Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.,
LIVEWIRE ACQUISITION CORPORATION,
▇▇▇▇▇▇▇▇.▇▇▇, INC.,
AND
THE PRINCIPAL STOCKHOLDER OF ▇▇▇▇▇▇▇▇.▇▇▇, INC.
November 19, 1999
TABLE OF CONTENTS
Page
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1. Certain Definitions.................................................................................. 2
2. The Merger........................................................................................... 6
2.1 Merger; Effective Time.......................................................................... 6
2.2 Closing......................................................................................... 6
2.3 Effect of the Merger............................................................................ 6
3. Effect of Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates;
Additional Payments.................................................................................. 6
3.1 Exchange of Stock; Rights to Additional Payments................................................ 6
3.2 Company Options................................................................................. 7
3.3 Conversion of Sub Common Stock.................................................................. 7
3.4 Adjustments to Parent Common Stock.............................................................. 8
3.5 Fractional Shares............................................................................... 8
3.6 Exchange of Certificates........................................................................ 8
3.7 Taking of Necessary Action; Further Action...................................................... 10
3.8 Escrow Account.................................................................................. 10
3.9 Dissenters' Rights.............................................................................. 10
3.10 Dissenting Shares After Payment of Fair Value................................................... 11
3.11 Tax and Accounting Consequences................................................................. 11
4. Securities Act Compliance............................................................................ 11
5. Representations and Warranties of the Company and Principal Stockholder.............................. 12
5.1 Organization, Qualification, and Corporate Power................................................ 12
5.2 Authorization................................................................................... 12
5.3 Capitalization.................................................................................. 12
5.4 Noncontravention................................................................................ 13
5.5 Fees............................................................................................ 14
5.6 Financial Statements............................................................................ 14
5.7 Subsidiaries.................................................................................... 14
5.8 Title to Assets................................................................................. 14
5.9 Events Subsequent to Most Recent Fiscal Period End.............................................. 15
5.10 Undisclosed Liabilities......................................................................... 17
5.11 Legal Compliance................................................................................ 17
5.12 Tax Matters..................................................................................... 17
5.13 Properties...................................................................................... 19
5.14 Intellectual Property........................................................................... 20
5.15 Tangible Assets................................................................................. 24
5.16 Contracts....................................................................................... 24
5.17 Notes and Accounts Receivable................................................................... 27
5.18 Power of Attorney............................................................................... 27
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TABLE OF CONTENTS
(continued)
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5.19 Insurance...................................................................................... 27
5.20 Litigation..................................................................................... 27
5.21 Restrictions on Business Activities............................................................ 28
5.22 Product Warranty............................................................................... 28
5.23 Employees...................................................................................... 28
5.24 Employee Matters and Benefits.................................................................. 28
5.25 Guaranties..................................................................................... 33
5.26 Environment, Health, and Safety................................................................ 33
5.27 Certain Business Relationships With the Company................................................ 34
5.28 No Adverse Developments........................................................................ 34
5.29 Full Disclosure................................................................................ 35
5.30 HSR............................................................................................ 35
6. Representations and Warranties of Parent and Sub.................................................... 35
6.1 Organization, Qualification, and Corporate Power............................................... 35
6.2 Authorization.................................................................................. 35
6.3 Capitalization................................................................................. 36
6.4 Noncontravention............................................................................... 36
6.5 Certain Proceedings............................................................................ 37
6.6 SEC Filings.................................................................................... 37
6.7 Suspension and Trading......................................................................... 37
6.8 No Material Adverse Change..................................................................... 37
6.9 Brokers' Fees.................................................................................. 37
7. Pre-Closing Covenants................................................................................ 37
7.1 General........................................................................................ 37
7.2 Notices and Consents........................................................................... 38
7.3 Operation of Business.......................................................................... 38
7.4 Access to Information.......................................................................... 38
7.5 Notice of Developments......................................................................... 38
7.6 Stockholder Approval........................................................................... 38
7.7 No Solicitation................................................................................ 39
7.8 Financial Schedules............................................................................ 40
7.9 Restated Financial Statements.................................................................. 40
8. Post-Closing Covenants............................................................................... 40
8.1 General........................................................................................ 40
8.2 Litigation Support............................................................................. 40
8.3 Confidentiality................................................................................ 40
8.4 FIRPTA Compliance.............................................................................. 41
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TABLE OF CONTENTS
(continued)
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8.5 Form S-8............................................................................. 41
8.6 Registration Statement............................................................... 41
8.7 Additional Documents and Further Assurances.......................................... 41
8.8 Tax Free Reorganization.............................................................. 41
9. Conditions to Obligations to Close.......................................................... 42
9.1 Conditions to Parent's and Sub's Obligation to Close................................. 42
9.2 Conditions to the Company's Obligations.............................................. 45
10. Survival of Representations, Warranties and Covenants; Stockholder Agent; Indemnity......... 46
10.1 Survival of Representations and Warranties........................................... 46
10.2 Stockholder Agent.................................................................... 46
10.3 Third-Party Claims................................................................... 47
10.4 Exclusive Remedy..................................................................... 47
11. Termination................................................................................. 48
11.1 Termination of the Agreement......................................................... 48
11.2 Effect of Termination................................................................ 49
11.3 Termination Fees and other Events.................................................... 49
12. Miscellaneous............................................................................... 51
12.1 Press Releases and Public Announcements.............................................. 51
12.2 No Third-Party Beneficiaries......................................................... 51
12.3 Entire Agreement and Modification.................................................... 51
12.4 Succession and Assignment............................................................ 51
12.5 Counterparts......................................................................... 51
12.6 Headings............................................................................. 51
12.7 Notices.............................................................................. 51
12.8 Governing Law........................................................................ 53
12.9 Forum Selection; Consent to Jurisdiction............................................. 53
12.10 Waivers.............................................................................. 53
12.11 Severability......................................................................... 53
12.12 Expenses............................................................................. 53
12.13 Construction......................................................................... 54
12.14 Company Disclosure Letter............................................................ 54
12.15 Attorneys' Fees...................................................................... 54
12.16 Further Assurances................................................................... 54
12.17 Time of Essence...................................................................... 54
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EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Form of Voting Agreement
Exhibit C-1 List of Persons signing Non-competition Agreements
Exhibit C-2 Form of Non-competition Agreement
Exhibit D-1 List of Persons signing Employment Agreements
Exhibit D-2 Form of Employment Agreement
Exhibit D-3 List of Persons signing Offer Letters
Exhibit D-4 Form of Offer Letters
Exhibit E Stockholder Certificate
Exhibit F Registration Rights Agreement
Exhibit G-1 List of Persons signing Non-Disclosure, Invention Release and
Non-Competition Agreements
Exhibit G-2 Form of Non-Disclosure, Invention Release and Non-Competition
Agreement
Exhibit H Opinion of Company Counsel
Exhibit I Form of Restricted Stock Agreement
Exhibit J Form of Release
Exhibit K Opinion of Parent Counsel
Exhibit L-1 Escrow and Indemnification Agreement
Exhibit L-2 Special Purpose Escrow Agreement
Exhibit M Form of Statement of Waiver
Exhibit N Form of Confidential Information and Invention Assignment
Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is entered into
as of November 19, 1999, by and among ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware
corporation ("Parent"), LiveWire Acquisition Corporation, a Delaware corporation
and wholly owned subsidiary of Parent ("Sub"), ▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware
corporation (the "Company") and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, an individual (the "Principal
Stockholder"). Parent, the Company, Sub and the Principal Stockholder are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties."
RECITALS
A. Pursuant to the Certificate of Merger in the form attached hereto as
Exhibit A (the "Certificate of Merger") providing for the merger of Sub with and
into the Company (the "Merger") pursuant to the Delaware General Corporation
Law, the shares of capital stock of the Company issued and outstanding
immediately prior to the Effective Time will be converted into shares of Common
Stock of Parent and all options to acquire capital stock of the Company will be
converted into rights to acquire Common Stock of Parent.
B. The Parties desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties and covenants made as an
inducement to the execution and delivery of this Agreement, and to serve as
conditions precedent to the consummation of the Merger.
C. The respective Boards of Directors of Parent, Sub and the Company have
approved and adopted this Agreement, and (i) the Agreement is intended to be a
plan of reorganization under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and (ii) the Merger is intended to be
accounted for as a purchase.
D. Concurrent with the execution of this Agreement, as a material
inducement to Parent and Sub, certain stockholders of the Company are entering
into voting agreements in the form of Exhibit B hereto (the "Voting Agreements")
non-competition agreements in the form of Exhibit C-2 hereto (the "Non-
Competition Agreements") and employment agreements in the form of Exhibit D-2
hereto (the "Employment Agreements").
E. A portion of the shares of Parent Common Stock otherwise issuable 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.
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
Parties do hereby agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa). Certain other terms are defined
in the text of this Agreement.
"Affiliate" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"Breach" of a representation, warranty, covenant, obligation, or other
provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any inaccuracy
in or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach or failure.
"Business Condition" means the current business, financial condition,
results of operations and assets of a corporate entity.
"Company Disclosure Letter" means the Company Disclosure Letter
delivered by the Company to the Parent concurrently with the execution and
delivery of this Agreement.
"Company Intellectual Property" means any Technology and Intellectual
Property Rights including the Company Registered Intellectual Property Rights
(as defined below) that are owned (in whole or in part) by or exclusively
licensed to the Company, including but not limited to the Intellectual Property
Rights and Technology listed in Section 5.14 of the Company Disclosure Letter.
"Company Stockholders" shall mean the stockholders of record of the
Company immediately prior to the Effective Time (other than the holders of
Dissenting Shares, if any).
"Contemplated Transactions" means all of the transactions contemplated
by this Agreement, including:
(a) the merger of Sub with the Company, the issuance by Parent of the
Parent Common Stock and Parent's acquisition and ownership of the Company and
exercise of control over the Company;
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(b) the execution, delivery, and performance of the Employment
Agreements, the Voting Agreements and the Non-Competition Agreements;
(c) the performance by Parent, the Company and Sub of their respective
covenants and obligations under this Agreement.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation, retirement plan, severance plan or similar plan or arrangement;
(b) Employee Pension Benefit Plan; (c) Employee Welfare Benefit Plan; and (d)
any other nonqualified plan providing welfare benefits, including but not
limited to medical, dental, life insurance and disability benefits.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Governmental Body" means any:
(a) nation, province, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, provincial, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Gross Negligence" consists of an intentional act, or the failure to
perform a duty, with reckless disregard for the consequences of such act or
failure.
"Intellectual Property Rights" any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and equivalent or similar rights anywhere in
the world in inventions and discoveries including without limitation invention
disclosures ("Patents"); (ii) all trade secrets and other rights in know-how and
confidential or proprietary information; (iii) all copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world ("Copyrights"); (iv) all mask works, mask work
registrations and applications
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therefor, and any equivalent or similar rights in semiconductor masks, layouts,
architectures or topology ("Maskworks"); (v) all industrial designs and any
registrations and applications therefor throughout the world; (vi) all rights in
World Wide Web addresses and domain names and applications and registrations
therefor; (vii) all trade names, logos, common law trademarks and service marks,
trademark and service ▇▇▇▇ registrations and applications therefor and all
goodwill associated therewith throughout the world ("Trademarks"); and (viii)
any similar, corresponding or equivalent rights to any of the foregoing anywhere
in the world.
"Knowledge" --an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
"Material Adverse Effect" shall mean a material adverse effect on the
Business Condition of the corporate entity and its subsidiaries, taken as a
whole, other than as a result of (i) general economic or industry conditions, or
(ii) performance by such corporate entity of its obligations under this
Agreement.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37) and
Code Sec. 414(f).
"Ordinary Course of Business" --an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising
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similar authority), in the ordinary course of the normal day-to-day operations
of other Persons that are in the same line of business as such Person.
"Parent SEC Reports" has the meaning set forth in Section 6.5.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Registered Intellectual Property Rights" all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including intent-to-
use applications, or other registrations or applications related to Trademarks;
(iii) Copyrights registrations and applications to register Copyrights; (iv)
Mask Work registrations and applications to register Mask Works; and (v) any
other Technology 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 or private legal authority at any time.
"Representatives" means, with respect to a Person, that Person's
officers, directors, employees, accountants, counsel, investment bankers,
financial advisors, stockholders and other representatives.
"Restated Financial Statements" has the meaning set forth in Section
7.9.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"SEC" means the United States Securities and Exchange Commission.
