or which would permit consummation of
the Merger only if certain divestitures were made or if Parent were to agree to
limitations on its business activities or operations.
(c) TAX OPINIONS. Parent and the Company shall each have received
written opinions from their counsel, in form and substance reasonably
satisfactory to each of them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
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(d) STOCKHOLDER APPROVAL. The Merger shall have been approved by the
written consent of a majority of the holders of Company Capital Stock issued and
outstanding on the record date set for determining stockholders of the Company
entitled to vote upon the Merger.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (if not qualified by materiality) and in all
respects (if qualified by materiality) when made and (other than representations
and warranties which by their express terms are made solely as of a specified
earlier date) on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall be true
and correct in all material respects (if not qualified by materiality) and in
all respects (if qualified by materiality) on and as of such earlier date,
except where the failure to be true and correct could not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect on Parent.
(b) PERFORMANCE. Parent and Merger Sub shall have performed and
complied with in all material respects each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Parent or
Merger Sub at or before the Closing.
(c) OFFICERS' CERTIFICATES. Parent and Merger Sub shall have delivered
to the Company certificates, dated the Closing Date and executed by their
respective President and Chief Executive Officers, substantially in the forms
set forth in EXHIBIT D-1 hereto, and certificates, dated the Closing Date and
executed by the Secretary of Parent and Merger Sub, substantially in the forms
set forth in EXHIBIT D-2 hereto.
(d) LEGAL OPINION. The Company shall have received a legal opinion
from Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, legal counsel to Parent and Merger Sub, as
to the matters set forth on EXHIBIT E hereto.
(e) QUALIFICATION AS A PRIVATE PLACEMENT. The Company shall be
reasonably satisfied that the shares of Parent Common Stock to be issued in
connection with the Merger pursuant to SECTION 1.6(A) are issuable without
registration pursuant to Section 4(2) of the Securities Act and SEC rules and
regulations promulgated thereunder.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct in
all material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) when
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made and (other than representations and warranties which by their express terms
are made solely as of a specified earlier date) on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date;
and any representation or warranty made as of a specified date earlier than the
Closing Date shall be true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of such earlier date, except where the failure to be true and correct
could not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect on the Company.
(b) PERFORMANCE. The Company shall have performed and complied with in
all material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company on or before the
Closing Date.
(c) OFFICERS' CERTIFICATES. The Company shall have delivered to Parent
a certificate, dated the Closing Date and executed by its President and Chief
Executive Officer of the Company, substantially in the form set forth in EXHIBIT
F-1 hereto, and a certificate, dated the Closing Date and executed by the
Secretary of the Company, substantially in the form set forth in EXHIBIT F-2
hereto.
(d) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers listed in Section 2.28 of the Disclosure Schedule (except
for such consents, approvals and waivers the failure of which to receive could
not reasonably be expected to have a Material Adverse Effect on the Surviving
Corporation).
(e) LEGAL OPINION. Parent shall have received a legal opinion Xxxxxx,
Xxxxxxxxxx & Xxxxxxxxx LLP, legal counsel to the Company, as to the matters set
forth on EXHIBIT G hereto.
(f) NON-COMPETITION AGREEMENTS. P.V. Kannan, Xxxxxxx Xxxxxxxxxxx and
Xxxxxxxxx Xxxxxxxxx shall have executed and delivered to Parent a
Non-Competition Agreement in the form attached hereto as EXHIBIT H-1, and each
of such Non-Competition Agreements shall be in full force and effect. Xxxx
Xxxxxx, Xxxxxx Xxxxxxxxxx and Xxxxx Xxxxx, shall have executed and delivered to
Parent a Non-Competition Agreement in the form attached hereto as EXHIBIT H-2,
and each of such Non-Competition Agreements shall be in full force and effect.
(g) LIMITATION ON DISSENT. The holders of at least 95% of the
outstanding shares of Company Capital Stock shall have consented to the Merger
in writing or otherwise acted in such a way as to waive or terminate any
dissenter's rights they may have under the DGCL.
(h) FIRPTA COMPLIANCE. The executed statement in the form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3) previously delivered by the Company
to Parent shall continue to be in full force and effect.
(i) LEGAL PROCEEDINGS. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends
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to commence proceedings to restrain or prohibit the transactions contemplated
hereby or force rescission, unless such Governmental or Regulatory Authority
shall have withdrawn such notice and abandoned any such proceedings prior to the
time which otherwise would have been the Closing Date.
(j) TERMINATION OF PENSION PLAN. The Company shall have terminated the
Company 401(k) Plan and no further contributions shall have been made to the
401(k) Plan. The Company shall have provided to Parent (i) executed resolutions
by the Board of Directors of the Company authorizing the termination and (ii) an
executed amendment to the 401(k) Plan sufficient to assure compliance with all
applicable requirements of the Internal Revenue Code and regulations thereunder
so that the tax-qualified status of the 401(k) Plan will be maintained at the
time of termination.
(k) COMPANY AFFILIATE AGREEMENTS. Each Company Affiliate shall have
executed and delivered to the Company and Parent the Company Affiliate Agreement
in the form attached hereto as EXHIBIT I and shall be in full force and effect.
(l) EMPLOYEES. The employees of the Company set forth on SCHEDULE
6.3(L) shall continue to be employed by the Company at the Closing (and shall
not have given any notice or other indication that they are not willing to be
employed by Parent or a Subsidiary of Parent (as Parent shall designate),
following the Merger.
(m) QUALIFICATION AS A PRIVATE PLACEMENT. Each of the stockholders of
the Company who is an "accredited investor" shall have delivered an executed
copy of the Stockholder Certificate, and Parent shall be reasonably satisfied
that the shares of Parent Common Stock to be issued in connection with the
Merger pursuant to SECTION 1.6(A) are issuable without registration pursuant to
Section 4(2) of the Securities Act and SEC rules and regulations promulgated
thereunder.
