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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NET PERCEPTIONS, INC.,
KENTUCKY ACQUISITION CORPORATION,
AND
KNOWLEDGE DISCOVERY ONE, INC.
DATED AS OF JANUARY 15, 2000
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TABLE OF CONTENTS
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ARTICLE I - THE MERGER
Section 1.1 The Merger.......................................................2
Section 1.2 Effective Time...................................................2
Section 1.3 Effects of the Merger............................................2
Section 1.4 Certificate of Incorporation of the Surviving Corporation........2
Section 1.5 By-Laws of the Surviving Corporation.............................2
Section 1.6 Directors and Officers of the Surviving Corporation..............2
Section 1.7 Closing..........................................................3
ARTICLE II
DETERMINATION OF EXCHANGE RATIO AND
CONVERSION AND EXCHANGE OF SECURITIES
Section 2.1 Determination of Exchange Ratio..................................3
Section 2.2 Conversion of Capital Stock......................................4
Section 2.3 Exchange of Certificates.........................................5
Section 2.4 Closing of Company Transfer Books................................6
Section 2.5 No Fractional Shares.............................................7
Section 2.6 Legends..........................................................7
Section 2.7 No Liability.....................................................8
Section 2.8 Dissenting Shares................................................8
ARTICLE IIII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Qualification and Corporate Power..................9
Section 3.2 Company Capital Structure.......................................10
Section 3.3 Authority; No Conflict; Required Filings and Consents...........12
Section 3.4 Financial Statements............................................14
Section 3.5 Absence of Undisclosed Liabilities..............................14
Section 3.6 Accounts Receivable.............................................15
Section 3.7 Intellectual Property...........................................15
Section 3.8 Absence of Changes..............................................20
Section 3.9 Tax Matters.....................................................22
Section 3.10 Compliance with Laws............................................23
Section 3.11 Action and Proceedings..........................................24
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Section 3.12 Contracts and Other Agreements..................................24
Section 3.13 Bank Accounts and Powers of Attorney............................26
Section 3.14 Properties......................................................26
Section 3.15 Customers, Distributors and Suppliers...........................27
Section 3.16 Employee Benefit Plans..........................................27
Section 3.17 Employee Relations..............................................30
Section 3.18 Employment Matters..............................................30
Section 3.19 Employee Conflicts..............................................31
Section 3.20 Management Relationships........................................31
Section 3.21 Insurance.......................................................31
Section 3.22 Brokerage and Finders; Third Party Expenses.....................32
Section 3.23 Hazardous Materials.............................................32
Section 3.24 Certain Business Practices......................................33
Section 3.25 Stockholder Composition.........................................33
Section 3.26 Information Statement...........................................33
Section 3.27 Termination of Existing Agreements with Holders of
Company Stock...................................................34
Section 3.28 Certain Waivers.................................................34
Section 3.29 Disclosure......................................................34
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF THE BUYER
Section 4.1 Organization....................................................35
Section 4.2 Capitalization..................................................35
Section 4.3 Authority; No Conflict; Required Filings and Consents...........36
Section 4.4 Filings; Financial Statements...................................38
Section 4.5 Consent Solicitation/Information Statement......................38
Section 4.6 Brokers and Finders.............................................38
ARTICLE V - CONDUCT OF BUSINESS
Section 5.1 Covenants of the Company........................................39
Section 5.2 Audited 1999 Financial Statements...............................41
Section 5.3 Cooperation.....................................................41
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ARTICLE VI - ADDITIONAL AGREEMENTS
Section 6.1 No Solicitation.................................................42
Section 6.2 Approval of Stockholders; Consent Solicitation/Information
Statement; Blue Sky.............................................43
Section 6.3 Access to Information...........................................44
Section 6.4 Supplements to Disclosure Schedule..............................44
Section 6.5 Legal Conditions to Merger......................................44
Section 6.6 Listing Application.............................................45
Section 6.7 Company Stock Plan..............................................45