"Stockholder Agent" means ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ as agent and attorney-in-
fact for each of the Company Stockholders.
"Technology" shall mean any or all of the following: (i) works of
authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (ii)
inventions (whether or not patentable), improvements, and technology; (iii)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (iv) databases, data
compilations and collections and technical data; (v) logos, trade names, trade
dress, trademarks, service marks; (vi) World Wide Web addresses, domain names
and sites; (vii) tools, methods and processes; and (viii) all instantiations of
the foregoing in any form and embodied in any media.
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2. The Merger.
2.1 Merger; Effective Time. Subject to the terms and conditions of
this Agreement and the applicable provisions of the Delaware General Corporation
Law ("Delaware Law"), Sub will be merged with and into the Company (the
"Merger"), the separate existence of Sub shall cease and the Company shall
continue as the surviving corporation and as a wholly owned subsidiary of
Parent. In accordance with the provisions of this Agreement, the Certificate of
Merger shall be filed with the Delaware Secretary of State in accordance with
Delaware Law and each issued and outstanding share of capital stock, of the
Company ("Company Capital Stock"), shall be converted into shares of Common
Stock, $0.0001 par value, of Parent ("Parent Common Stock") in the manner
contemplated by Section 3. The Merger shall become effective at the time of the
acceptance of the Certificate of Merger by the Delaware Secretary of State (the
date of such acceptance being hereinafter referred to as the "Effective Date"
and the time of such acceptance being hereinafter referred to as the "Effective
Time").
2.2 Closing. The closing of the Merger (the "Closing") will take
place as soon as practicable after satisfaction or waiver of the latest to occur
of the conditions set forth in Section 9 (the "Closing Date"), at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2.3 Effect of the Merger. At the Effective Time, (i) the separate
existence of Sub shall cease and Sub shall be merged with and into the Company
(Sub and the Company are sometimes referred to herein as the "Constituent
Corporations" and the Company after the Merger is sometimes referred to herein
as the "Surviving Corporation"), (ii) the Certificate of Incorporation of Sub in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation; provided, however, that Article I of
the Certificate of Incorporation of the Surviving Corporation shall be amended
to read as follows: "The name of the corporation is ▇▇▇▇▇▇▇▇.▇▇▇, Inc.", (iii)
the Bylaws of Sub in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation, (iv) the directors of Sub shall be the
directors of the Surviving Corporation until their successors shall have been
duly elected and qualified, (v) the officers of Sub shall be the initial
officers of the Surviving Corporation until their successors have been duly
appointed and qualified, (vi) all shares of capital stock of Sub shall be
canceled, and (vii) the Merger shall, from and after the Effective Time, have
all the effects provided by applicable law.
3. Effect of Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates; Additional Payments.
3.1 Exchange of Stock; Rights to Additional Payments. As of the
Effective Time, each share of Company Capital Stock that is issued and
outstanding immediately prior to the Effective Time (other than shares, if any,
held by Persons exercising dissenters' rights in accordance with Delaware Law as
provided for in Section 3.9 below) shall, by virtue of the Merger and without
any action on the part of Company Stockholders, be converted into a number of
shares of Parent
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Common Stock based upon the Exchange Ratio (as defined below). The "Exchange
Ratio" for Parent Common Stock shall equal the quotient obtained by dividing the
Merger Consideration by the sum of (A) the total number of shares of Company
Capital Stock that are issued and outstanding immediately prior to the Effective
Time, (B) the total number of shares of Company Capital Stock issuable upon
conversion or exercise in full of all convertible securities or options (vested
and unvested), warrants or other rights to acquire Company Capital Stock that
are outstanding immediately prior to the Effective Time and (C) the total number
of shares reserved for future grant under the Company's 1999 Stock Plan. The
"Merger Consideration" shall equal the number of shares obtained by dividing
$25,000,000 by the average closing price of Parent Common Stock for the ten (10)
consecutive trading days prior to the date of this Agreement. The terms of the
rights of repurchase applicable to the outstanding shares of Company Capital
Stock under the Company's existing repurchase agreements will remain effective
with respect to such shares so that as a result of the Merger, these
stockholders will receive shares of Parent Common Stock subject to identical
rights of repurchase, except that the terms of such repurchase rights regarding
acceleration of vesting will not apply with respect to the Merger, other that
with respect to the shares held by ConsulTeam Corp.
3.2 Company Options. Prior to the Effective Time, the Company shall
issue options to purchase shares of the Company's Common Stock to the following
employees and in the following amounts: 50,000 shares of Common Stock to each of
Andiry ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Akhmetov, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ (the "Company Options"). The Company Options will be granted
pursuant to a stock option agreement in the form attached to the Company
Disclosure Letter. There are no other outstanding options or warrants to
purchase Company Capital Stock. At the Effective Time, each of the Company
Options will by virtue of the Merger, and without any further action on the part
of any holder thereof, be assumed by Parent and converted into an option to
purchase that whole number of shares of Parent Common Stock determined by
multiplying the number of shares of Company Capital Stock subject to such
Company Option at the Effective Time by the Exchange Ratio, at an exercise price
per share of Parent Common Stock equal to the exercise price per share of such
Company Option immediately prior to the Effective Time divided by the Exchange
Ratio, rounded up to the nearest cent. If the foregoing calculation results in
an assumed Company Option being exercisable for a fraction of a share of Parent
Common Stock, then the number of shares of Parent Common Stock subject to such
option will be rounded down to the nearest whole number of shares. The term,
exercisability, vesting schedule, vesting commencement date, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
other terms and conditions of the Company Options will otherwise be unchanged.
Continuous employment with the Company will be credited to an optionee of the
Company for purposes of determining the number of shares of Parent Common Stock
subject to exercise under an assumed Company Option after the Effective Time.
3.3 Conversion of Sub Common Stock. Each share of common stock,
$0.0001 par value, of Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, $0.0001 par value, of the
Surviving Corporation. Each stock certificate of Sub evidencing ownership
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of any such shares shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
3.4 Adjustments to Parent Common Stock. The number of shares of
Parent Common Stock issuable hereunder shall be adjusted to reflect fully the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock or
Company Capital Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock or Company Capital Stock occurring after the
date hereof.
3.5 Fractional Shares. No fractional shares of Parent Common Stock
shall be issued in the Merger. In lieu thereof, any fractional share shall be
rounded up to the nearest whole share of Parent Common Stock.
3.6 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Parent shall
appoint itself or ChaseMellon Shareholder Services, L.L.C., to act as the
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Parent Common Stock. Promptly after the
Effective Date, Parent shall make available for exchange in accordance with this
Section 3, through such reasonable procedures as Parent may adopt, the shares of
Parent Common Stock issuable pursuant to Section 3.1 in exchange for outstanding
shares of Company Capital Stock, other than the shares to be held in escrow
pursuant to Section 3.8 hereof.
(c) Exchange Procedures. Within ten (10) days after the Effective
Date, the Exchange Agent shall mail 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") whose shares
are being converted into the Merger Consideration pursuant to Section 3.1 hereof
(less any shares held in escrow pursuant to Section 3.8 hereof), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and which shall be in such form and have such
other provisions as Parent may reasonably specify, including appropriate
investment representations)(the "Letter of Transmittal") and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration (less any shares held in escrow pursuant to Section 3.8
hereof). 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 and a Stockholder Certificate in the form of Exhibit
E, duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the number of shares of Parent Common Stock (less any shares
held in escrow pursuant to Section 3.8 hereof) to which the holder of Company
Common Stock is entitled pursuant to Section 3.1 hereof. The Certificate so
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surrendered shall forthwith be canceled. No interest will accrue or be paid to
the holder of any outstanding Company Common Stock. From and after the
Effective Date, until surrendered as contemplated by this Section 3.6, each
Certificate shall be deemed for all corporate purposes to evidence the number of
shares of Parent Common Stock into which the shares of Company Common Stock
represented by such Certificate have been converted.
(d) No Further Ownership Rights in Capital Stock of the Company.
The Merger Consideration delivered upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof shall be deemed to
have been delivered in full satisfaction of all rights pertaining to such
Company Capital Stock. There shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of Company Capital Stock
which were outstanding immediately prior to the Effective Date. If, after the
Effective Date, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Section 3.6,
provided that the presenting holder is listed on the Company's stockholder list
as a holder of Company Capital Stock, except as otherwise provided in Section
3.6(f).
(e) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock.
(f) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(g) Lost, Stolen or Destroyed Certificates. In the event that any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock as may be required
pursuant to Section 3.1; provided, however, that Parent may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed
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certificates to 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.
(h) No Liability. Notwithstanding anything to the contrary in
this Section 3.6, none of the Exchange Agent, the Surviving Corporation or any
Party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
3.7 Taking of Necessary Action; Further Action. Parent, Sub and the
Company shall take all such actions as may be necessary or appropriate in order
to effect the Merger as promptly as possible. If, at any time after the
Effective Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of such corporation
are fully authorized in the name of the corporation or otherwise to take, and
shall take, all such action.
3.8 Escrow Account. The Parties agree that (i) ten percent (10%) of
the shares of Parent Common Stock to be issued to the Company Stockholders (the
"Escrow Amount") will, without any act of any stockholder of the Company, be
deposited with U.S. Bank Trust National Association (the "Escrow Agent"), such
deposit to constitute an escrow fund (the "Escrow Fund") Pursuant to the Escrow
and Indemnification Agreement among Parent, Sub, the Company, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and the Escrow Agent attached hereto as Exhibit L-1 (the "Escrow and
Indemnification Agreement") and (ii) twenty-five percent (25%) of the shares of
Parent Common Stock to be issued to the Company Stockholders ("Employee Escrow
Amount") will, without any act of any stockholder of the Company, be deposited
with the Escrow Agent, such deposit to constitute an escrow fund (the "Employee
Escrow Fund") pursuant to the Special Purpose Escrow Agreement among Parent,
Sub, the Company, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Escrow Agent attached hereto as
Exhibit L-2 (the "Special Purpose Escrow Agreement"). The portion of the Escrow
Amount and the Employee Escrow Amount contributed on behalf of each such Company
Stockholder shall be in proportion to the aggregate Merger Consideration which
such Company Stockholder would otherwise be entitled to receive. No shares of
Parent Common Stock shall be deposited in the escrow funds with respect to the
Company Options.
3.9 Dissenters' Rights.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with Delaware Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted into
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or represent a right to receive the Merger Consideration, but the holder thereof
shall only be entitled to such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration, without interest thereon, upon surrender of the
Certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands. To the extent that Parent or the Company makes any payment or payments
in respect of any Dissenting Shares, Parent shall be entitled to recover under
the terms of the Escrow and Indemnification Agreement (by surrender of shares of
Parent Common Stock) (i) the aggregate amount by which such payment or payments
exceed the aggregate Merger Consideration that otherwise would have been payable
in respect of such shares plus (ii) the aggregate fees and expenses (including
reasonable attorneys' fees and expenses) incurred by Parent or the Surviving
Corporation in connection with calculating, settling or litigating the amount
of, or making, any such payment.
3.10 Dissenting Shares After Payment of Fair Value. Dissenting Shares,
if any, after payments of fair value in respect thereto have been made to
dissenting stockholders of the Company pursuant to Delaware Law, shall be
canceled.
3.11 Tax and Accounting Consequences. It is intended by the Parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) qualify for accounting treatment as a purchase. Each Party has consulted
with its own tax advisors and accountants with respect to the tax and accounting
consequences, respectively, of the Merger.
4. Securities Act Compliance. The shares of Parent Common Stock issued
in connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), by reason of Rule 506 of Regulation D thereof and, as such, will
constitute "restricted securities" within the meaning of Rule 144 promulgated
thereunder. The certificates for the shares of Parent Common Stock to be issued
in the Merger 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. It is acknowledged and understood that Parent is relying
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upon certain written representations made by the Company Stockholders in the
Stockholder Certificates in substantially the form attached hereto as Exhibit E.
5. Representations and Warranties of the Company and Principal
Stockholder. Each of the Company and the Principal Stockholder, jointly and
severally, hereby represents and warrants to Parent that the statements
contained in this Section 5 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 5).
5.1 Organization, Qualification, and Corporate Power. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. The Company is duly authorized to conduct
business and is in good standing under the laws of each other jurisdiction where
such qualification is required. There is no state other than California in which
the Company owns any property or in which it has any employees, offices or
operations. The Company has full corporate power and authority, and has all
necessary licenses and permits, to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. Section 5.1 of
the Company Disclosure Letter lists the directors and officers of the Company.