(n) OPINION OF ACCOUNTANTS. Parent and the Company shall each have
received letters, dated on or prior to the Closing Date from KPMG LLP regarding
such firm's concurrence with Parent management's and the Company management's
conclusions, respectively, as to the appropriateness of accounting for the
Merger as a Pooling of Interests if the Merger is closed and consummated in
accordance with this Agreement.
(o) CERTAIN WAIVERS. The holders of all outstanding shares of Company
Preferred Stock shall have executed and delivered waivers to Parent and the
Company, in form reasonably acceptable to Parent, accepting the consideration
provided by SECTION 1.6 of this Agreement in lieu of any other consideration
that might be claimed by any such holder pursuant to the Company Restated
Certificate and unconditionally and irrevocably waiving and releasing all right
or claim that such holder might have or assert in respect of such consideration
pursuant to the provisions of Article III Section 2 of the Company Restated
Certificate relating to payment in cash and the provisions of Section 5(a) of
the Company Restated Certificate relating to the notice of the Merger.
(p) LOCK-UP AGREEMENTS. Each holder of Equity Equivalents who is a
party to a security issuance agreement that includes a lock-up provision shall
have entered into the lock-
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up agreement in the form attached hereto as EXHIBIT J.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company
(whether pursuant to SECTION 5.3 or otherwise) or a waiver by Parent or the
Company of any condition to Closing set forth in ARTICLE 6, each party shall
have the right to rely fully upon the representations, warranties, covenants and
agreements of the other party contained in this Agreement or in any instrument
delivered pursuant to this Agreement. Except for the Audit Representations,
which shall survive the Merger and continue until the Audit Expiration Date, the
representations and warranties of the Company in this Agreement, all covenants
and agreements of the Company which by their terms are to be performed on or
prior to the Closing Date, all representations and warranties of Parent and
Merger Sub, and all covenants and agreements of Parent and Merger Sub which by
their terms are to be performed on or prior to the Closing Date, contained in
this Agreement or in any certificate delivered pursuant to SECTION 6.2(C) or
SECTION 6.3(C) of this Agreement shall survive the Merger and continue until the
General Expiration Date.
7.2 ESCROW PROVISIONS.
(a) ESTABLISHMENT OF THE ESCROW FUND. As soon as practicable after the
Effective Time, the Escrow Amount, without any act of any stockholder, will be
deposited with the Depositary Agent (plus a proportionate share of any
additional shares of Parent Common Stock as may be issued upon any stock splits,
stock dividends or recapitalizations effected by Parent following the Effective
Time), such deposit to constitute the "ESCROW FUND" to be governed by the terms
set forth herein. Notwithstanding any other provision of this Agreement to the
contrary, it is agreed that such terms may be changed, with the consent of
Parent and the Company (which consent shall not be unreasonably withheld), as
necessary from time to time to comply with then current interpretations of the
requirements of paragraph 47(g) of APB Opinion Xx. 00, Xxxxxxxxxxxxxx 00 xx XXX
00 issued by the AICPA, and the interpretations of the staff of the SEC to the
extent such interpretations shall apply to the transactions contemplated by this
Agreement. The portion of the Escrow Amount contributed on behalf of each
stockholder of the Company shall be in proportion to the aggregate number of
shares of Parent Common Stock which such holder would otherwise be entitled
under SECTION 1.6.
(b) INDEMNIFICATION. Subject to the limitations set forth in this
Article 7, the Company's stockholders at the Effective Time shall indemnify and
hold harmless Parent and the Surviving Corporation and their respective
officers, directors, employees, agents, Affiliates or Associates (the
"INDEMNIFIED PERSONS"), directly or indirectly, for any and all Losses (whether
or not involving a Third Party Claim), incurred or sustained by the Indemnified
Persons, directly or indirectly, as a result of any inaccuracy, breach or
default in connection with any representation, warranty, covenant or agreement
of the Company contained in this Agreement,
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the Company Disclosure Schedule, any Schedule to this Agreement or any Ancillary
Agreement, including (without limitation) any inaccuracy, breach or default in
connection with an Identified Risk.
(c) RECOURSE TO THE ESCROW FUND. The Escrow Amount shall be available
as security for the indemnification obligations of the Company's stockholders.
The Escrow Amount shall serve as an absolute limitation on liability for any
Losses, provided, however, that this limitation shall not apply to Losses that
are related to an Identified Risk or the result of fraud. Notwithstanding the
foregoing, nothing in this agreement shall be construed to limit the amount
which may be recovered by the Indemnified Persons or through any other remedy as
a result of Losses relating to an Identified Risk or in the event of fraud. The
maximum liability for any Stockholder, including Founder, for any breach of a
representation, warranty or covenant of the Company shall be limited to the
portion of the Escrow Amount in which such Stockholder has an interest pursuant
to this Agreement.
(i) No investigation made by or on behalf of Parent with respect to
the Company shall be deemed to affect Parent's reliance on the representations,
warranties, covenants and agreements made by the Company contained in this
Agreement and shall not be waiver of Parent's rights to indemnity as herein
provided for the breach or inaccuracy of, or failure to perform or comply with,
any of the Company's representations, warranties, covenants or agreements under
this Agreement. All representations and warranties set forth in this Agreement
shall be deemed to have been made again by the Company at and as of the Closing.
No performance or execution of this Agreement in whole or in part by any party
hereto, no course of dealing between or among the parties hereto or any delay or
failure on the part of any party in exercising any rights hereunder or at law in
equity, and no investigation by any party hereto shall operate as a waiver of
any rights of such party.
(ii) Subject to the limitations provided in this ARTICLE 7, the
stockholders of the Company shall have liabilities and obligations of Losses (as
defined herein) under this ARTICLE 7 only with respect to claims submitted or
notice of claims provided during the time period of survivability of the
specific representation, warranty, covenant or agreement as set forth herein.