Section 6.8 Consents........................................................46
Section 6.9 Reasonable Efforts..............................................46
Section 6.10 Voting Agreement................................................46
Section 6.11 Financial Statement Preparation and Review......................46
Section 6.12 Company Director and Officer Indemnification; Insurance.........46
Section 6.13 Tax-Free Reorganization.........................................47
Section 6.14 Employee Matters................................................47
Section 6.15 Ancillary Agreements............................................48
ARTICLE VII - CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger......48
Section 7.2 Additional Conditions to Obligations of the Buyer and Sub.......49
Section 7.3 Additional Conditions to Obligations of the Company.............51
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION
Section 8.1 Survival of Company Obligations.................................52
Section 8.2 Company Stockholder Obligation to Indemnify.....................52
Section 8.3 Limitations on Company Stockholder Indemnification..............53
Section 8.4 Survival of Buyer Obligations...................................54
Section 8.5 Buyer Obligation to Indemnify...................................54
Section 8.6 Limitations on Buyer Indemnification............................55
Section 8.7 Procedures Relating to Indemnification..........................56
Section 8.8 Stockholder Representative......................................57
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ARTICLE IX - TERMINATION; FEES AND EXPENSES
Section 9.1 Termination.....................................................59
Section 9.2 Effect of Termination...........................................60
Section 9.3 Fees and Expenses...............................................60
ARTICLE X - DEFINITIONS AND INTERPRETATION
Section 10.1 Certain Definitions.............................................61
Section 10.2 Interpretation..................................................63
ARTICLE XI - MISCELLANEOUS
Section 11.1 Press Releases and Announcements................................64
Section 11.2 [Intentionally Omitted].........................................65
Section 11.3 Entire Agreement................................................65
Section 11.4 Succession and Assignment.......................................65
Section 11.5 Counterparts....................................................65
Section 11.6 Notices.........................................................65
Section 11.7 Governing Law...................................................66
Section 11.8 Amendments and Waivers..........................................66
Section 11.9 Severability....................................................67
Section 11.10 Incorporation of Exhibits and Schedules.........................67
Section 11.11 Enforcement.....................................................67
Section 11.12 Arbitration.....................................................67
Schedule 1 Closing Stockholder Schedule......................................
Schedule 2 Company Stockholder Affiliates....................................
Schedule 3 Disclosure Schedule...............................................
Schedule 4 Key Employees.....................................................
Exhibit A Form of Investment Representation and Affiliate's
Lock-Up Agreement..............................................A-1
Exhibit B Form of Non-Affiliate Investment Representation Agreement......B-1
Exhibit C Form of Escrow Agreement.......................................C-1
Exhibit D Form of Voting Agreement.......................................D-1
Exhibit E Form of Registration Rights Agreement..........................E-1
Exhibit F Form of Opinion of Company Counsel.............................F-1
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Exhibit G Form of Opinion of Buyer Counsel...............................G-1
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger entered into as of January 15,
2000 (this "Agreement") by and among Net Perceptions, Inc., a Delaware
corporation (the "Buyer"), Kentucky Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of the Buyer ("Sub"), and Knowledge
Discovery One, Inc., a Delaware corporation (including its predecessor company,
the "Company"). The Buyer, Sub and the Company are sometimes referred to herein
as the "Parties." Certain capitalized terms used in this Agreement have the
meanings ascribed to them in Article X.
WHEREAS, each of the board of directors of the Buyer and the
board of directors of Sub has determined that it is advisable and in the best
interests of its stockholders to acquire the Company upon the terms and subject
to the conditions set forth in this Agreement, and the board of directors of the
Company (the "Company Board") has determined that it is advisable and in the
best interests of the Company and its stockholders to be acquired by the Buyer
upon the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the Company Board has unanimously recommended
that the Company's stockholders adopt this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that
the Merger (as defined herein) will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(together with the rules and regulations thereunder, the "Code"), and that this
Agreement shall be, and hereby is, adopted as a plan of reorganization for
purposes of Section 368 of the Code.