The operations now being conducted by the Company have not been conducted under
any other name since its inception. The copies of the Company's Certificate of
Incorporation, Bylaws, minute books, stock transfer ledger and stock option
ledger which have been delivered to Parent are accurate, correct and complete as
of the date hereof and shall be as of the Effective Time.
5.2 Authorization. The Company has full power and authority to
execute and deliver this Agreement and all agreements and instruments delivered
pursuant hereto (the "Ancillary Agreements") to which it is a Party, and,
subject to receipt of the requisite approval of its stockholders, to consummate
the transactions contemplated hereunder and to perform its obligations hereunder
and no other proceedings on the part of the Company are necessary to authorize
the execution, delivery and performance of this Agreement and the Ancillary
Agreements to which the Company is a Party. This Agreement and the Ancillary
Agreements to which the Company is a Party and the Contemplated Transactions
have been approved by the unanimous vote of the Company's Board of Directors.
This Agreement and the Ancillary Agreements to which the Company is a Party
constitute the valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms and conditions.
Other than (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware.
5.3 Capitalization.
(a) Capital Stock. The entire authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock, of which (i) 9,650,000
are issued and outstanding and (ii) 350,000 are reserved for issuance under the
1999 Stock Plan. All of the issued and
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outstanding shares of capital stock have been duly authorized, are validly
issued, fully paid, non-assessable and were not issued in violation of any
preemptive rights, rights of first refusal, or any similar rights and are held
of record by the respective stockholders as set forth in Section 5.3(a) of the
Company Disclosure Letter. All of the outstanding shares of capital stock have
been offered, issued and sold by the Company in compliance with applicable
federal and state securities laws.
(b) No Other Rights or Agreements. Section 5.3(b) of the Company
Disclosure Letter lists all of the holders of options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights and other rights
that could require the Company to issue, sell or otherwise cause to become
outstanding any of its capital stock or other agreements or commitments of any
character to which Company is a Party relating to the issued or unissued capital
stock or other securities of Company, including, without limitation, any
agreement or commitment obligating Company to issue, deliver or sell, or cause
to be issued, delivered or sold, shares of capital stock or other securities of
Company or obligating Company to grant, extend or enter into any subscription,
option, warrant, right or convertible or exchangeable security, right of first
refusal, right to receive notification of the transactions contemplated hereby
or other similar agreement or commitment with respect to Company, or obligating
Company to make any payments pursuant to any stock based or stock related plan
or award, in each case other than any rights in favor of Parent or Sub (the
"Stock Rights"), and the number and class of shares of Company Capital Stock
subject to such Stock Rights. Except as set forth in Section 5.3(b) of the
Company Disclosure Letter, there are no other outstanding or authorized Stock
Rights. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Company.
Except as set forth in Section 5.3(b) of the Company Disclosure Letter, no terms
relating to the vesting or exercisability of any Stock Rights or restricted
shares of Company Capital Stock will be affected by the execution of the
Agreement or the consummation of the transactions contemplated hereby. There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of the Company. As of the Closing
Date, there will be (i) no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Company and
(ii) no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of the Company. As a result of the
Merger, Parent will be the sole beneficial owner of all outstanding Company
Capital Stock and all rights to acquire or receive any Company Capital Stock,
whether or not such Company Capital Stock is outstanding.
5.4 Noncontravention. Neither the execution and the delivery of
this Agreement by the Company nor the consummation of the Contemplated
Transactions will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is subject or any
provision of its Certificate of Incorporation or bylaws, or (B) except as set
forth in Schedule 5.4 of the Company Disclosure Letter, conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any Party the right to accelerate, terminate, modify, or cancel, or require
any notice or consent under, any agreement, contract, lease, license,
instrument, franchise,
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permit, mortgage, indenture or other arrangement to which the Company is a Party
or by which it is bound or to which any of its assets are subject (or result in
the imposition of any Security Interest upon any of its assets).
5.5 Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder, agent or attorney, with respect to
the transactions contemplated by this Agreement.
5.6 Financial Statements. Section 5.6 of the Company Disclosure
Letter contains the following financial statements (collectively the "Financial
Statements"): an unaudited balance sheet and statements of income and cash flows
(the "Most Recent Financial Statements") as of and for the period from inception
to September 30, 1999 (the "Most Recent Fiscal Period End") for the Company. The
Financial Statements, to the Company's Knowledge, (including the notes thereto)
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered thereby
and present fairly the financial condition of the Company as of such dates and
the results of operations of the Company for such periods; provided, however,
that the Financial Statements lack footnotes and certain other presentation
items and are subject to normal year end adjustments which will not be material
individually or in the aggregate. The Restated Financial Statements will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of the
Company as of such dates and the results of operations of the Company for such
periods; provided, however, that the Restated Financial Statements will lack
footnotes and certain other presentation items and are subject to normal year
end adjustments which will not be material individually or in the aggregate. The
Restated Financial Statements delivered pursuant to Section 7.9 will not differ
materially from the Financial Statements. The books of account of the Company
reflect as of the dates shown thereon all items of income and expenses, and all
assets, liabilities and accruals of the Company required to be reflected
therein.
5.7 Subsidiaries. The Company does not have, and never has had,
any subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
5.8 Title to Assets. Except as set forth in Section 5.8 of the
Company Disclosure Letter, the Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets (including, without
limitation, all Company Intellectual Property) used by it, located on its
premises, or shown on the balance sheet contained within the Most Recent
Financial Statements (the "Most Recent Balance Sheet") or acquired after the
date thereof, free and clear of all Security Interests whether absolute,
contingent or otherwise, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet. No
Person other than the Company will own at the time of the Closing any assets or
properties currently utilized in or necessary to the operations or business of
the Company or situated on any of the premises of the
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Company. There are no existing contracts, agreements, commitments or
arrangements with any Person to acquire any of the assets or properties of the
Company (or any interest therein) except for this Agreement.
5.9 Events Subsequent to Most Recent Fiscal Period End. Since the
Most Recent Fiscal Period End, there has not been any material adverse change in
the Business Condition of the Company. Without limiting the generality of the
foregoing and except as set forth in Section 5.9 of the Company Disclosure
Letter, since that date:
(a) the Company has not sold, leased, transferred, or assigned
any assets or properties, tangible or intangible, outside the Ordinary Course of
Business;
(b) the Company has not entered into, assumed or become bound
under or obligated by any agreement, contract, lease or commitment (collectively
a "Company Agreement") or extended or modified the terms of any Company
Agreement which (i) involves the payment of greater than $10,000 per annum or
which extends for more than one (1) year, (ii) involves any payment or
obligation to any Affiliate of the Company other than in the Ordinary Course of
Business, (iii) involves the sale of any material assets, or (iv) involves any
license of any Company Intellectual Property;
(c) no Party (including the Company) has accelerated, terminated,
made modifications to, or canceled any agreement, contract, lease, or license to
which the Company is a Party or by which it is bound and the Company has not
modified, canceled or waived or settled any debts or claims held by it, outside
the Ordinary Course of Business, or waived or settled any rights or claims of a
substantial value, whether or not in the Ordinary Course of Business;
(d) none of the assets of the Company, tangible or intangible,
has become subject to any Security Interest;
(e) the Company has not made any capital expenditures except in
the Ordinary Course of Business and not exceeding $10,000 in the aggregate of
all such capital expenditures;
(f) the Company has not made any capital investment in, or any
loan to, any other Person;
(g) the Company has not created, incurred, assumed, prepaid or
guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness;
(h) the Company has not granted any license or sublicense of any
rights under or with respect to any Company Intellectual Property;
-15-
(i) there has been no change made or authorized in the
Certificate of Incorporation or bylaws of the Company;
(j) there has not been (i) any change in the Company's authorized
or issued capital stock, (ii) any grant of any stock option or right to purchase
shares of capital stock of the Company, (iii) the issuance of any security
convertible into such capital stock, (iv) the grant of any registration rights,
(v) any purchase, redemption, retirement, or other acquisition by the Company of
any shares of any such capital stock or (vi) any declaration or payment of any
dividend or other distribution or payment in respect of shares of capital stock;
(k) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property in excess of $10,000
in the aggregate of all such damage, destruction and losses;
(l) the Company has not suffered any repeated, recurring or
prolonged shortage, cessation or interruption of communications, customer
access, supplies or utility services;
(m) the Company has not made any loan to, or entered into any
other transaction with, or paid any bonuses in excess of an aggregate of $10,000
to, any of its Affiliates, directors, officers, or employees or their
Affiliates, and, in any event, any such transaction was on fair and reasonable
terms no less favorable to the Company than would be obtained in a comparable
arm's length transaction with a Person which is not such a director, officer or
employee or Affiliate thereof;
(n) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(o) the Company has not granted any increase in the base
compensation of any of its directors or officers, or, except in the Ordinary
Course of Business, any of its employees;
(p) the Company has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, or employees (or
taken any such action with respect to any other Employee Benefit Plan);
(q) the Company has not made any other change in employment terms
for any of its directors or officers, and the Company has not made any other
change in employment terms for any other employees outside the Ordinary Course
of Business;
(r) the Company has not suffered any adverse change or any threat
of any adverse change in its relations with, or any loss or threat of loss of,
any of its major customers, distributors or partners;
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(s) the Company has not suffered any adverse change or any
threat of any adverse change in its relations with, or any loss or threat of
loss of, any of it major suppliers;
(t) the Company has not received notice and does not have
Knowledge of any actual or threatened labor trouble or strike, or any other
occurrence, event or condition of a similar character;
(u) the Company has not changed any of the accounting
principles followed by it or the method of applying such principles;
(v) the Company has not made a change in any of its banking or
safe deposit arrangements;
(w) the Company has not entered into any transaction other
than in the Ordinary Course of Business; and
(x) the Company has not become obligated to do any of the
foregoing.
5.10 Undisclosed Liabilities. The Company has no liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type (whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for taxes), except for that which
individually or in the aggregate (i) is reflected on the Most Recent Balance
Sheet or (ii) has arisen after the Most Recent Fiscal Period End in the Ordinary
Course of Business.
5.11 Legal Compliance. To the Company's Knowledge, the Company has
complied with all material applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof). No
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, notice or inquiry has been filed or commenced against the Company by any
governmental body alleging any failure to so comply. The Company has all
licenses, permits, approvals, registrations, qualifications, certificates and
other governmental authorizations that are necessary for the operations of the
Company as they are presently conducted.
5.12 Tax Matters.
(a) For purposes of this Agreement, (i) "Tax" or,
collectively, "Taxes", means (i) any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts; (ii) any liability for the payment of any amounts of the type
described in clause (i) as a result of being or ceasing to be a member of an
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affiliated, consolidated, combined or unitary group for any period (including,
without limitation, any liability under Treas. Reg. Section 1.1502-6 or any
comparable provision of foreign, state or local law); and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Except as set forth in Section 5.12(b) of the Company
Disclosure Letter, the Company has filed all reports and returns with respect to
any Taxes ("Tax Returns") that it was required to file. All such Tax Returns
were correct and complete in all respects and have been completed in accordance
with applicable law and were prepared in accordance with the applicable
statutes, rules and regulations. No such Tax Returns are currently the subject
of audit or examination nor has the Company been notified of any request for an
audit or examination. All Taxes owed by the Company (whether or not shown on any
Tax Return) were paid in full when due or are being contested in good faith and
are supported by adequate reserves on the Most Recent Financial Statements. The
Company has provided adequate reserves on its Financial Statements for the
payment of any taxes accrued but not yet due and payable. The Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return, and the Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(c) There is no dispute, claim or proposed adjustment concerning
any Tax liability of the Company either (A) claimed or raised by any authority
in writing or (B) based upon personal contact with any agent of such authority.
The Company is not a Party to nor has it been notified that it is the subject of
any pending, proposed or threatened action, investigation, proceeding, audit,
claim or assessment by or before the Internal Revenue Service or any other
governmental authority and no claim for assessment, deficiency or collection of
Taxes, or proposed assessment, deficiency or collection from the Internal
Revenue Service or any other governmental authority which has not been
satisfied, nor does the Company have any reason to believe that any such notice
will be received in the future. The Internal Revenue Service has never audited
any federal income tax return of the Company. The Company has not filed any
requests for rulings with the Internal Revenue Service. No power of attorney has
been granted by the Company or any of its Affiliates with respect to any matter
relating to Taxes of the Company. There are no tax liens of any kind upon any
property or assets of the Company, except for inchoate liens for taxes not yet
due and payable.