Notwithstanding the expiration date of the representations, warranties,
covenants and agreements set forth herein, if Parent shall notify in writing the
Depositary Agent with respect to the submission of a claim during the time
period of survivability of such representation, warranty, covenant or agreement
in conformity with the terms of the Escrow Agreement, such liability or
obligation of Losses shall continue in full force and effect until those claims
timely made are finally settled.
(iii) Notwithstanding the foregoing, Parent may not receive any
shares from the Escrow Fund unless and until an Officer's Certificate or
Certificates (as defined in Section 7.2(f)(i) below) identifying Losses the
aggregate amount of which exceeds $100,000 has been delivered to the Depositary
Agent as provided in Section 7.2(f) below and such amount is determined pursuant
to this ARTICLE 7 to be payable, in which case Parent shall receive shares equal
in value to the full amount of Losses (including the first $100,000) up to the
Escrow Amount, except as otherwise stated herein.
(d) ESCROW PERIOD; DISTRIBUTION OF ESCROW FUND UPON TERMINATION OF
ESCROW
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PERIOD. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5
p.m., Pacific Time, on the General Expiration Date (the period of time from the
Effective Time through and including the General Expiration Date is referred to
herein as the "ESCROW PERIOD"); and all shares of Parent Common Stock remaining
in the Escrow Fund shall be distributed as set forth in the last sentence of
this SECTION 7.2(D). Parent and Stockholders shall promptly notify the
Depositary Agent of the Audit Expiration Date once such date is established.
Upon termination of the Escrow Period, the Depositary Agent shall deliver to the
stockholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of shares of Parent Common Stock
remaining in the Escrow Fund to the stockholders of the Company pursuant to this
SECTION 7.2(D) shall be made ratably in proportion to their respective
contributions to the Escrow Fund and Parent shall use all requisite commercially
reasonable efforts to have such shares delivered as promptly as possible after
such resolution. Upon termination of the Escrow Period, subject to Section
7.2(f) below, Parent and the Stockholders' Agent will together notify the
Depositary Agent in writing that the Escrow Fund may be distributed and the
allocation of such distribution. The Depositary Agent will not have any
liability in respect thereof, but shall be fully protected in relying on such
notice.
(e) PROTECTION OF ESCROW FUND.
(i) The Depositary Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other Equity Equivalents
securities issued or distributed by Parent ("NEW SHARES") in respect of Parent
Common Stock in the Escrow Fund which have not been released from the Escrow
Fund shall be added to the Escrow Fund. New Shares issued in respect of shares
of Parent Common Stock which have been released from the Escrow Fund shall not
be added to the Escrow Fund but shall be distributed to the record holders
thereof. Cash dividends on Parent Common Stock shall not be added to the Escrow
Fund but shall be distributed to the record holders of the Parent Common Stock
on the record date set for any such dividend.
(iii) Each stockholder shall have voting rights with respect to the
shares of Parent Common Stock contributed to the Escrow Fund by such stockholder
(and on any voting securities added to the Escrow Fund in respect of such shares
of Parent Common Stock). Notwithstanding the foregoing, the Depositary Agent
shall have no duty or obligation to monitor or take any action with respect to
the foregoing paragraph.
(f) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Depositary Agent at any time on or before
the last day of the Escrow Period of a certificate signed by any officer of
Parent (an "OFFICER'S CERTIFICATE"): (A) stating that Parent has paid or
properly accrued or reasonably anticipates that it will pay or accrue a Loss,
directly or indirectly, as a result of any inaccuracy or breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any
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Ancillary Agreement, and (B) specifying in reasonable detail the
individual items of Losses included in the amount so stated, the date each such
item was paid or properly accrued, or the basis for such anticipated liability,
and the nature of the misrepresentation, breach of warranty, agreement or
covenant to which such item is related and the number of shares of Parent Common
Stock to be delivered to Parent in respect of such Losses, the Depositary Agent
shall, subject to the provisions of SECTION 7.2(G) hereof, deliver to Parent out
of the Escrow Fund, as promptly as practicable, shares of Parent Common Stock
held in the Escrow Fund in an amount equal to such Losses. Where the basis for a
claim upon the Escrow Fund by Parent is that Parent reasonably anticipates that
it will pay or accrue a Loss, no payment will be made from the Escrow Fund for
such Loss unless and until such Loss is actually paid or accrued.
(ii) For the purposes of determining the number of shares of Parent
Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
SECTION 7.2(F)(I), the shares of Parent Common Stock shall be valued at the
price per share of the Common Stock of Parent on the Closing Date.
(g) OBJECTIONS TO CLAIMS. At the time of delivery of any Officer's
Certificate to the Depositary Agent, a duplicate copy of such certificate shall
be delivered to the Stockholders' Agent and for a period of thirty (30) days
after such delivery, the Depositary Agent shall make no delivery to Parent of
any Escrow Amounts pursuant to SECTION 7.2(F) hereof unless the Depositary Agent
shall have received written authorization from the Stockholders' Agent to make
such delivery. After the expiration of such thirty (30) day period, the
Depositary Agent shall make delivery of shares of Parent Common Stock from the
Escrow Fund in accordance with SECTION 7.2(F) hereof, 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 Depositary Agent prior to the
expiration of such thirty (30) day period.