NOW, therefore, in consideration of the foregoing, and the
representations, warranties and covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2), Sub shall merge
with and into the Company in accordance with the General Corporation Law of the
State of Delaware (the "DGCL"), and the separate corporate existence of Sub
shall thereupon cease and the Company shall continue as the surviving
corporation. The Company, in its capacity as the corporation surviving the
Merger, is sometimes hereinafter referred to as the "Surviving Corporation."
1.2 Effective Time. In order to effectuate the Merger, on the
Closing Date (as defined in Section 1.7), the Company shall cause a certificate
of merger (the "Certificate of Merger") to be filed with the Secretary of State
of Delaware, in such form as required by, and executed in accordance with, the
DGCL. The Merger shall be effective as of the time of filing of the Certificate
of Merger (the "Effective Time").
1.3 Effects of the Merger. The Merger shall have the effects
provided for in Section 259 of the DGCL.
1.4 Certificate of Incorporation of the Surviving Corporation. At
and after the Effective Time, the certificate of incorporation of Sub, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation, until amended in accordance with the
DGCL, except that from and after the Effective Time, Article I of such
certificate of incorporation will read in its entirety as follows:
"The name of the corporation is "Knowledge Discovery One, Inc."
1.5 By-Laws of the Surviving Corporation. At and after the
Effective Time, the by-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation, until amended
in accordance with the DGCL, except that the name of the Surviving Corporation
as set forth in such by-laws shall be "Knowledge Discovery One, Inc."
1.6 Directors and Officers of the Surviving Corporation. The
directors and officers of the Surviving Corporation shall be determined by The
Buyer, each to hold office in accordance with the certificate of incorporation
and by-laws of the Surviving Corporation.
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1.7 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m., E.S.T., on the later of (a) February 10, 2000 or (b) the
third business day after satisfaction of the conditions set forth in Sections
7.1(a) and (b) (provided, in the case of (a) or (b), that all the closing
conditions set forth in Article VII have been met or waived as provided in
Article VII at or prior to the Closing), at the offices of Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, or on such
other date, or at such other time or place, as is agreed to in writing by The
Buyer and the Company. The date on which the Closing shall occur is referred to
herein as the "Closing Date."
ARTICLE II
DETERMINATION OF EXCHANGE RATIO AND
CONVERSION AND EXCHANGE OF SECURITIES
2.1 Determination of Exchange Ratio.
(a) At the Closing, the Company shall deliver to the
Buyer a certificate, in form and substance satisfactory to The Buyer and signed
by the Company's President and Chief Financial Officer (the "Company Closing
Certificate"), certifying (i) that the warrant ("Warrant") issued to Phoenix
Leasing Incorporated (the "Warrant Holder") in connection with an equipment
finance line of credit has been fully exercised (the "Warrant Exercise") for
Common Stock (as defined below); (ii) that pursuant to clause (B) of ARTICLE IV,
Section 3(b) of the Certificate of Incorporation (as defined in Section 3.1(b)),
all outstanding shares of (x) Series A Preferred Stock, par value $0.001 per
share, of the Company ("Series A Preferred Stock"), (y) Series B Preferred
Stock, par value $0.001 per share, of the Company ("Series B Preferred Stock"),
and (z) Series C Preferred Stock, par value $0.001 per share, of the Company
("Series C Preferred Stock" and, together with Series A Preferred Stock and
Series B Preferred Stock, "Preferred Stock") have been mandatorily converted,
effective immediately prior to the Effective Time (the "Preferred Stock
Conversion"), into an equivalent number of shares of Common Stock, par value
$.0001 per share, of the Company ("Common Stock", and, together with Preferred
Stock, "Company Stock"); (iii) as to the number of shares of Common Stock
underlying all options to purchase Common Stock ("Options") granted and