(d) The Company has not filed a consent under Sec. 341(f) of the
Code concerning collapsible corporations. The Company has not made any payments,
is not obligated to make any payments, and is not a Party to any agreement that
under any circumstances could obligate it to make any payments as a result of
the consummation of the Merger that will not be deductible under Code Sec. 280G.
The Company has not been a United States real property holding corporation
within the meaning of Code Sec. 897(c)(2) during the applicable period specified
in Code Sec. 897(c)(1)(A)(ii). The Company is not a Party to any tax allocation
or sharing agreement. The
-18-
Company (A) has not been a member of any affiliated group within the meaning of
Code Sec. 1504 or any similar group defined under a similar provision of state,
local, or foreign law (an "Affiliated Group") filing a consolidated federal
Income Tax Return (other than a group the common parent of which was the
Company) and (B) has no liability for the taxes of any Person (other than any of
the Company) under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise. The Company has not requested or received a ruling from any taxing
authority or signed a closing agreement with any taxing authority. No claim has
ever been made by a taxing authority in a jurisdiction where the Company does
not file Tax returns that the Company is or may be subject to taxation by such
jurisdiction.
(e) The unpaid Taxes of the Company (A) did not, as of the
Most Recent Fiscal Period End, exceed by any amount the reserve for Tax
liability (other than any reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B) will not
exceed that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the Company in
filing its Tax Returns.
5.13 Properties.
(a) The Company does not currently own and has never
previously owned any real property.
(b) Section 5.13 of the Company Disclosure Letter lists and
describes briefly all real property leased or subleased to the Company. The
Company has delivered to Parent correct and complete copies of the leases and
subleases (as amended to date) listed in Section 5.13 of the Company Disclosure
Letter. With respect to each lease and sublease listed in Section 5.13 of the
Company Disclosure Letter:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all respects against the Company
and, to the Company's Knowledge, the other Parties thereto;
(ii) neither the Company nor, to the Company's
Knowledge, any other Party thereto is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(iii) neither the Company nor, to the Company's
Knowledge, any other Party thereto has repudiated any provision thereof;
(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease: and
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(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold.
5.14 Intellectual Property
(a) Section 5.14 (a) of the Company Disclosure Letter lists all
rights to Company Intellectual Property, including but not limited to,
Registered Intellectual Property Rights owned by, filed in the name of, or
applied for, by the Company (the "Company Registered Intellectual Property
Rights") and lists any proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property Rights or Company Intellectual Property.
(b) Each item of Company Registered Intellectual Property
Rights is valid and subsisting, and all necessary registration, maintenance and
renewal fees in connection with such Company Registered Intellectual Property
Rights have been paid and all necessary documents and certificates in connection
with such Company Registered Intellectual Property Rights have been filed with
the relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property Rights. There are no actions
that must be taken by the Company within one hundred twenty (120) days of the
Closing Date, including the payment of any registration, maintenance or renewal
fees or the filing of any responses to PTO office actions, documents,
applications or certificates for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any Registered Intellectual Property
Rights. In each case in which the Company has acquired any Technology or
Intellectual Property Right from any person, the Company or such Subsidiary has
obtained a valid and enforceable assignment sufficient to irrevocably transfer
all rights in such Technology and the associated Intellectual Property Rights
(including the right to seek past and future damages with respect thereto) to
the Company. To the maximum extent provided for by, and in accordance with,
applicable laws and regulations, the Company has recorded each such assignment
of a Registered Intellectual Property Right assigned to the Company with the
relevant Governmental Body, including the PTO, the U.S. Copyright Office, or
their respective equivalents in any relevant foreign jurisdiction, as the case
may be. The Company has not claimed a particular status, including "Small
Business Status," in the application for any Intellectual Property Rights, which
claim of status was not at the time made, or which has since become, inaccurate
or false or that will no longer be true and accurate as a result of the Closing.
(c) The Company has no knowledge of any facts or circumstances
that would render any Company Intellectual Property invalid or unenforceable.
Without limiting the foregoing, Company knows of no information, materials,
facts, or circumstances, including any information or fact that would constitute
prior art, that would render any of the Company Registered Intellectual Property
Rights invalid or unenforceable, or would adversely effect any pending
application for any Company Registered Intellectual Property Right and the
Company has not
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misrepresented, or failed to disclose, and has no knowledge of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Registered Intellectual Property Right that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Company Registered
Intellectual Property Right.
(d) Each item of Company Intellectual Property is free and clear
of any Security Interests except for non-exclusive licenses granted to end-user
customers in the Ordinary Course of Business. The Company is the exclusive owner
or exclusive licensee of all Company Intellectual Property. Without limiting the
foregoing: (i) the Company is the exclusive owner of all Trademarks used in
connection with the operation or conduct of the business of the Company,
including the sale, licensing, distribution or provision of any products or
services by the Company; (ii) the Company owns exclusively, and has good title
to, all Copyrighted Works that are products of the Company or which the Company
otherwise purports to own; and (iii) to the extent that any Patents would
otherwise be infringed by any product or services of the Company, such Patents
constitute Company Intellectual Property.
(e) All Company Intellectual Property will be fully
transferable, alienable or licensable by Surviving Corporation and/or Parent
without restriction and without payment of any kind to any third party.
(f) To the extent that any Company Technology has been developed
or created by a third party for the Company, the Company has a written agreement
with such third party with respect thereto and the Company thereby either (i)
has obtained ownership of, and is the exclusive owner of, or (ii) has obtained a
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted) to all such third party's Intellectual Property
Rights in such Technology by operation of law or by valid assignment, to the
fullest extent it is legally possible to do so.
(g) With exception of "shrink-wrap" or similar widely-available
commercial end-user licenses, all Technology used in or necessary to the conduct
of Company's business as presently conducted or currently contemplated to be
conducted by the Company was written and created solely by either (i) employees
of the Company acting within the scope of their employment or (ii) by third
parties who have validly and irrevocably assigned all of their rights, including
Intellectual Property Rights therein, to the Company, and no third party owns or
has any rights to any of the Company Intellectual Property.
(h) All employees and consultants of the Company and VisualTek
Solutions, Inc. ("VisualTek") listed on Section 5.14(h) of the Company
Disclosure Letter will have entered into a valid and binding written agreement
with VisualTek before the Closing Date, sufficient to vest title in VisualTek of
all Technology, including all accompanying Intellectual Property Rights,
-21-
created by such employee or consultant in the scope of his or her services or
employment for the Company and VisualTek.
(i) The Company has taken all steps that are reasonably required
to protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other person to the Company. Without limiting the
foregoing, the Company has, and enforces, a policy requiring each employee,
consultant and contractor to execute a proprietary information, confidentiality
and assignment agreement, substantially in the form attached hereto as Section
5.14(i) of the Company Disclosure Letter, and all current and former employees,
consultants and contractors of the Company have executed such an agreement.
(j) No person who has licensed Technology or Intellectual
Property Rights to the Company has ownership rights or license rights to
improvements made by the Company in such Technology or Intellectual Property
Rights.
(k) The Company has not transferred ownership of, or granted any
exclusive license of or right to use, or authorized the retention of any
exclusive rights to use or joint ownership of, any Technology or Intellectual
Property Right that is or was Company Intellectual Property, to any other
person.
(l) Other than inbound "shrink-wrap" and similar publicly
available commercial binary code end-user licenses and outbound "shrink-wrap"
licenses in the form set forth on Section 5.14(l) of the Company Disclosure
Letter, the contracts, licenses and agreements listed in Section 5.14(l) of the
Company Disclosure Letter lists all contracts, licenses and agreements to which
the Company is a party with respect to any Technology or Intellectual Property
Rights. The Company is not in breach of nor has the Company failed to perform
under, any of the foregoing contracts, licenses or agreements and, to the
Company's knowledge, no other party to any such contract, license or agreement
is in breach thereof or has failed to perform thereunder.
(m) There are no material contracts, licenses and agreements
between the Company and any other person wherein or whereby the Company has
agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse,
hold harmless, guaranty or otherwise assume or incur any obligation or liability
or provide a right of rescission with respect to the infringement or
misappropriation by the Company or such other person of the Intellectual
Property Rights of any person other than the Company.
(n) To the knowledge of the Company, there are no contracts,
licenses or agreements between the Company and any other person with respect to
Company Intellectual Property under which there is any dispute regarding the
scope of such agreement, or performance under such agreement, including with
respect to any payments to be made or received by the Company thereunder.
-22-
(o) The operation of the business of the Company as it currently
is conducted or is contemplated to be conducted by the Company, including but
not limited to the design, development, use, import, branding, advertising,
promotion, marketing, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company does not and will not and will not when conducted by
Parent and/or Surviving Corporation in substantially the same manner following
the Closing, infringe or misappropriate any Intellectual Property Right of any
person, violate any right of any person (including any right to privacy or
publicity) or constitute unfair competition or trade practices under the laws of
any jurisdiction, and the Company has not received notice from any person
claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates any Intellectual Property Right of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction (nor does the Company have knowledge of any basis therefor).
(p) To the Company's knowledge, no person is infringing or
misappropriating any Company Intellectual Property Right.
(q) No Company Intellectual Property or service of the Company
is subject to any proceeding or outstanding decree, order, judgment or
settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(r) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company, or (iii) conduct
or statement of the Company constitutes obscene material, a defamatory statement
or material, false advertising or otherwise violates in any material respect any
law or regulation.
(s) The Company Intellectual Property constitutes all the
Technology and Intellectual Property Rights used in and/or necessary to the
conduct of the business of the Company as it currently is conducted, and, to the
knowledge of the Company, as it is currently planned or contemplated to be
conducted by the Company, including, without limitation, the design,
development, manufacture, use, import and sale of products, technology and
performance of services (including products, technology or services currently
under development).
(t) Neither this Agreement nor the transactions contemplated by
this Agreement, including the assignment to Parent or Surviving Corporation, by
operation of law or otherwise, of any contracts or agreements to which the
Company is a party, will result in (i) either Parent's or the Surviving
Corporation's granting to any third party any right to or with respect to any
Technology or Intellectual Property Right owned by, or licensed to, either of
them, (ii) either the Parent's or the Surviving Corporation's being bound by, or
subject to, any non-compete or other restriction on the operation or scope of
their respective businesses, or (iii) either the Parent's or the
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Surviving Corporation's being obligated to pay any royalties or other amounts to
any third party in excess of those payable by Parent or Surviving Corporation,
respectively, prior to the Closing.
(u) There are no royalties, fees, honoraria or other payments
payable by the Company to any person or entity by reason of the ownership,
development, use, license, sale or disposition of the Company Intellectual
Property, other than salaries and sales commissions paid to employees and sales
agents in the Ordinary Course of Business.
(v) To the Company's Knowledge, all of the Company's products
(including products currently under development): (i) will record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent on or relating to such dates
(collectively, "Year 2000 Compliant"); and (ii) will lose no functionality with
respect to the introduction of records containing dates falling on or after
January 1, 2000. To the Company's Knowledge, all of the Company's Information
Technology (as defined below) is Year 2000 Compliant, and will not cause an
interruption in the ongoing operations of the Company's business on or after
January 1, 2000. For purposes of the foregoing, the term "Information
Technology" shall mean and include all software, hardware, firmware,
telecommunications systems, network systems, embedded systems and other systems,
components and/or services (other than general utility services including gas,
electric, telephone and postal) that are owned or used by the Company in the
conduct of its business, or purchased by the Company from third party suppliers.
5.15 Tangible Assets. To the Company's Knowledge, the buildings,
equipment, and other tangible assets that the Company owns and leases have been
maintained in accordance with normal industry practice, and are in good
operating condition and repair (subject to normal wear and tear) and are usable
in the Ordinary Course of Business.