(h) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Stockholders' Agent shall object in writing to any
claim or claims made in any Officer's Certificate, the Stockholders' Agent and
Parent shall attempt in good faith 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 Depositary
Agent. The Depositary Agent shall be entitled to rely on any such memorandum and
distribute shares of Parent Common Stock from the Escrow Fund in accordance with
the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholders' Agent may demand arbitration of
the dispute unless the amount of the damage or loss is at issue in a pending
Action or Proceeding involving a Third Party Claim, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three (3) arbitrators, one (1) selected by Parent and one (1)
selected by the Stockholders' Agent, and the two (2) arbitrators selected by
Parent and the Stockholders' Agent shall select a third arbitrator. The
arbitrators shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery of information relating to any
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dispute while allowing the parties an opportunity, adequate as determined in the
sole judgment of the arbitrators, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrators shall
rule upon motions to compel, limit or allow discovery as they shall deem
appropriate given the nature and extent of the disputed claim. The arbitrators
shall also have the authority to impose sanctions, including attorneys' fees and
other costs incurred by the parties, to the same extent as a court of law or
equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to by a
party without substantial justification. The decision of a majority of the three
(3) 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 SECTION 7.2(F) hereof, the Depositary Agent
shall be entitled to act, and shall incur no liability in acting, in accordance
with such decision and make or withhold payments out of the Escrow Fund in
accordance therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions regarding the dispute which shall set
forth the award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having competent jurisdiction. Any such arbitration shall
be held in the city and county of Santa Clara, California under the commercial
rules of arbitration then in effect of the American Arbitration Association. For
purposes of this SECTION 7.2(H), in any arbitration hereunder in which any claim
or the amount thereof stated in the Officer's Certificate is at issue, Parent
shall be deemed to be the Non-Prevailing Party in the event that the arbitrators
award Parent less than the sum of one-half (1/2) of the disputed amount of any
Losses plus any amounts not in dispute; otherwise, the stockholders of the
Company as represented by the Stockholders' Agent shall be deemed to be the
Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay its
own expenses, the fees of each arbitrator, the administrative costs of the
arbitration and the expenses, including reasonable attorneys' fees and costs,
incurred by the other party to the arbitration.
(i) STOCKHOLDERS' AGENT; POWER OF ATTORNEY.
(i) In the event that the Merger is approved by the stockholders of
the Company, effective upon such vote, and without further act of any
stockholder, Xxxx Xxxxxxxx shall be appointed as agent and attorney-in-fact (the
"STOCKHOLDERS' AGENT") for each stockholder of the Company (except such
stockholders, if any, as shall have perfected their appraisal or dissenters'
rights under the DGCL), for and on behalf of stockholders of the Company, to
give and receive notices and communications, to authorize delivery to Parent of
shares of 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
stockholders of the Company from time to time upon not less than thirty (30)
days prior written notice to Parent and the Depositary Agent; PROVIDED, HOWEVER,
that the Stockholders' Agent may not be removed unless holders of a two-thirds
interest in the Escrow Fund agree to such removal and to the identity of the
substituted Stockholders' Agent. Any vacancy in the position of Stockholders'
Agent may be filled by approval of the holders of a majority in interest of the
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Escrow Fund. No bond shall be required of the Stockholders' Agent, and the
Stockholders' Agent shall not receive compensation for his services. After the
Effective Time, Notices or communications to or from the Stockholders' Agent
shall constitute notice to or from each of the stockholders of the Company.
(ii) 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.
(iii) The Stockholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising its
rights hereunder, provided that the Stockholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
(j) ACTIONS OF THE STOCKHOLDERS' AGENT. A decision, act, consent or
instruction of the Stockholders' Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such stockholders, and the Depositary Agent and Parent may rely upon any
such decision, act, consent or instruction of the Stockholders' Agent as being
the decision, act, consent or instruction of every such stockholder of the
Company. The Depositary 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.
(k) THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim (a "THIRD PARTY CLAIM") which Parent reasonably expects may
result in a demand against the Escrow Fund, Parent shall notify the
Stockholders' Agent of such claim, and the Stockholders' Agent, as
representative for the stockholders of the Company, 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 Third Party Claim; PROVIDED, HOWEVER,
that if Parent settles any Third Party Claim without the Stockholders' Agent's
consent (which consent shall not be unreasonably withheld or delayed), Parent
may not make a claim against the Escrow Fund with respect to the amount of
Losses incurred by Parent in such settlement.
(l) DEPOSITARY AGENT'S DUTIES.
(i) The Depositary Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and with the
consent of the Depositary Agent, which consent will not be unreasonably
withheld, as set forth in any additional written escrow instructions which the
Depositary Agent may receive after the date of this Agreement which are signed
by an officer of Parent and the Stockholders' Agent, and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed to be genuine and to have been signed or presented by the proper party
or parties. The Depositary Agent shall not be liable for any act taken, suffered
or omitted hereunder as Depositary Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
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advice of counsel shall be conclusive evidence of such good faith.
(ii) The Depositary Agent is hereby expressly authorized to comply
with and obey Orders of any court of law or Governmental or Regulatory
Authority, notwithstanding any notices, warnings or other communications from
any party or any other person to the contrary. In case the Depositary Agent
obeys or complies with any such Order, the Depositary Agent shall be fully
protected and shall not be liable to any of the parties hereto or to any other
Person by reason of such compliance, notwithstanding any such Order being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction or proper authority.
(iii) The Depositary Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Depositary Agent shall not be liable for the expiration of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Depositary Agent.
(v) In performing any duties under the Agreement, the Depositary
Agent shall not be liable to any Person for any damages, losses, liabilities,
penalties, claims, settlements, judgments, costs or expenses, except for gross
negligence or willful misconduct on the part of the Depositary Agent (each as
may be finally determined by a court of competent jurisdiction). The Depositary
Agent shall not incur any such liability for any action taken, suffered or
omitted in reliance upon any instrument, including any written statement or
affidavit provided for in this Agreement that the Depositary Agent shall in good
faith believe to be genuine, nor will the Depositary Agent be liable or
responsible for forgeries, fraud, impersonations or determining the scope of any
representative authority. In addition, the Depositary Agent may consult with
legal counsel in connection with the Depositary Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or permitted
by him/her in good faith in accordance with the advice of counsel. The
Depositary Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement. Anything to the contrary notwithstanding, in no event shall the
Depositary Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Depositary Agent has been advised of the likelihood
of such loss or damage. Except for liability resulting from willful misconduct
or gross negligence on the part of the Depositary Agent, any liability of the
Depositary Agent under this Agreement will be limited to the amount of fees paid
by the Parent to the Depositary Agent.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Depositary Agent will not be required to
determine the controversy or to take any action regarding it. The Depositary
Agent may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Depositary Agent's discretion, the Depositary Agent may
be required, despite what may be set forth elsewhere in this Agreement. In such
event, the Depositary Agent
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will not be liable for any damages. Furthermore, the Depositary Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Depositary Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all costs, expenses, charges and
reasonable attorney fees incurred by the Depositary Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Depositary Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) Parent, the Company and Merger Sub and their respective
successors and assigns agree jointly and severally to indemnify and hold the
Depositary Agent harmless against any and all Losses incurred by the Depositary
Agent in connection with its acceptance and the performance of the Depositary
Agent's duties under this Agreement, including any litigation arising from this
Agreement or involving its subject matter. The indemnity provided herein shall
survive the termination of this Agreement and the termination and expiration of
the Escrow Account. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Parent.