outstanding under the Company's 1996 Stock Option/Stock Issuance Plan (the
"Company Stock Plan") and related Option Agreements (each an "Option
Agreement"), whether or not vested or exercisable, outstanding as of immediately
prior to the Effective Time; (iv) the number of shares of Common Stock
outstanding immediately prior to the Effective Time, calculated on a fully
diluted basis, giving effect to the exercise and the conversion referred to in
(i) and (ii) above and assuming that all Options referred to in (iii) above,
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whether or not vested, have been exercised in full (such number of shares of
Common Stock being referred to as the "Fully Diluted Common Stock Number"); and
(v) by reference to a schedule to the Company Closing Certificate, as to a list
of all the holders of shares of Common Stock (after giving effect to the
exercise and conversion referred to in (i) and (ii) above) as such names appear
on the stock transfer books of the Company (individually, a "Company
Stockholder" and collectively, the "Company Stockholders"), the number of shares
of Common Stock held by each Company Stockholder and the ownership interest
percentage of each Company Stockholder (with respect to each Company
Stockholder, such Company Stockholder's "Ownership Percentage Interest")
determined by dividing the number of shares of Common Stock held by such Company
Stockholder (after giving effect to the exercise and conversion referred to in
(i) and (ii) above) by the number of outstanding shares of Common Stock, in each
case, as of immediately prior to the Effective Time. The Schedule containing the
information referred to in clause (v) of the immediately preceding sentence,
upon acceptance by the Buyer at the Closing (such acceptance not to be
unreasonably withheld), shall be appended as Schedule 1 to this Agreement and
shall be deemed incorporated herein and made a part hereof and shall hereinafter
be referred to as the "Closing Stockholder Schedule."
(b) The fraction of share of common stock, $.0001 par
value per share, of the Buyer ("Buyer Common Stock") to be issued in the Merger
per share of Common Stock outstanding immediately prior to the Effective Time in
accordance with this Article II shall be the quotient obtained by dividing (i)
2,237,927, which is the aggregate number of shares to be issued in the Merger
and upon the exercise of Options assumed by the Buyer pursuant to Section 6.7
hereof (the "Merger Shares"), by (ii) the Fully Diluted Common Stock Number
(such quotient being referred to as the "Exchange Ratio"). 2,027,927 of such
aggregate number of Merger Shares are hereinafter referred to as the "Fixed
Shares" and the remaining 210,000 of such aggregate number of Merger Shares are
hereinafter referred to as the "Escrow Shares".
2.2 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Common Stock or of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding
share of common stock, par value $.01 per share, of Sub shall be converted into
and become one fully paid and nonassessable share of common stock, par value
$.01 per share, of the Surviving Corporation.
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(b) Cancellation of Treasury Stock. All shares of Common
Stock that are owned by the Company as treasury stock, if any, shall be
cancelled and retired and shall cease to exist and no stock of the Buyer or
other consideration shall be delivered in exchange therefor.
(c) Company Stock. Subject to Sections 2.3, 2.5 and 2.6,
each issued and outstanding share of Common Stock (other than shares of Common
Stock cancelled in accordance with Section 2.2(b) and any Dissenting Shares (as
defined in Section 2.8)) shall be converted into the right to receive a number
of fully paid and nonassessable shares (or fraction of a share) of Buyer Common
Stock equal to the Exchange Ratio. All such shares of Common Stock, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate formerly
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of Buyer Common Stock pursuant
to this Section 2.2(c), and any cash in lieu of fractional shares payable
pursuant to Section 2.5, upon the surrender of such certificate and the other
documents referred to in Section 2.3(a), in accordance with such Section
(collectively, the "Merger Consideration").