5.16 Contracts. Section 5.16 of the Company Disclosure Letter lists
the following written or oral contracts, agreements, commitments and other
arrangements to which the Company is a Party or by which the Company or any of
its assets is bound, and lists or describes all contracts, agreements,
commitments, and arrangements relating to the conduct of the business of the
Company to which VisualTek is a party and the Company is not:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person that involves aggregate annual
payments of more than $10,000;
(b) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Company;
-24-
(c) any agreement (or group of related agreements) for the
purchase or sale of commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance of which will
extend over a period of more than one year or involve consideration in excess of
$10,000;
(d) any agreement for the purchase of supplies, components,
products or services from single source suppliers, custom manufacturers or
subcontractors that involves aggregate annual payments of more than $10,000;
(e) any agreement concerning a partnership or joint venture;
(f) any agreement (or group of related agreements) under which
the Company has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or any capitalized lease obligation in excess of $10,000 or under
which a Security Interest has been imposed on any of the Company's assets,
tangible or intangible;
(g) any agreement to which the Company is a party and which
contains covenants of the Company not to compete or engage in any line of
business, in any geographic area or with any person or covenants of any other
person not to compete with the Company or engage in any line of business of the
Company;
(h) any agreement with any Company Stockholder or any of such
stockholder's Affiliates (other than the Company) or with any Affiliate of the
Company;
(i) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers or employees;
(j) any collective bargaining agreement;
(k) any agreement for the employment (other than employment
agreements that are terminable at will by the Company without payment of any
penalty or severance benefit) of any individual on a full-time, part-time,
consulting, or other basis;
(l) any executory agreement under which the Company has advanced
or loaned any amount to any of its directors, officers, and employees;
(m) any advertising services, e-commerce or other agreement
involving the promotion of products and services of third parties by the
Company;
(n) any executory agreement pursuant to which the Company is
obligated to provide maintenance, support or training for its services or
products;
-25-
(o) any revenue or profit participation agreement which involves
aggregate annual payments of more than $10,000;
(p) any license, agreement or other permission which the Company
or any Affiliate of the Company has granted to any third party with respect to
any of the Intellectual Property used in the Company's business;
(q) any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or services that contains an escalation clause
or that obligates the Company to purchase all or substantially all of its
requirements of a particular product or service from a supplier or to make
periodic minimum purchases of a particular product or service from a supplier,
which is not terminable on not more than 30 days notice (without penalty or
premium);
(r) any agreement of surety, guarantee or indemnification, other
than agreements in the Ordinary Course of Business with respect to obligations
in an aggregate amount not in excess of $10,000;
(s) any agreement with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements;
(t) any agreement obligating the Company to deliver maintenance
services or future product enhancements or containing a "most favored nation"
pricing clause;
(u) any agreement obligating the Company to provide source code
to any third party for any Company Intellectual Property;
(v) any agreement granting an exclusive license to any Company
Intellectual Property or granting any exclusive distribution rights;
(w) any agreement relating to the acquisition by the Company of
any operating business or the capital stock of any other person;
(x) any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee (other than
arrangements to pay commissions or fees to employees in the Ordinary Course of
Business); and
(y) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000 or which is
expected to continue for more than one (1) year from the date hereof.
The Company has delivered to Parent a correct and complete copy of each written
agreement (as amended to date) listed in Section 5.16 of the Company Disclosure
Letter and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 5.16 of the
-26-
Company Disclosure Letter. With respect to each such agreement: (A) the
agreement, with respect to the Company and, to the Company's Knowledge, all
other parties thereto, is legal, valid, binding, enforceable, and in full force
and effect in all respects; (B) neither the Company nor, to the Company's
Knowledge, any other Party is in breach or default, and no event has occurred,
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; (C) no
Party has repudiated any provision of the agreement; and (D) the Company does
not have any reason to believe that the service called for thereunder cannot be
supplied in accordance with its terms and without resulting in a loss to the
Company. The Company has obtained or will obtain prior to the Closing Date, all
necessary consents, waivers and approvals of Parties to any such agreement as
are required thereunder in connection with the Merger or to remain in effect
without modification after the Closing. Following the Effective Time, the
Company will be permitted to exercise all of the Company's rights under such
agreements to the same extent the Company would have been able to had the Merger
not occurred and without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which the Company would otherwise
be required to pay.
5.17 Notes and Accounts Receivable. All notes and accounts
receivable of the Company, all of which are reflected properly on the books and
records of the Company, are valid receivables subject to no setoffs, defenses or
counterclaims, are current and, to the Company's Knowledge, collectible subject
in each case only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the Company.
5.18 Power of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
5.19 Insurance. The Company has delivered to Parent copies of each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) with
respect to which the Company is a Party, a named insured, or otherwise the
beneficiary of coverage. With respect to each such insurance policy: (A) the
policy is legal, valid, binding, enforceable, and in full force and effect (and
there has been no notice of cancellation or nonrenewal of the policy received);
(B) neither the Company nor any other Party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; (C) no Party to the policy has repudiated any
provision thereof; and (D) there has been no failure to give any notice or
present any claim under the policy in due and timely fashion. Section 5.19 of
the Company Disclosure Letter describes any self-insurance arrangements
presently maintained by the Company.
5.20 Litigation. There is no instance in which the Company (or any
of its assets) (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is or has been since its inception a Party,
or, to the Knowledge of the Company, is threatened to be made a
-27-
Party, to any action, suit, proceeding, hearing, arbitration, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. To the
Knowledge of the Company, there are no facts or circumstances which would form
the basis of any claim against the Company.
5.21 Restrictions on Business Activities. There is no agreement (not
to compete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a Party or which is otherwise binding upon the Company
which has the effect of prohibiting or restricting any business or any
acquisition of property (tangible or intangible) by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its technology (including any Company Intellectual Property)
or products to or providing services to, customers or potential customers or any
class of customers, in any geographic area, or in any segment of the market.
5.22 Product Warranty. To the Company's Knowledge, the technologies
or products licensed, sold, leased, and delivered and all services provided by
the Company have conformed in all material respects with all applicable
contractual commitments and all express and implied warranties, and the Company
has no liability (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) for replacement or modification thereof or
other damages in connection therewith, other than in the Ordinary Course of
Business in an aggregate amount not exceeding $10,000.
5.23 Employees. No executive, key employee, or significant group of
employees has advised any executive officer of the Company that he, she or they
plan to terminate employment with the Company during the next 12 months. The
Company is not a Party to or bound by any collective bargaining agreement, nor
has it experienced any strike or grievance, claim of unfair labor practices, or
other collective bargaining dispute. To the Company's Knowledge, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
5.24 Employee Matters and Benefits
. (a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 5.24(a)(i) below (which definition shall apply
only to this Section 5.24), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder;
-28-
(ii) "Code" shall mean the Internal Revenue Code of 1986,
as amended, or any successor statute thereto;
(iii) "Company Employee Plan" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation;
(iv) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(v) "DOL" shall mean the Department of Labor;
(vi) "Employee" shall mean any current or former
employee, consultant or director of the Company or any Affiliate;
(vii) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between the
Company or any Affiliate and any Employee;
(viii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(x) "International Employee Plan" shall mean each
Company Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "Multiemployer Plan" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan," as defined in Section 3(37)
of ERISA;
(xiii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
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(xiv) "Pension Plan" shall mean each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.
(b) Schedule. Section 5.24(b) of the Company Disclosure Letter
contains an accurate and complete list of each Company Employee Plan and each
Employee Agreement under each Company Employee Plan or Employee Agreement. The
Company does not have any plan or commitment to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement.
(c) Documents. The Company has provided to Parent: (i) correct
and complete copies of all documents embodying each Company Employee Plan and
each Employee Agreement including (without limitation) all amendments thereto
and all related trust documents; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the three (3)
most recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Company Employee Plan; (iv) if the Company Employee Plan is
funded, the most recent annual and periodic accounting of Company Employee Plan
assets; (v) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to or
from the IRS or the DOL with respect to any such application or letter; (vii)
all material written agreements and contracts relating to each Company Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii) all communications
material to any Employee or Employees relating to any Company Employee Plan and
any proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to the Company; (ix) all correspondence to or from any
governmental agency relating to any Company Employee Plan; (x) all COBRA forms
and related notices; (xi) all policies pertaining to fiduciary liability
insurance covering the fiduciaries for each Company Employee Plan; (xii) all
discrimination tests for each Company Employee Plan for the most recent plan
year; and (xiii) all registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared in connection with each Company
Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed in
all material respects all obligations required to be performed by it under, is
not in default or violation of, and has no Knowledge of any default or violation
by any other Party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA or the Code; (ii) each
Company Employee Plan
-30-
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Plan as to its qualified status under the Code, including
all amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Company Employee Plan; (iii) no "prohibited transaction,"
within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 408 of ERISA, has occurred with respect
to any Company Employee Plan; (iv) there are no actions, suits or claims
pending, or, to the Knowledge of the Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to the
Parent, Company or any of its Affiliates (other than ordinary administration
expenses); (vi) there are no audits, inquiries or proceedings pending or, to the
Knowledge of the Company or any Affiliates, threatened by the IRS or DOL with
respect to any Company Employee Plan; and (vii) neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plan. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any
Affiliate contributed to or been obligated to contribute to any Multiemployer
Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
Person for any reason, except as may be required by COBRA or other applicable
statute, and the Company has never represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) or any other Person that such Employee(s) or other Person would be
provided with retiree life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute.
(h) COBRA etc. Neither the Company nor any Affiliate has, prior
to the Effective Time and in any material respect, violated any of the health
care continuation requirements of COBRA, the requirements of FMLA, the
requirements of the Women's Heath and Cancer Rights Act, the requirements of the
Newborns' and Mothers' Health Protection Act of 1996, or any similar provisions
of state law applicable to its Employees.
(i) Effect of Transaction.
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(i) Except as set forth on Section 5.24(i) of the Company
Disclosure Letter, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by the
Company or its Affiliates with respect to any Employee as a result of the
transactions contemplated by this Agreement or otherwise will be characterized
as a "parachute payment," within the meaning of Section 280G(b)(2) of the Code
(but without regard to clause (ii) thereof).
(j) Employment Matters. The Company: (i) to its Knowledge, is in
compliance in all respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any taxes
or any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund governed by or maintained by
or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened or
reasonably anticipated claims or actions against the Company under any worker's
compensation policy or long-term disability policy.
(k) Labor. No work stoppage or labor strike against the Company is
pending, threatened or reasonably anticipated. The Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
Knowledge of the Company, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to the Company. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. The Company is not presently, nor
has it been in the past, a Party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company.
(l) International Employee Plan. The Company does not now, nor has it
ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
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5.25 Guaranties. The Company is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
5.26 Environment, Health, and Safety
(a) For purposes of this Agreement, the following terms have
the following meanings:
"Environmental, Health, and Safety Laws" means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, plans, injunctions, judgments, decrees, requirements or
rulings now or hereafter in effect, imposed by any governmental authority
regulating, relating to, or imposing liability or standards of conduct relating
to pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
public health and safety, or employee health and safety, concerning any
Hazardous Materials or Extremely Hazardous Substances, as such terms are defined
herein, or otherwise regulated, under any Environmental, Health and Safety Laws.
The term "Environmental, Health and Safety Laws" shall include, without
limitation, the Clean Water Act (also known as the Federal Water Pollution
Control Act), 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section
136 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986,
Public Law 99-4, 99, 100 Stat. 1613, the Emergency Planning and Community Right
to Know Act, 42 U.S.C. Section 11001 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., and the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq., all as amended, together with any
amendments thereto, regulations promulgated thereunder and all substitutions
thereof.
"Extremely Hazardous Substance" means a substance on the list
described in Section 302 (42 U.S.C. Section 11002(a)(2)) of the Emergency
Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et seq., as
amended.
"Hazardous Material" means any material or substance that,
whether by its nature or use, is now or hereafter defined as a pollutant,
dangerous substance, toxic substance, hazardous waste, hazardous material,
hazardous substance or contaminant under any Environmental, Health and Safety
Laws, or which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and which is now or
hereafter regulated under any Environmental, Health and Safety Laws, or which is
or contains petroleum, gasoline, diesel fuel or other petroleum hydrocarbon
product.
(b) To the Company's Knowledge, each of the Company and its
predecessors and Affiliates (A) has complied with the Environmental, Health, and
Safety Laws (and
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no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, directive or notice has been filed or commenced against any of them
alleging any such failure to comply), (B) has obtained and been in substantial
compliance with all of the terms and conditions of all permits, licenses,
certificates and other authorizations which are required under the
Environmental, Health, and Safety Laws, and (C) has complied in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in the Environmental, Health, and Safety Laws.
(c) The Company has no liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), and none of the Company and its predecessors and Affiliates has handled or
disposed of any Hazardous Materials or Extremely Hazardous Substances, arranged
for the disposal of any Hazardous Materials or Extremely Hazardous Substances,
exposed any employee or other individual to any Hazardous Materials or Extremely
Hazardous Substances, or owned or operated any property or facility in any
manner that could give rise to any liability, for damage to any site, location,
surface water, groundwater, land surface or subsurface strata, for any illness
of or personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(d) To the Company's Knowledge, no Extremely Hazardous
Substances are currently, or have been, located at, on, in, under or about all
properties and equipment used in the business of the Company and its
predecessors and Affiliates.