(viii) The Depositary Agent may resign at any time upon giving at
least 30 days written notice to the parties; PROVIDED, HOWEVER, that no such
resignation shall become effective until the appointment of a successor
depositary agent which shall be accomplished as follows: Parent and
Stockholders' Agent shall use their commercially reasonable efforts to mutually
agree on a successor depositary agent within thirty (30) days after receiving
such notice. If the parties fail to agree upon a successor depositary agent
within such time, the Depositary Agent shall have the right to appoint a
successor depositary agent authorized to do business in the State of California
or to petition a court of competent jurisdiction to appoint a successor
depository agent. The successor depositary agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor depositary agent as if originally named as depositary agent. The
Depositary Agent shall be discharged from any further duties and liability under
this Agreement.
(m) FEES. All fees of the Depositary Agent for performance of its
duties hereunder shall be paid by Parent in accordance with the fee schedule
that will be attached to this Agreement prior to the Closing as EXHIBIT K. In
the event that the conditions of this Agreement are not promptly fulfilled, or
if the Depositary Agent renders any service not provided for in this Agreement,
or if the parties request a substantial modification of its terms (which is
consented to by the Depositary Agent, such consent not to be unreasonably
withheld), or if any controversy arises, or if the Depositary Agent is made a
party to, or intervenes in, any Action or Proceeding pertaining to this escrow
or its subject matter, the Depositary Agent shall be reasonably compensated for
such extraordinary services and reimbursed for all costs, attorney's fees, and
expenses occasioned by such default, delay, controversy or Action or Proceeding.
Parent agrees to pay these sums upon demand.
7.3 EXCLUSIVE REMEDY. (a) With the exception of claims based upon fraud,
from and after the Closing, recourse of Indemnified Persons to the Escrow Fund
pursuant to this Agreement shall be the sole and exclusive remedy of the
Indemnified Persons for monetary
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damages for any Losses incurred or sustained by the Indemnified Persons,
directly or indirectly, as a result of any inaccuracy, breach or default in
connection with any representation, warranty, covenant or agreement of the
Company or Founder contained in this Agreement, the Company Disclosure Schedule,
any Schedule to this Agreement, any Ancillary Agreement or any other instrument
delivered pursuant to this Agreement.
(b) With respect to claims for monetary damages based upon fraud, the
limitation regarding the sole and exclusive remedy set forth in Section 7.3(a)
above shall be applicable except with respect to suits against the person
alleged to have directly committed the fraud.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in SECTION 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual agreement of the Company, Parent and Merger Sub;
(b) by Parent, Merger Sub or the Company if: (i) the Effective Time
has not occurred before 5 p.m. (Pacific Time) on a date which is ten (10)
business days following the date hereof (PROVIDED, HOWEVER, that the right to
terminate this Agreement under this SECTION 8.1(B)(I) shall not be available to
any party whose willful failure to fulfill any obligation hereunder has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date); (ii) there shall be a final nonappealable order of a federal
or state court in effect preventing consummation of the Merger; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any Governmental or Regulatory Authority
that would make consummation of the Merger illegal;
8.2 EFFECT OF TERMINATION. In the event of a valid termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub
or the Company, or their respective officers, directors or stockholders or
Affiliates or Associates; PROVIDED, HOWEVER, that each party shall remain liable
for any breaches of this Agreement prior to its termination; and PROVIDED
FURTHER that, the provisions of SECTIONS 5.4, 5.5, 8.2 AND ARTICLE 9 of this
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by prepaid first class certified mail, return
receipt requested, or mailed by overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
IF TO PARENT OR MERGER SUB TO:
-00-
Xxxx Xxxxxxxxxxxxxx, Inc.
000 Xxx Xxxx
Xxxxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer and
Attn: General Counsel
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx, LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxxxx, Esq.
IF TO THE COMPANY TO:
Business Evolution, Inc.
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer
with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
0000 Xxxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxx
IF TO THE DEPOSITARY AGENT TO:
ChaseMellon Shareholders Services.
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxx
IF TO THE STOCKHOLDERS' AGENT TO:
Xxxx Xxxxxxxx
0000 Xxxxxxxxxxx Xxxx X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile No.: (000) 000-0000
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All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this SECTION 9.1, be deemed given one
business day following delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided for in this SECTION 9.1, be deemed given one
business day following facsimile confirmation, (iii) if delivered by mail in the
manner described above to the address as provided for in this SECTION 9.1, be
deemed given on the third Business Day following mailing and (iv) if delivered
by overnight courier to the address as provided in this SECTION 9.1, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this SECTION 9.1). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving five (5) days advance written
notice specifying such change to the other parties hereto.
9.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules hereto,
including the Company Disclosure Schedule and the Parent Disclosure Schedule,
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.
9.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or from time
to time after the Closing, the parties shall execute and deliver to the other
party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4 WAIVER. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 THIRD PARTY BENEFICIARIES. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under ARTICLE 7 or indemnification pursuant to SECTION 5.17.
9.6 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the
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preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
assigns.