(d) Adjustment of Exchange Ratio. In the event the Buyer
changes the number of shares of Buyer Common Stock issued and outstanding prior
to the Effective Time pursuant to a stock split, stock dividend,
recapitalization, subdivision, reclassification, combination, exchange of shares
or similar transaction with respect to the outstanding Buyer Common Stock and
the record date therefor shall be prior to the Effective Time, the Exchange
Ratio (for purposes of this Article II and Section 6.7) shall be proportionately
adjusted to reflect such stock split, stock dividend, recapitalization,
subdivision, reclassification, combination, exchange of shares or similar
transaction.
(e) Company Stock Options. All Options which are
outstanding and not exercised as of the Effective Time, will be assumed by The
Buyer in accordance with Section 6.7.
2.3 Exchange of Certificates.
(a) At the Closing (after the Effective Time), each
Company Stockholder shall surrender and deliver to the Buyer:
(i) Certificates representing all of such Company
Stockholder's ownership of Common Stock;
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(ii) A properly completed letter of transmittal in a
form reasonably satisfactory to the Buyer and the Buyer's transfer agent; and
(iii) (A) In the case of Company Stockholders who or
which are Affiliates of the Company as of the date hereof (which Company
Stockholders are listed on Schedule 2 hereto), a duly executed Investment
Representation and Affiliate Lock-Up Agreement substantially in the form of
Exhibit A hereto (an "Investment Representation and Affiliate Lock-Up
Agreement"), and (B) in the case of each other Company Stockholder, a duly
executed Non-Affiliate Investment Representation Agreement substantially in the
form of Exhibit B hereto (a "Non-Affiliate Investment Representation
Agreement").
(b) At the Closing (after the Effective Time), the Buyer
shall (i) deliver (or cause to be delivered) to each Company Stockholder a
certificate representing the number of whole shares of Buyer Common Stock into
which such Company's Stockholder's shares of Common Stock have been converted
pursuant to Section 2.2(c), which number of shares of Buyer Common Stock shall,
subject to Section 2.5, be equal to such Stockholder's Ownership Percentage
Interest (as set forth on the Closing Stockholder Schedule) in the Fixed Shares
and (ii) deposit (or cause to be deposited) in escrow on behalf of each Company
Stockholder a number of whole shares of Buyer Common Stock equal to such Company
Stockholder's Ownership Percentage Interest (as set forth on the Closing
Stockholder Schedule) in the Escrow Shares, to be held and released in
accordance with an escrow agreement among the Buyer, the Stockholder
Representative (as defined in Section 8.8) and the Escrow Agent referred to
therein (the "Escrow Agent") substantially in the form of Exhibit C hereto (the
"Escrow Agreement").
(c) If any certificate(s) representing Common Stock held
by a Company Stockholder immediately prior to the Effective Time are not
surrendered at the Closing as provided in Section 2.3(a), after the Effective
Time, the Buyer will deliver (or cause to be delivered) to such Stockholder the
certificate representing Buyer Common Stock referred to in clause (i) of Section
2.3(b) at such time as such Company Stockholder surrenders and delivers to the
Buyer such certificate(s) and the other documents required to be surrendered and
delivered pursuant to Section 2.3(a).
2.4 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Stock shall thereafter be made.
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2.5 No Fractional Shares. No certificates representing fractional
shares of Buyer Common Stock shall be issued upon the surrender for exchange of
certificates representing Common Stock in accordance with Section 2.3, and no
fractional interest shall entitle a Company Stockholder to vote or to any rights
of a security holder. In lieu of fractional shares, each Company Stockholder who
would otherwise have been entitled to a fractional share of Buyer Common Stock,
will receive, upon the surrender and delivery by such Company Stockholder of the
certificate(s) and other documents required to be surrendered and delivered
pursuant to Section 2.3(a), an amount in cash (without interest) determined by
multiplying such fraction by 42.45.