(e) To the Company's Knowledge, no Hazardous Materials are
currently located at, on, in, under or about all properties and equipment used
in the business of the Company and its predecessors and Affiliates in a manner
which violates any Environmental, Health and Safety Laws or which requires
cleanup or corrective action of any kind under any Environmental, Health and
Safety Laws.
5.27 Certain Business Relationships With the Company. To the
Company's Knowledge, neither the stockholders of the Company nor any director or
officer of the Company, nor any member of their immediate families, nor any
Affiliate of any of the foregoing, owns, directly or indirectly, or has an
ownership interest in (a) any business (corporate or otherwise) which is a Party
to, or in any property which is the subject of, any business arrangement or
relationship of any kind with the Company, or (b) any business (corporate or
otherwise) which conducts the same business as that conducted by the Company.
5.28 No Adverse Developments. There is no development (exclusive of
general economic factors affecting business in general or the Internet sector in
particular) or, to the Company's Knowledge, threatened development affecting the
Company (or affecting customers, suppliers, employees, and other Persons which
have relationships with the Company) that (i) is having or is reasonably likely
to have a Material Adverse Effect on the Company, or (ii) would prevent
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Parent from conducting the business of the Surviving Corporation following the
Closing in the manner in which it was conducted by the Company prior to the
Closing.
5.29 Full Disclosure. No representation or warranty in this
Section 5 or in any document delivered by the Company or its Representatives
pursuant to the transactions contemplated by this Agreement, and no statement,
list, certificate or instrument furnished to Parent pursuant hereto or in
connection with this Agreement, when taken as a whole, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statement herein or therein, in light of the circumstances in which
they were made, not misleading. The Company has delivered to Parent true,
correct and complete copies of all documents, including all amendments,
supplements and modifications thereof or waivers currently in effect thereunder,
described in the Company Disclosure Letter.
5.30 HSR. The Principal Stockholder represents and warrants that
he is the "ultimate parent entity" of the Company as defined in 16 C.F.R. 801.1,
and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and
that he does not, and will not at the time of the closing of the transaction
described herein, hold total assets nor have annual income of $10,000,000 or
more (aggregating all those held by any entities he controls and aggregating all
those held by his spouse and minor children), and therefore, that he is not a
$10 million person under the HSR Act. The Principal Stockholder does not control
any manufacturing companies.
6. Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company that the statements contained in this
Section 6 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 6).
6.1 Organization, Qualification, and Corporate Power. Parent and
Sub are corporations duly organized, validly existing, and in good standing
under the laws of the State of Delaware. Parent and Sub are duly authorized to
conduct business and are in good standing under the laws of each other
jurisdiction where such qualification is required and in which the failure to so
qualify is reasonably likely to have a Material Adverse Effect on Parent. Parent
and Sub have full corporate power and authority, and have all necessary licenses
and permits, to carry on the businesses in which they are engaged and to own and
use the properties owned and used by them.
6.2 Authorization. Parent and Sub have full power and authority
to execute and deliver this Agreement and the Ancillary Agreements to which they
are Parties, and to consummate the transactions contemplated hereunder and to
perform their obligations hereunder, and no other proceedings on the part of
Parent or Sub are necessary to authorize the execution, delivery and performance
of this Agreement and the Ancillary Agreements to which they are Parties. This
Agreement and the Ancillary Agreements to which they are Parties and the
transactions contemplated hereby and thereby have been approved by Parent's
Board of Directors. The consummation of the
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Contemplated Transactions does not require the approval or consent of the
stockholders of Parent. This Agreement and the Ancillary Agreements to which
they are Parties constitute the valid and legally binding obligations of Parent
and/or Sub, enforceable against Parent and/or Sub in accordance with their
respective terms and conditions. Other than (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws, (iv) the
filing of the Merger Amendment with the Secretary of State of the State of
Delaware, and (iii) any applicable filings required under the HSR Act, neither
Parent nor Sub need give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
6.3 Capitalization.
(a) As of September 30, 1999 the authorized capital stock of
Parent consisted of (i) 15,000,000 shares of Preferred Stock, $0.0001 par value,
none of which was issued or outstanding, and (ii) 200,000,000 shares of Common
Stock, $0.0001 par value, of which 47,557,639 shares were issued and
outstanding. As of September 30, 1999, 12,488,144 shares of Parent's Common
Stock were issuable upon exercise of outstanding stock options and warrants. All
of the outstanding shares of Parent's capital stock have been duly authorized
and validly issued and are fully paid and nonassessable. The shares of Common
Stock issuable upon exercise of outstanding stock options and warrants have been
duly authorized and, when issued and sold in the manner referred to in the
agreements accompanying such options and warrants, will be validly issued, fully
paid and nonassessable. All of the outstanding shares of Parent capital stock
have been offered, issued and sold by Parent in compliance with applicable
federal and state securities laws. Except as set forth in this Section 6.3 or as
described in the Parent SEC Reports, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of Parent or obligating Parent to issue or sell
any shares of capital stock of, or other equity interests in, Parent.
(b) The shares of Parent Common Stock to be issued pursuant
to Section 3.1 of this Agreement are duly authorized and reserved for issuance,
and upon issuance thereof in accordance with this Agreement and the Certificate
of Merger will be validly issued, fully paid and nonassessable.
6.4 Noncontravention. Neither the execution and the delivery of
this Agreement nor the consummation of the Contemplated Transactions, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Parent or Sub is subject or any provision
of their respective charters or bylaws, or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
Party the right to accelerate, terminate, modify, or cancel, or require any
notice under, any agreement, contract, lease, license, instrument, or other
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arrangement to which Parent or Sub is a Party or by which either is bound or to
which any of their assets is subject which has been filed as an exhibit to the
Parent SEC Reports.
6.5 Certain Proceedings. There is no pending proceeding that has
been commenced against Parent that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Parent's Knowledge, no such proceeding has been
threatened.
6.6 SEC Filings. Parent has filed all forms, reports and
documents required to be filed with the SEC since December 31, 1998, and has
heretofore made available to the Company, in the form filed with the SEC, (i)
its Annual Report on Form 10-K for the fiscal year ended December 31, 1998, (ii)
its Quarterly Report on Form 10-Q for the periods ended March 31, 1999, June 30,
1999 and September 30, 1999, (iii) the proxy statement relating to Parent's
annual meeting of stockholders held on May 24, 1999 and (iv) its Current Reports
on Form 8-K dated July 15, 1999, August 16, 1999 and October 14, 1999
(collectively, the "Parent SEC Reports"). The Parent SEC Reports (i) were
prepared in accordance with the requirements of the Securities Exchange Act of
1934, as amended, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
6.7 Suspension and Trading. No order ceasing or suspending
trading securities of Parent is currently outstanding, and no proceedings for
this purpose have been instituted or, to Parent's Knowledge, are pending,
contemplated or threatened.
6.8 No Material Adverse Change. Since September 30, 1999, there
has not been any material adverse change in the Business Condition of Parent.
6.9 Brokers' Fees. Parent does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
7. Pre-Closing Covenants. With respect to the period between the
execution of this Agreement and the earlier of the termination of this Agreement
and the Effective Time:
7.1 General. Each of the Parties will use their Best Efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 9 below).
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7.2 Notices and Consents. The Company will give any notices to
third parties and will use its reasonable best efforts to obtain any third party
consents that are required in connection with the matters identified in Section
5.4 of the Company Disclosure Letter or otherwise required in connection with
the Merger so as to preserve all material rights of or benefits to the Company.
Each of the Parties will give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters identified
in Section 5.4 of the Company Disclosure Letter or as otherwise required in
connection with the Merger.
7.3 Operation of Business. The Company will (a) conduct its
business only in the Ordinary Course of Business, (b) use its Best Efforts to
preserve intact the current business organization of the Company, keep available
the services of the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with the
Company, (c) confer with Parent concerning operational matters of a material
nature, (d) not hire or engage any new employee or contractor, or enter into any
binding commitment to do so, without the prior written consent of Parent, which
consent shall not be unreasonably withheld or delayed and (e) otherwise report
periodically to Parent concerning the status of the business, operations, and
finances of the Company. In addition, except as otherwise expressly permitted by
this Agreement, the Company will not, without the prior consent of Parent, (i)
issue any shares or options to purchase shares of the Company Capital Stock or
(ii) take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 5.9 is likely to occur.
7.4 Access to Information. Each of the Company and Parent will
permit the other Party and its representatives to have access at all reasonable
times, and in a manner so as not to interfere with its normal business
operations, to its business and operations (subject, in the case of Parent, to
compliance with applicable securities laws). Neither such access, inspection and
furnishing of information to any Party and its representatives, nor any
investigation by any Party and its representatives, shall in any way diminish or
otherwise affect such Party's right to rely on any representation or warranty
made by the other Parties hereunder.
7.5 Notice of Developments. Each of the Company and Parent will
give prompt written notice to the other Party of any material development
causing a Breach of any of its own representations and warranties in Section 5
or Section 6 above, as the case may be. No disclosure pursuant to this Section
7.5, however, shall be deemed to amend or supplement the Company Disclosure
Letter, or to prevent or cure any misrepresentation, Breach of warranty, or
Breach of covenant.
7.6 Stockholder Approval. As promptly as practicable after the
execution of this Agreement, the Company shall submit this Agreement and the
transactions contemplated hereby to the Company Stockholders for approval and
adoption as provided by Delaware Law and its
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Certificate of Incorporation and Bylaws. The Company shall use its Best Efforts
to solicit and obtain the consent of its stockholders sufficient to approve the
Merger and this Agreement and to enable the Closing to occur as promptly as
practicable. The materials submitted to the Company Stockholders shall be
subject to review and approval by Parent and include information regarding the
Company, the terms of the Merger and this Agreement and the unanimous
recommendation of the Board of Directors of the Company regarding the Merger and
this Agreement. The Company shall deliver to Parent, concurrently with the
execution of this Agreement, executed Voting Agreements from holders with
beneficial ownership of (i) a majority of the outstanding shares of Company
Preferred Stock and (ii) a majority of the outstanding shares of Company Common
Stock.
7.7 No Solicitation.
(a) From and after the date hereof and until the earlier of
the Effective Time, the termination of this Agreement and December 31, 1999, the
Company shall instruct its Representatives, and each Principal Stockholder
agrees, not to, directly or indirectly, solicit, initiate or intentionally
encourage (including by way of furnishing non-public information) any proposal
which constitutes or may reasonably be expected to lead to an Acquisition
Proposal (as defined below) in respect of the Company or any of its material
assets, from any Person, or engage in any discussion or negotiations relating
thereto or enter into any agreement with any Person providing for or
contemplating any Acquisition Proposal.
(b) The Company and the Principal Stockholder shall
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Party or Parties
conducted heretofore by the Company, the Principal Stockholder or its other
Representatives with respect to any Acquisition Proposal. The Company shall
notify Parent orally and in writing of any Acquisition Proposal and any
amendments thereto with respect to the Company or any other transaction, the
consummation of which would reasonably be expected to prevent or materially
interfere with or materially delay the Merger (including the material terms and
conditions of any such Acquisition Proposal and the identity of the Person
making it and any subsequent modifications thereto), promptly, but in any event
within 24 hours, after receipt by the Company.
(c) As used in this Section 7.7, "Acquisition Proposal"
shall mean:
(i) a bona fide proposal or offer for a merger,
consolidation or other business combination involving an acquisition of the
Company or any material asset of the Company; or
(ii) any proposal to acquire in any manner any of the
Company's Capital Stock (other than upon the exercise of options outstanding on
the date hereof and listed in Section 5.3(b) of the Company Disclosure Letter).
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7.8 Financial Schedules. The Company shall deliver to Parent a
schedule of current accounts payable to VisualTek as of the date of this
Agreement (the "Preliminary Accounts Payable") and as of the date of Closing
(the "Final Accounts Payable"). Parent shall have the opportunity to reject
unreasonable charges reflected in the Preliminary Accounts Payable and any such
unreasonable charges shall be deducted from the Final Accounts Payable, subject
to the consent of the Company, which consent shall not be unreasonably withheld.
7.9 Restated Financial Statements. Prior to the Effective Time,
the Company shall deliver a restated unaudited balance sheet and statements of
income and cash flows as of and for the period from inception to September 30,
1999 (the "Restated Financial Statements"), which Restated Financial Statements
shall not be materially different from the Financial Statements.