9.7 HEADINGS. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance therefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California; provided
however, that all provisions regarding the rights, duties and obligations of the
Depositary Agent shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed
entirely within such State.
9.10 CONSTRUCTION. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Except where this Agreement specifically provides for arbitration, it is agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
ARTICLE 10
DEFINITIONS
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10.1 DEFINITIONS.
(a) As used in this Agreement, the following defined terms shall have
the meanings indicated below:
"Actions or Proceedings" means any action, suit, complaint, petition,
investigation, proceeding, arbitration, litigation or Governmental or Regulatory
Authority investigation, audit or other proceeding, whether civil or criminal,
in law or in equity, or before any arbitrator or Governmental Regulatory
Authority.
"Affiliate" means, as applied to any Person, (a) any other Person directly
or indirectly controlling, controlled by or under common control with, that
Person, or (b) any other Person that owns or controls (i) ten percent (10%) or
more of any class of equity securities of that Person or any of its Affiliates
or (ii) ten percent (10%) or more of any class of equity securities (including
any equity securities issuable upon the exercise of any option or convertible
security) of that Person or any of its Affiliates. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with") as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through ownership of voting securities or by contract or otherwise.
"Aggregate Common Number" has the meaning ascribed to it in SECTION 1.6.
"Aggregate Share Number" has the meaning ascribed to it in SECTION 1.6.
"Agreement" means this Merger Agreement and Plan of Reorganization,
including (unless the context otherwise requires) the Exhibits and the
Disclosure Schedule and the certificates and instruments delivered in connection
herewith, or incorporated by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Ancillary Agreements" has the meaning ascribed to it in SECTION 2.3.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or other
business organization of which such Person is an officer or partner or is the
beneficial owner, directly or
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indirectly, of ten percent (10%) or more of any class of equity securities, any
trust or estate in which such Person has a substantial beneficial interest or as
to which such Person serves as a trustee or in a similar capacity and any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person.
"Audit Expiration Date" means the date of issuance of KPMG LLP's first
audit report for the combined operations of Parent and the Company which report
shall be issued in connection with the filing of the Parent annual report on
Form 10-K for fiscal 1999.
"Audit Representations" means the representations and warranties of the
Company relevant to the Company's audit.
"Books and Records" means all files, documents, instruments, papers, books
and records relating to the Business or Condition of the Company, including
financial statements, internal reports, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, minute books, stock certificates and books, stock transfer
ledgers, Contracts, Licenses, customer lists, computer files and programs
(including data processing files and records), retrieval programs, operating
data and plans and environmental studies and plans.
"Business Combination" means, with respect to any Person, (i) any merger,
consolidation or other business combination to which such Person is a party,
(ii) any sale, dividend, split or other disposition of any capital stock or
other equity interests of such Person, (iii) any tender offer (including a self
tender), exchange offer, recapitalization, restructuring, liquidation,
dissolution or similar or extraordinary transaction, (iv) any sale, dividend or
other disposition of all or a material portion of the Assets and Properties of
such Person or (v) the entering into of any agreement or understanding, the
granting of any rights or options, or the acquiescence of the Company, with
respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of California are authorized or obligated to close.
"Business or Condition" means, with respect to Parent, the business,
condition (financial or otherwise), results of operations, prospects or Assets
and Properties of Parent and each of its Subsidiaries, taking Parent together
with such Subsidiaries as a whole, and, with respect to the Company, the
business, condition (financial or otherwise), results of operations, prospects
or Assets and Properties of the Company.
"Certificates" has the meaning ascribed to it in SECTION 1.8(B).
"Closing" means the closing of the transaction contemplated by SECTION 1.2.
"Closing Date" has the meaning ascribed to it in SECTION 1.2.
"Closing Price" has the meaning ascribed to it in SECTION 1.6(A)(II).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
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"Common Stock Exchange Ratio" has the meaning ascribed to it in SECTION
1.6.
"Company" has the meaning ascribed to it in the preamble to this Agreement.
"Company Affiliates" has the meaning ascribed to it in SECTION 5.10.
"Company Authorizations" has the meaning ascribed to it in SECTION 2.9.
"Company Balance Sheet" means the balance sheet included in the Company
Financial Statements as of the Company Balance Sheet Date.
"Company Balance Sheet Date" means November 30, 1999.
"Company Capital Stock" means the Company Common Stock and Company
Preferred Stock.
"Company Common Stock" has the meaning ascribed to it in SECTION 2.2.
"Company Employee Plans" has the meaning ascribed to it in SECTION 2.14(A).
"Company Disclosure Schedule" means a document of even date herewith
delivered by or on behalf of the Company to Parent and Merger Sub prior to the
execution and delivery of this Agreement., containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein in connection with the representations and warranties made by the
Company in ARTICLE 2 of this Agreement or otherwise.
"Company Financial Statements" has the meaning ascribed to it in SECTION
2.4.
"Company 401(k) Plan" means the Company's 401(k) Plan.
"Company Option" means any Option to purchase Company Capital Stock granted
pursuant to the Company Stock Plan.
"Company Preferred Stock" has the meaning ascribed to it in SECTION 2.2.
"Company Restated Certificate" means the Amended and Restated Certificate
of Incorporation of the Company filed with the Secretary of State of the State
of Delaware on August 10, 1999.
"Company Restricted Stock" means shares of Company Capital Stock which are
subject to a repurchase option by the Company.
"Company Stock Plan" has the meaning ascribed to it in SECTION 1.6(C)(I).
"Company Subordinated Promissory Note" means each Subordinated Promissory
Note of the Company listed or required to be listed in SECTION 2.2 OF THE
DISCLOSURE SCHEDULE pursuant to SECTION 2.2 of this Agreement.
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"Company Warrant" means each Business Evolution Stock Purchase Warrant
listed or required to be listed in SECTION 2.2 OF THE DISCLOSURE SCHEDULE and
each other warrant to purchase Company Capital Stock (if any) listed or required
to be listed in SECTION 2.3 OF THE DISCLOSURE SCHEDULE.