2.6 Legends. The shares of Buyer Common Stock issued in the
Merger shall be characterized as "restricted securities" for purposes of Rule
144 under the Securities Act, and each certificate representing any of such
shares shall bear a legend identical or similar in effect to the following
legend (together with any other legend or legends required by applicable state
securities laws or otherwise including, if applicable, any legend with respect
to repurchase or other restrictions on any such shares under the Company Stock
Plan or related agreements as contemplated by Section 6.7(b)):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT
BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. [THESE SECURITIES ARE
ALSO SUBJECT TO AN INVESTMENT REPRESENTATION AND
LOCK-UP AGREEMENT WITH THE CORPORATION WHICH
RESTRICTS THE TRANSFER THEREOF UNTIL AUGUST 15,
2000, A COPY OF WHICH CAN BE OBTAINED FROM THE
CORPORATION AT ITS EXECUTIVE OFFICES.](1)
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(1) Bracketed language included only on certificates for shares of Buyer
Common Stock issued to Affiliates.
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The Buyer may issue appropriate stop transfer instructions to the
transfer agent for Buyer Common Stock to the foregoing effect.
2.7 No Liability. Notwithstanding any other provision of this
Agreement, neither the Buyer, the Surviving Corporation, the Buyer's transfer
agent nor any other Person shall be liable for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar laws.
2.8 Dissenting Shares.
(a) Notwithstanding any other provision of this
Agreement to the contrary, shares of Common Stock that are outstanding
immediately prior to the Effective Time and which are held by Company
Stockholders who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL and who shall not have
withdrawn such demand or otherwise have forfeited appraisal rights
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Merger Consideration. Such Company Stockholders shall
be entitled to receive payment of the appraised value of such shares of Common
Stock held by them in accordance with the provisions of such Section 262, except
that all Dissenting Shares held by Company Stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Common Stock under such Section 262 shall thereupon
be deemed to have been converted into and to have become exchangeable, as of the
Effective Time, for the right to receive, without interest, the Merger
Consideration upon surrender, in the manner provided in Section 2.3(a), of the
certificate or certificates which immediately prior to the Effective Time
represented such shares of Common Stock and the delivery of the other documents
required to be delivered pursuant to such Section 2.3.
(b) The Company shall give the Buyer (i) prompt notice of
any demands for appraisal received by the Company, withdrawals of such demands,
and any other instruments served pursuant to the DGCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the DGCL. The Company shall not, except
with the prior written consent of the Buyer, make any payment with respect to
any demands for appraisal, or offer to settle, or settle, any such demands.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure schedule executed and
delivered by the Company to the Buyer on or prior the date hereof and attached
hereto as Schedule 3 (the "Disclosure Schedule"), the section numbers of which
are numbered to correspond to the section numbers of this Agreement to which
they refer, the Company represents and warrants to the Buyer and Sub as set
forth below:
3.1 Organization, Qualification and Corporate Power.
(a) 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 qualified or licensed as a foreign corporation to conduct
business and is in good standing under the laws of each jurisdiction listed in
Section 3.1(a) of the Disclosure Schedule, which jurisdictions constitute every
jurisdiction where the nature of the Company's business or the ownership or
leasing of its properties requires such qualification, except for failures, if
any, to be so qualified or licensed which, individually or in the aggregate,
have not had and would not be reasonably likely to have a Material Adverse
Effect. The Company has all requisite corporate power and authority to own,
lease and operate its assets and to carry on its business as now being and as
heretofore conducted.
(b) The Company has furnished to the Buyer true and
complete copies of its Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and By-laws, as amended (the "Amended
By-laws"), each as in effect on the date hereof. The Company is not in default
under or in violation of any provision of the Certificate of Incorporation or
the Amended By-laws.
(c) All minute books, stock record books and other similar
records of the Company have been provided or made available to the Buyer or its
counsel prior to the execution of this Agreement, and are complete and correct
in all material respects. Such minute books contain a true and complete record
of all actions taken at all meetings and by all written consents in lieu of
meetings of the directors, stockholders and committees of the Board of Directors
of the Company from inception through the date hereof.