8. Post-Closing Covenants. With respect to the period following the
Effective Time:
8.1 General. In case at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under the Escrow and
Indemnification Agreement).
8.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time involving the Company or (B) arising out of Parent's
operation of the business of the Surviving Corporation following the Effective
Time in the manner in which it is presently conducted and planned to be
conducted, each of the other Parties will cooperate with the Party and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under the Escrow and
Indemnification Agreement).
8.3 Confidentiality. Each of the Parties hereto hereby agrees to
keep such information or Knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential, except to
the extent that such information is or becomes publicly known or available or is
independently acquired or developed. In this regard, the Company and its
employees and agents acknowledge that Parent's Common Stock is publicly traded
and that any information obtained during the course of its due diligence could
be considered to be material non-public information within the meaning of
federal and state securities laws. Accordingly, the Company and
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its employees and agents, acknowledge and agree not to engage in any
transactions in Parent's Common Stock in violation of applicable ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
laws.
8.4 FIRPTA Compliance. On the Closing Date, the Company shall
deliver to Parent a properly executed statement in a form reasonably acceptable
to Parent for purposes of satisfying Parent's obligations under U.S. Treasury
Regulation Section 1.1445-2(c)(3).
8.5 Form S-8. Parent shall file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect to the assumed
Company Options no later than 21 days after the Closing Date.
8.6 Registration Statement. Subject to certain limitations set
forth in the Registration Rights Agreement attached hereto as Exhibit F, (i)
Parent shall, at Parent's own expense, use its Best Efforts to file, on or prior
to December 20, 1999, a registration statement on Form S-3 (the "Registration
Statement") under the Securities Act to provide for resale by the Company
Stockholders of the shares of Parent Common Stock constituting the Merger
Consideration (including the shares held in escrow pursuant to Section 3.8
above) and shall use its Best Efforts to cause such Registration Statement to
become effective as promptly as practicable thereafter. The rights and
obligations of the Company Stockholders and Parent in respect of the
Registration Statement shall be as set forth in the Registration Rights
Agreement. Notwithstanding anything herein or in the Registration Rights
Agreement, in the event that all of the shares of Parent Common Stock issued to
a Company Stockholder can be sold by such Person in a single three month period
in accordance with Rule 144 under the Securities Act, Parent shall have no
obligation to cause such shares to continue to be registered.
8.7 Additional Documents and Further Assurances. Each Party
hereto, at the request of another Party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
8.8 Tax Free Reorganization. The Parties intend to adopt this
Agreement and the Merger as a tax-free plan of reorganization under Section
368(a)(1)(A) of the code by virtue of the provisions of Section 368(a)(2)(E) of
the Code. The Parent Common Stock issued in the Merger will be issued solely in
exchange for the Company Capital Stock, and no other transaction other than the
Merger represents, provides for or is intended to be an adjustment to the
consideration paid for the Company Capital Stock. No consideration that could
constitute "other property" within the meaning of Section 356(b) of the Code is
being transferred by Parent for the Company Capital Stock in the Merger. The
Parties shall not take a position on any tax return inconsistent with this
Section 8.8 unless there has been a final "determination" (within the meaning of
Section 1313(a) of the Code) to the contrary. From and after the Effective Time,
neither Parent, Sub nor, the Company shall take any action that could reasonably
be expected to cause the Merger not to be treated as a reorganization within the
meaning of Section 368 of the Code.
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9. Conditions to Obligations to Close.
9.1 Conditions to Parent's and Sub's Obligation to Close. The
obligations of Parent and Sub to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
(a) Representations and Warranties.
(i) The representations and warranties set forth in
Section 5 above shall be true and correct when made and shall be true and
correct in all material respects on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date; and
(ii) The representations and warranties set forth in
Sections 5.2 and 5.3 above shall be true and correct on and as of the Closing
Date as though such representations and warranties were made on and as of the
Closing Date;
(b) Covenants. The Company shall have performed and
complied with all of its covenants hereunder in all material respects through
the Closing.
(c) Consents. The Company shall have procured all of the
third party consents specified in Section 5.4 of the Company Disclosure Letter.
(d) No Actions. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect materially the right of Parent to control the
Company following the Effective Time, or (D) affect materially the right of
Parent or the Company to own the Company's assets (including without limitation
its Intellectual Property) and to operate the Company's businesses (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect) and no
law, statute, ordinance, rule, regulation or order shall have been enacted,
enforced or entered which has caused, or would reasonably be expected to cause,
any of the effects under clause (A), (B), (C), or (D) of this Section 9.1(d) to
occur.
(e) Certificates. The President and the Secretary of the
Company shall have delivered to Parent a certificate to the effect that each of
the conditions specified above in Section 9.1(a) to 9.1(d) (inclusive) is
satisfied in all respects.
(f) Governmental Authorizations. The Parties shall have
received all authorizations, consents and approvals of governments and
governmental agencies referred to in
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Section 5.4, Section 7.2 or Section 7.8 above or disclosed in a corresponding
section in the Company Disclosure Letter.
(g) Standard Employee Agreements. The Persons listed on
Exhibit G-1 shall each have executed and delivered to Parent Parent's standard
form of employee Non-Disclosure, Invention Release and Non-Competition Agreement
in substantially the form attached hereto as Exhibit G-2, and such Non-
Disclosure, Invention Release and Non-Competition Agreements shall be in full
force and effect.
(h) Employment Agreements and Offer Letters. The Persons
listed on Exhibit D-1 shall each have executed and delivered to Parent an
Employment Agreement in substantially the form attached hereto as Exhibit D-2,
and the Persons listed on Exhibit D-3 shall have executed and delivered to
Parent the Parent standard Offer Letter in the form attached hereto as Exhibit
D-4, and such Employment Agreements and Offer Letters shall be in full force and
effect.
(i) Non-competition Agreements. The Persons listed on
Exhibit C-1 shall each have executed and delivered to Parent a Non-competition
Agreement in substantially the form attached hereto as Exhibit C-2, and such
Non-competition Agreements shall be in full force and effect.
(j) Stockholder Certificate. Each Company Stockholder
shall have executed and delivered to Parent a Stockholder Certificate in
substantially the form attached hereto as Exhibit E.
(k) Legal Opinion. Parent shall have received from Heller,
Ehrman, White & ▇▇▇▇▇▇▇▇▇, counsel to the Company, an opinion in form and
substance as set forth in Exhibit H attached hereto, addressed to Parent, and
dated as of the Closing Date.
(l) Stockholder Vote. This Agreement and the Merger shall
have been approved by the vote of the holders of at least 90% of the outstanding
Company Capital Stock and holders of not more than 5% of Company Capital Stock
shall continue to have a right to exercise appraisal, dissenters or similar
rights under applicable law with respect to their Company Capital Stock by
virtue of the Merger;
(m) No Material Adverse Change. There shall not have
occurred any material adverse change in the Business Condition of the Company
since the Most Recent Fiscal Period End.
(n) Resignation of Directors. Each of the directors of the
Company shall have resigned.
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(o) Voting Agreements. The Voting Agreements executed and
delivered to Parent on the date hereof by each of the Affiliates of the Company
shall remain in full force and effect;
(p) Restricted Stock Agreement. ▇▇▇▇▇ ▇▇▇▇▇ shall have
executed and delivered to Parent a Restricted Stock Agreement in substantially
the form attached hereto as Exhibit I.
(q) Releases. Each officer and director of the Company,
and each holder of more than five percent (5%) of the Company's capital stock,
shall have executed and delivered a Release in substantially the form attached
hereto as Exhibit J.
(r) Escrow and Indemnification Agreement. The Company,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and Escrow Agent shall have executed the Escrow and
Indemnification Agreement.
(s) Special Purpose Escrow Agreement. The Company,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and Escrow Agent shall have executed the Special Purpose Escrow
Agreement.
(t) Employee Waivers. Each of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇ Tymchencko shall have executed and delivered a Statement of Waiver in
the form attached hereto as Exhibit M, waiving any accelerated vesting triggered
by the Contemplated Transactions pursuant to the restricted stock purchase
agreements by such persons.
(u) Intellectual Property Assignment. The Company and
VisualTek shall have executed an Amended and Restated Assignment Agreement, in
form and substance reasonably satisfactory to Parent, assigning all right, title
and interest in and to all Company Intellectual Property from VisualTek to the
Company and amending and restating that certain Assignment Agreement between the
Company and VisualTek dated as of July 18, 1999.
(v) Contract Assignment. All contracts and agreements to
which VisualTek is a party listed on Section 5.16 of the Company Disclosure
Letter shall have been duly and exclusively assigned to the Company unless
otherwise indicated on the Disclosure Letter, in form and substance reasonably
satisfactory to Parent.
(w) VisualTek Certificate. VisualTek shall have executed
and delivered a certificate to the effect that there are no continuing financial
obligations of the Company to VisualTek and releasing all claims against the
Company.
(x) Employee and Consultant Assignment of Intellectual
Property to VisualTek. All employees and consultants of the Company and
VisualTek listed on Section 5.14(h) of the Company Disclosure Letter shall have
executed a Confidential Information and Invention
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Assignment Agreement in the form attached hereto as Exhibit N (the "Confidential
Information and Invention Assignment Agreement").
(y) Tender of Payment for Deferred Revenues. VisualTek
shall have delivered to Parent a check in the amount of the deferred revenue
recorded on the Company's Restated Financial Statements which represents
unrecognized revenue under the maintenance support agreements listed on Section
5.16(n) of the Company Disclosure Letter.
Parent may waive any condition (in whole or in part) specified in this
Section 9.1 if it executes a writing so stating at or prior to the Closing.
9.2 Conditions to the Company's Obligations. The obligation of
the Company to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations
and warranties set forth in Section 6 above shall be true and correct when made
and shall be true and correct in all material respects on and as of the Closing
Date as though such representations and warrants were made on and as of the
Closing Date.
(b) Covenants. Parent shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing.
(c) No Actions. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect). All waiting periods under the HSR
Act relating to the transactions contemplated hereby shall have expired or
terminated early.
(d) Certificate. The President or other duly authorized
officer of Parent shall have delivered to the Company a certificate to the
effect that each of the conditions specified above in Section 9.2(a) to 9.2(c)
(inclusive) is satisfied in all respects.
(e) Legal Opinion. The Company shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel to Parent an
opinion in form and substance as set forth in Exhibit K attached hereto,
addressed to the Company, and dated as of the Closing Date .
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(f) Nasdaq Listing. The shares of Parent Common Stock
issuable in connection with the Merger shall have been authorized for listing on
the Nasdaq National Market upon official notice of issuance.
(g) Tender of Payment for Final Accounts Payable. Parent
shall have delivered to VisualTek a check in the amount of the Final Accounts
Payable.
The Company may waive any condition (in whole or in part) specified in
this Section 9.2 if it executes a writing so stating at or prior to the Closing.
10. Survival of Representations, Warranties and Covenants; Stockholder
Agent; Indemnity.
10.1 Survival of Representations and Warranties. All covenants
of the Company and the Principal Stockholder to be performed prior to the
Effective Time, and all representations and warranties of the Company and the
Principal Stockholder in this Agreement or in any instrument delivered pursuant
to this Agreement, shall survive the Merger for a period ending one (1) year
from the Effective Time of the Merger; provided, however, that the
indemnification obligations due to Breaches of the representations and
warranties with respect to Taxes shall survive until the expiration of the
applicable statute of limitations, if any. All covenants of Parent to be
performed prior to the Effective Time, and all representations and warranties of
Parent in this Agreement or in any instrument delivered pursuant to this
Agreement shall terminate at the Effective Time.
10.2 Stockholder Agent.
(a) Stockholder Agent; Power of Attorney.
(i) In the event that the Merger is approved by the
Company Stockholders, effective upon such vote, and without any further act of
any Company Stockholder, the Stockholder Agent shall be appointed as agent and
attorney-in-fact for each Company Stockholder, for and on behalf of each such
Principal Stockholder, to give and receive notices and communications, to
authorize delivery to (A) Parent of shares from the Escrow Fund in satisfaction
of claims by Parent pursuant to the Escrow and Indemnification Agreement or (B)
the Company Stockholders of shares from the Employee Escrow Fund pursuant to the
Special Purpose Escrow Agreement, 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
Stockholder Agent for the accomplishment of the foregoing. The Stockholder Agent
may be changed by the Company Stockholders from time to time upon not less than
thirty (30) days' prior written notice to Parent and Escrow Agent; provided that
the Stockholder Agent may not be removed unless holders of a two-thirds interest
of the Escrow Amount or the Employee Escrow Amount in the Escrow Fund or the
Employee Escrow Fund, respectively, agree to such removal and to the identity
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of the substituted agent. Any vacancy in the position of Stockholder Agent may
be filled by approval of the holders of a majority in interest of the Escrow
Fund or Employee Escrow Fund, as the case may be. No bond shall be required of
the Stockholder Agent, and the Stockholder Agent shall not receive compensation
for his services. Notices or communications to or from the Stockholder Agent
shall constitute notice to or from each of the Company Stockholders.