"Competing Proposed Transaction" has the meaning ascribed to it in SECTION
4.2.
"Confidential Information" has the meaning ascribed to it in SECTION
2.11(F).
"Confidentiality Agreement" has the meaning ascribed to it in SECTION 5.4.
"Contract" has the meaning ascribed to it in SECTION 2.26.
"Delaware Certificate of Merger" has the meaning ascribed to it in Section
1.2.
"Depositary Agent" means ChaseMellon Shareholder Services, L.L.C. or such
other institution as may be reasonably acceptable to Parent and the Company (if
named prior to the Effective Time) or to Parent and the Stockholders' Agent (if
named after the Effective Time).
"DGCL" means the Delaware General Corporation Law.
"Dissenting Shares" has the meaning ascribed to it in SECTION 1.7(A).
"Effective Time" has the meaning ascribed to it in SECTION 1.2.
"Environment" means air, surface water, ground water, or land, including
land surface or subsurface, and any receptors such as persons, wildlife, fish,
biota or other natural resources.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including the Comprehensive, Environmental Response Compensation and
Liability Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the California Safe Drinking Water and Toxic Enforcement Act.
"Equity Equivalents" means securities (including Options to purchase any
shares of Company Capital Stock or Parent Common Stock, as applicable) which, by
their terms, are or may be exercisable, convertible or exchangeable for or into
common stock, preferred stock or other equity securities of the Company at the
election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" has the meaning ascribed to it in SECTION 2.14(A).
"Escrow Amount" means ten percent (10%) of the Aggregate Share Number less
the number of shares of Company Common Stock issuable pursuant to Company
Options assumed by Parent hereunder, as such number may be adjusted according to
the provisions of Section 7.2(c) and the number of shares that are subject to a
repurchase right by the Company.
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"Escrow Fund" has the meaning ascribed to it in SECTION 7.2(A).
"Escrow Period" has the meaning ascribed to it in SECTION 7.2(C).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder.
"Exchange Agent" means ChaseMellon Stockholder Services, L.L.C.
"Exchange Ratios" means the Common Stock Exchange Ratio and the Preferred
Stock Exchange Ratio.
"GAAP" means generally accepted accounting principles in the United States,
as in effect from time to time.
"General Expiration Date" means the earlier of the first anniversary of the
Closing Date or such time as financial results covering at least 30 days of the
combined operations of Parent and the Company after the Effective Time have been
filed with the SEC.
"Good Faith Consultation" with a Person's independent accountants, as used
in SECTION 3.8 of this Agreement, means consultation with such accountants
following disclosure in good faith to such accountants of all facts requested by
such accountants or which the specified Person otherwise had reason to believe
would be relevant to such accountants' assessment.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Material" means (a) any chemical, material, substance or waste
including, containing or constituting petroleum or petroleum products, solvents
(including chlorinated solvents), nuclear or radioactive materials, asbestos in
any form that is or could become friable, radon, lead-based paint, urea
formaldehyde foam insulation or polychlorinated biphenyls, (b) any chemicals,
materials, substances or wastes which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; or
(c) any other chemical, material, substance or waste which is regulated by any
Governmental or Regulatory Authority or which could constitute a nuisance.
"Income Tax" means any income, alternative or add-on minimum tax, gross
income, gross receipts, franchise, profits, including estimated taxes relating
to any of the foregoing, or other similar tax or other like assessment or charge
of similar kind whatsoever, excluding any Other Tax, together with any interest
and any penalty, addition to tax or additional amount imposed by any Taxing
Authority responsible for the imposition of any such Tax (domestic or foreign).
-52-
"Identified Risk" means those risks disclosed on SCHEDULE A.
"Indebtedness" of any Person means all obligations of such Person (a) for
borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Information Statement" has the meaning ascribed to it in SECTION 5.1(A).
"Intellectual Property" means all trademarks and trademark rights, trade
names and trade name rights, service marks and service xxxx rights, service
names and service name rights, patents and patent rights, utility models and
utility model rights, copyrights, mask work rights, brand names, trade dress,
product designs, product packaging, business and product names, logos, slogans,
rights of publicity, trade secrets, inventions (whether patentable or not),
invention disclosures, improvements, processes, formulae, industrial models,
processes, designs, specifications, technology, methodologies, computer software
(including all source code and object code), firmware, development tools, flow
charts, annotations, all Web addresses, sites and domain names, all data bases
and data collections and all rights therein, any other confidential and
proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to xxx for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files and other
media on which any of the foregoing is stored.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by any party.
"IRS" means the United States Internal Revenue Service or any successor
entity.
"Law" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, any foreign country, or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other liabilities of
a Person, whether absolute, accrued, contingent (or based upon any contingency),
known or unknown, fixed or otherwise, or whether due or to become due.
"License" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to xxx with respect to any Intellectual Property).
-53-
"Loss(es)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses (including lost profits or diminution in value), expenses,
reasonable expenses of investigation, court costs, reasonable fees and expenses
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and expenses
to include all fees and expenses, including fees and expenses of attorneys,
incurred in connection with the investigation or defense of any Third Party
Claims, net of insurance proceeds received by Parent or the Company (without any
adverse effect on premiums paid by Parent or the Company) or proceeds received
by Parent by virtue of third party indemnification or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"Material" or "material" means, with respect to any entity or group of
entities, any material event, change, condition or effect related to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business (as it is now conducted or presently proposed to
be conducted), prospects, operations or results of operations of such entity or
group of entities.
"Material Adverse Effect" means, with respect to any entity or group of
entities means any event, change or effect that is materially adverse to the
condition (financial or otherwise), properties, assets, liabilities, business
(as it is now conducted or presently proposed to be conducted), operations or
results of prospects, operations of such entity and its subsidiaries, taken as a
whole, PROVIDED that for purposes of SECTION 6.2(A) and SECTION 6.3(A), neither
of the following, in and of themselves, shall constitute a Material Adverse
Effect: (i) changes or effects which are primarily and directly caused by the
execution and delivery of this Agreement or the announcement of the transactions
contemplated hereby (it being understood that in any controversy concerning the
applicability of this clause (i) the party claiming the benefit of this clause
(i) shall have the burden of proof with respect to the elements of such clause),
and (ii) changes or effects which are primarily and directly caused by Parent's
refusal to consent to action requested to be taken by the Company which the
Company (at the time of such request) certified to Parent was necessary, in the
good faith judgment of the Company's Board of Directors, to avoid a Material
Adverse Effect on the Company.
"Merger" has the meaning ascribed to it in Recital A.
"Merger Sub" has the meaning ascribed to it in the preamble to this
Agreement
"NASD" means the National Association of Securities Dealers, Inc.
"New Shares" has the meaning ascribed to it in SECTION 7.2(D)(II).
"NNM" means the distinct tier of The Nasdaq Stock Market referred to as the
Nasdaq National Market.
"Non-Audit Representations" means all representations and warranties of the
Company contained in Article II hereof which are not Audit Representations.
"Non-Competition Agreement" has the meaning ascribed to it in SECTION
6.3(F).
-54-
"Officer's Certificate" has the meaning ascribed to it in SECTION
7.2(E)(I).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"Parent" has the meaning ascribed to it in the preamble to this Agreement.
"Parent Affiliate" has the meaning ascribed to it in SECTION 5.11.
"Parent Common Stock" has the meaning ascribed to it in Recital C.
"Parent Disclosure Schedule: means descriptions, exceptions and other
information and materials as are required to be included therein in connection
with the representations and warranties made by Parent in ARTICLE 3 of this
Agreement or otherwise.
"Parent Financial Statements" has the meaning ascribed to it in SECTION
3.3.
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Pooling of Interests" shall mean pooling of interests accounting treatment
under Accounting Principles Board Opinion No. 16.
"Preferred Share Number" has the meaning ascribed to it in SECTION 1.6.
"Preferred Stock Exchange Ratio" has the meaning ascribed to it in SECTION
1.6.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks and
-55-
servicemarks, applications to register trademarks and servicemarks,
intent-to-use applications, other registrations or applications to trademarks or
servicemarks, or trademarks or servicemarks in which common law rights are owned
or otherwise controlled; (iii) registered copyrights and applications for
copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Intellectual Property that is the subject
of an application, certificate, filing, registration or other document issued
by, filed with, or recorded by, any state, government or other public legal
authority.
"Representatives" has the meaning ascribed to it in SECTION 4.2.
"Restricted Stock Purchase Agreement" means a Restricted Stock Purchase
Agreement in one of the forms attached to the Company Stock Plan pursuant to
which the Company has sold Company Restricted Stock or as may otherwise been
entered into by the Company prior to the date of this Agreement.
"SEC" means the Securities and Exchange Commission or any successor entity.
"SEC Documents" means, with respect to any Person, each report, schedule,
form, statement or other document filed with the SEC by such Person pursuant to
Section 13(a) of the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Stockholders' Agent" has the meaning ascribed to it in SECTION 7.2(H)(I).
"Stockholder Certificate" has the meaning ascribed to it in SECTION 5.1(C).
"Software" has the meaning ascribed to it in SECTION 2.32.
"Subsidiary" means any Person in which the Company or Parent, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.
"Support Agreement" has the meaning ascribed to it in Recital D.
"Surviving Corporation" has the meaning ascribed to it in SECTION 1.1.
"Tax," "Taxes" and "Taxable" mean, as the context requires, (i) any Income
Tax and/or Other Tax; (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 any express or implied obligation to indemnify any other person.
"Tax Returns" means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with, or, where none is required to
be filed with a Taxing Authority, the statement or
-56-
other document issued by, a Taxing Authority in connection with any Tax,
estimated Tax Returns and reports, withholding Tax Returns and reports and
information reports and Returns required to be filed with respect to Taxes.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in SECTION 7.2(J).
"Third Party Expenses" has the meaning ascribed to it in SECTION 5.5.
"Third Party Intellectual Property Rights" has the meaning ascribed to it
in SECTION 2.11(B).
"Year 2000 Compliant" has the meaning ascribed to it in SECTION 2.32.
(b) Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender, (ii) words using the singular or plural
number also include the plural or singular number, respectively, (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement as a whole and not to any particular Article, Section or other
subdivision, (iv) the terms "Article" or "Section" or other subdivision refer to
the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
the Company, (vi) the words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation," and (vii) when a
reference is made in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP. The term "party" or "parties" when used herein refer to Parent and
Merger Sub, on the one hand, and the Company, on the other.
(c) When used herein, the phrase "to the knowledge of" any Person, "to
the best knowledge of" any Person, "known to" any Person or any similar phrase,
means (i) with respect to any Person who is an individual, the actual knowledge
of such Person, and (ii) with respect to any other Person, the actual knowledge
of the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as the officers and directors
of such Person, in each case after due and diligent inquiry of such directors,
officers and other individuals.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company, and with
respect to SECTION 2 only, Founder, and with respect to SECTION 7.2 only, the
Stockholders' Agent and the Depositary Agent, have caused this Agreement to be
signed by their duly authorized representatives, all as of the date first
written above.
PARENT: KANA COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
President and Chief Executive Officer
COMPANY: BUSINESS EVOLUTION, INC.
By:
-----------------------------------
Name:
President and Chief Executive Officer
MERGER SUB: KING ACQUISITION CORP.
By:
-----------------------------------
Name:
President and Chief Executive Officer
FOUNDER:
--------------------------------------
P.V. Kannan
DEPOSITARY AGENT: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Depositary Agent
By:
-----------------------------------
Its:
STOCKHOLDERS' AGENT:
By:
-----------------------------------
Xxxx Xxxxxxxx, as Stockholders' Agent