(ii) The Stockholder Agent shall not be liable for
any act done or omitted hereunder as Stockholder Agent while acting in good
faith and in the exercise of reasonable judgment. The Company Stockholders on
whose behalf the Escrow Amount or Employee Escrow Amount was contributed to the
Escrow Fund or Employee Escrow Fund, respectively, shall severally indemnify the
Stockholder Agent and hold the Stockholder Agent harmless against any loss,
liability or expense incurred without negligence or bad faith on the part of the
Stockholder Agent and arising out of or in connection with the acceptance or
administration of the Stockholder Agent's duties hereunder, including the
reasonable fees and expenses of any legal counsel retained by the Stockholder
Agent.
(b) Actions of the Stockholder Agent. A decision, act, consent
or instruction of the Stockholder Agent shall constitute a decision of all the
Company Stockholders and shall be final, binding and conclusive upon each of
such Company Stockholders, and the Escrow Agent and Parent may rely upon any
such decision, act, consent or instruction of the Stockholder Agent as being the
decision, act, consent or instruction of each Company Stockholder. The Escrow
Agent and Parent are hereby relieved from any liability to any Person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Stockholder Agent.
10.3 Third-Party Claims. In the event that Parent becomes aware of
a third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Stockholder Agent of such claim, and the
Stockholder Agent and the Company Stockholders shall be entitled, at their
expense, to participate in any defense of such claim. Parent shall have the
right in its sole discretion to settle any such claim; provided, however, that
except with the consent of the Stockholder Agent, no settlement of any such
claim with third-party claimants shall alone be determinative of the amount of
any claim against the Escrow Fund. In the event that the Stockholder Agent has
consented to any such settlement, the Stockholder Agent shall have no power or
authority to object under any provision of this Agreement or the Escrow and
Indemnification Agreement to the amount of any claim by Parent against the
Escrow Fund with respect to such settlement to the extent that such amount is
consistent with the terms of such settlement.
10.4 Exclusive Remedy. The indemnity set forth in the Escrow and
Indemnification Agreement and the Escrow Fund provided for therein shall apply
only to Breaches by the Company or the Principal Stockholder of any
representation, warranty, covenant or agreement of the Company or the Principal
Stockholder contained herein and, except as provided below, resort to the Escrow
Fund shall be the exclusive right and remedy of Parent for such Breaches, or for
Breaches of any Stockholder Certificate or otherwise under or in connection with
this Agreement, once the Closing
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occurs. Notwithstanding the foregoing, the existence of this the Escrow and
Indemnification Agreement and of the rights and restrictions set forth therein
do not limit any other potential remedies of Parent with respect to any knowing
and intentional or fraudulent actual Breaches of the representations and
warranties or covenants of the Company contained in this Agreement or of any
Company Stockholder contained in a Stockholder Certificate. In addition, this
Section 10.3 shall not apply if the Merger does not close.
11. Termination.
11.1 Termination of the Agreement. The Parties may terminate
this Agreement as provided below:
(a) Parent and the Company may terminate this Agreement as
to all Parties by mutual written consent at any time prior to the Closing;
(b) Parent or the Company may terminate this Agreement by
written notice if: (i) the Closing has not occurred by December 31, 1999;
provided, however, that the right to terminate this Agreement under this Section
11.1(b)(i) shall not be available to any Party whose action or failure to act
has been a principal cause of or resulted in the failure of the Merger to occur
on or before such date and such action or failure to act constitutes a Breach of
this Agreement; (ii) there shall be a final nonappealable order of a court of
competent jurisdiction 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 Body that would
make consummation of the Merger illegal;
(c) Parent may terminate this Agreement by written notice
if there shall be any action taken, or any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Body, which would (i) prohibit Parent's or the Company's ownership
or operation of all or a portion of the business of the Company or (ii) compel
Parent or the Company to dispose of or hold separate all or a portion of the
business or assets of Parent or the Company as a result of the Merger;
(d) Parent may terminate this Agreement by written notice
if it is not in material Breach of its obligations under this Agreement and
there has been a material Breach of any representation, warranty, covenant or
agreement contained in this Agreement on the part of the Company or any
Principal Stockholder and such Breach has not been cured within thirty (30)
calendar days after written notice to the Company and the Principal Stockholder;
provided, however, that, no cure period shall be required for a Breach which by
its nature cannot be cured;
(e) the Company may terminate this Agreement by written
notice if neither it nor any Principal Stockholder is in material Breach of its
obligations under this Agreement and there has been a material Breach of any
representation, warranty, covenant or agreement contained in
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this Agreement on the part of Parent and such Breach has not been cured within
thirty (30) calendar days after written notice to Parent; provided, however,
that no cure period shall be required for a Breach which by its nature cannot be
cured;
(f) Parent or the Company may terminate this Agreement by
written notice if the Company Stockholders shall have taken a final vote on the
matters set forth in Section 7.6 hereof, and such matters shall not have been
approved by the Company Stockholders; and
(g) Parent may terminate this Agreement by written notice
if an event having a Material Adverse Effect on the Company shall have occurred
after the date of this Agreement.
(h) The Company may terminate this Agreement by written
notice if an event having a Material Adverse Effect on Parent shall have
occurred after the date of this Agreement.
11.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 11.1 above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in Breach); provided
that each Party shall remain liable for any willful Breaches of this Agreement
prior to its termination and provided, further, that the provisions contained in
Sections 8.3 (confidentiality), 11.3 (termination fees and other events) and 12
(miscellaneous) shall survive termination.
11.3 Termination Fees and other Events.
(a) The Company shall pay to Parent a termination fee of
$1,250,000, plus Expenses payable in cash by wire transfer or cashier's check
(or assets, if sufficient cash is not readily available), in the event, and only
in the event, that the Closing does not occur, this Agreement is terminated,
Parent is not in material Breach of its obligations under this Agreement, and
one or more of the following events has occurred:
(i) the Company or the Principal Stockholder has
willfully and materially Breached any representation, warranty, covenant or
agreement contained in this Agreement; or
(ii) the Board of Directors of the Company shall have
failed to unanimously recommend, shall have changed its unanimous recommendation
concerning the Merger and the Contemplated Transactions, or shall have
recommended an alternative Acquisition Proposal, or shall have disclosed, in any
manner, its intention not to unanimously recommend, to change its unanimous
recommendation to stockholders concerning the Merger or to recommend an
Alternative Proposal; or
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(iii) the Company Stockholders shall have failed to
approve the Contemplated Transactions.
(b) Parent shall pay to the Company a termination fee of
$1,250,000 (the "InfoSpace Termination Fee"), plus Expenses, payable in cash by
wire transfer or cashier's check (or assets, if sufficient cash is not readily
available), in the event, and only in the event, that the Closing does not
occur, this Agreement is terminated, the Company is not in material Breach of
its obligations under this Agreement, and Parent has willfully and materially
Breached any representation, warranty, covenant or agreement contained in this
Agreement. Parent will deposit the InfoSpace Termination Fee into a third-party
escrow account to secure any required payment pursuant to this Section 11.3(b).
The InfoSpace Termination Fee will be returned to Parent at Closing.
(c) For purposes of this Section "Expenses" shall mean the
amount of any documented out-of-pocket expenses incurred by a Party and its
Affiliates in connection with the negotiation and preparation of this Agreement
and any other ancillary agreements executed and delivered in connection with the
transactions contemplated hereby and thereby and its due diligence review
(including fees of counsel and accountants) up to the date of termination of
this Agreement.
(d) The Company, the Principal Stockholder and Parent each
acknowledge and agree that the agreements contained in this Section 11.3 are an
integral part of the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary contained in this Section 11.3, if any
Party fails to pay the other Party any fees or expenses due under this Section
11.3 within the time required under this Agreement or, if no time period is
specified, within five business days of the event giving rise to the payment of
such fees and expenses, in addition to any other amounts paid or payable
pursuant to this Agreement, the delinquent Party shall pay the out-of-pocket
costs and expenses (including reasonable legal fees and expenses) in connection
with any action, including the filing of any lawsuit or other legal action,
taken to collect payment together with interest on the amount of any unpaid fees
and expenses at the publicly announced prime rate of Chase Manhattan Bank from
the date on which such fees and expenses were required to be paid.
(e) The Parties acknowledge and agree that it is difficult or
impossible to determine with precision the amount of damages that would or might
be incurred by non-terminating Party if a Party were to terminate this Agreement
as contemplated by paragraph (a) or (b). It is understood and agreed by the
Parties that if the non-terminating Party shall be damaged by such a
termination, (i) it would be impracticable or extremely difficult to fix the
actual damages resulting therefrom, (ii) the termination fee is in the nature of
liquidated damages, and not a penalty, and is fair and reasonable, and (iii) the
termination fee represents a reasonable estimate of fair compensation for the
losses that may reasonably be anticipated from such a termination, and shall be
the sole and exclusive measure of damages with respect to any such termination.
Once such liquidated damages have been paid in accordance with the provisions of
this Agreement, the terminating Party and its
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Affiliates shall be relieved of any further liability in respect of damages
relating to the fact or circumstance giving rise to such liquidated damages.
12. Miscellaneous
12.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that Parent may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case Parent will
use its Best Efforts to advise the Company prior to making the disclosure). In
furtherance of the foregoing sentence, the Parties agree and acknowledge that
Parent will issue a press release following the execution and delivery of this
Agreement by the Parties.
12.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, and their
respective successors and permitted assigns.
12.3 Entire Agreement and Modification. This Agreement (including
the exhibits hereto) constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof. This Agreement may
not be amended except by a written agreement executed by all Parties.
12.4 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties; provided, however, that Parent may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder.
12.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
12.6 Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if
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delivered by hand, (c) one business day after the business day of deposit with
Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed to the intended recipient as set forth below:
If to Parent:
▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company:
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile:
Copy to:
Heller, Ehrman, White & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Peers
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties ten (10) days' advance written notice to the other Parties pursuant to
the provisions above.
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12.8 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 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.
12.9 Forum Selection; Consent to Jurisdiction. All disputes arising
out of or in connection with this Agreement (other than matters subject to
arbitration pursuant to the terms of this Agreement or the other agreements
delivered by the Parties pursuant hereto) shall be solely and exclusively
resolved by a court of competent jurisdiction in the State of Washington. The
Parties hereby consent to the jurisdiction of the Courts of the State of
Washington and the United States District Court of the Western District of
Washington and waive any objections or rights as to forum nonconvenience, lack
of personal jurisdiction or similar grounds with respect to any dispute relating
to this Agreement.
12.10 Waivers. The rights and remedies of the Parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any Party in exercising any right, power or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one Party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other Party; (b) no waiver that
may be given by a Party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one Party will be deemed to
be a waiver of any obligation of such Party or of the right of the Party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
12.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
12.12 Expenses. Each Party will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. In the event the Merger
is consummated, Parent will bear the costs and expenses (including accounting
and legal fees and expenses) of the Company incurred in connection with this
Agreement and the transactions contemplated thereby, up to a maximum of $75,000;
any costs or expenses in excess of such amount shall be borne by the Company
Stockholders in proportion to the amount of Merger Consideration received.
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12.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
12.14 Company Disclosure Letter.
(a) The disclosures in the Company Disclosure Letter, and
those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Company Disclosure Letter (other
than an exception expressly set forth as such in the Company Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
12.15 Attorneys' Fees. If any legal proceeding or other action
relating to this Agreement is brought or otherwise initiated, the prevailing
Party shall be entitled to recover reasonable attorneys fees, costs and
disbursements (in addition to any other relief to which the prevailing Party may
be entitled).
12.16 Further Assurances. The Parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other Party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
12.17 Time of Essence . With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on of
the date first above written.
Parent: ▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: Chief Executive Officer
----------------------------
Company: ▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: President and CEO
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Principal Stockholder: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Sub: LIVEWIRE ACQUISITION
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇
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Title: Chief Executive Officer
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[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
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