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(d) The Company has no Subsidiaries and does not own,
directly or indirectly, any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, limited liability company, joint
venture or other business organization or entity.
3.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists
of (i) 15,000,000 shares of Common Stock and (ii) 10,650,000 shares of preferred
stock, par value $0.001 per share, of which 4,000,000 shares are designated
Series A Preferred Stock, 3,570,810 are designated Series B Preferred Stock and
2,919,382 are designated Series C Preferred Stock. As of the date of this
Agreement, (i) 1,998,093 shares of Common Stock are issued and outstanding, of
which (A) 1,935,093 shares were issued upon the exercise of Options ("Purchased
Shares") and are subject to repurchase rights of the Company ("Purchased Share
Repurchase Rights") pursuant to the Company Stock Plan and the applicable
Purchase Agreement thereunder (each, a "Purchase Agreement") to the extent
unvested, (B) no shares were issued pursuant to the Stock Issuance Program
provided for in Article Three of the Company Stock Plan ("Restricted Shares")
and remain subject to repurchase rights of the Company (Restricted Share
Repurchase Rights and, together with Purchased Share Repurchase Rights, "Company
Repurchase Rights") in accordance with a Stock Issuance Agreement thereunder (a
"Stock Issuance Agreement"), and (C) no shares of Common Stock are held in the
treasury of the Company, (ii) 4,000,000, 3,570,810 and 2,919,382 shares of
Common Stock are reserved for future issuance upon conversion of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
respectively; (iii) 75,918 shares of Common Stock remain authorized and reserved
for issuance pursuant to the Company Stock Plan, and 1,698,716 shares are
reserved for issuance upon the exercise of currently outstanding Options; (iv)
4,000,000 shares of Series A Preferred Stock are issued and outstanding; (v)
3,570,810 shares of Series B Preferred Stock are issued and outstanding; and
(vi) 2,919,382 shares of Series C Preferred Stock are issued and outstanding.
All of the issued and outstanding shares of the Company's capital stock have
been duly authorized, and are valid issued, fully paid, nonassessable and free
of preemptive rights. None of the issued and outstanding shares of the Company's
capital stock has been issued in violation of any applicable federal or state
law or any preemptive rights or rights to subscribe for or purchase securities.
All shares of Company Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid,
nonassessable, and free of preemptive rights, and, assuming such issuance prior
to the Effective Time, will not have been issued in violation of any
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applicable federal or state law or any preemptive rights or rights to subscribe
for or purchase securities.
(b) Except as set forth in Section 3.2(a), there are no
equity securities of any class or series of the Company, or any security
directly or indirectly convertible into or exchangeable or exercisable for any
such equity securities ("Convertible Securities"), issued, reserved for issuance
or outstanding. Except as set forth in Section 3.2(a), there are no options,
warrants, calls, rights, commitments or agreements of any character to which the
Company is a party, or by which the Company is bound, obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company, or any security directly or indirectly
convertible into or exchangeable or exercisable for any such shares of capital
stock, or obligating the Company to grant, extend or accelerate the vesting of
or enter into any such option, warrant, call, right, commitment or agreement
("Equity Rights"). Except for the Voting Agreement being entered into by certain
stockholders of the Company and the Buyer on the date hereof substantially in
the form of Exhibit D hereto (the "Voting Agreement"), there are no voting
trusts, proxies or other agreements or understandings with respect to any
Company Stock to which the Company or, to the knowledge of the Company, any
other Person is a party or by which it or any such other Person is bound. There
are no obligations, contingent or otherwise, of the Company to repurchase,
redeem or otherwise acquire any Company Stock or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity.
(c) Section 3.2(c) of the Disclosure Schedule sets forth
lists of (i) all holders of Company Stock as of the Record Date (as defined in
Section 3.3(b)), the address of each such holder, as well as the class, series
and number of shares of Company Stock held by each such holder and, if
applicable, the number of such shares held by each such holder which are
Purchased Shares, the vesting schedule with respect thereto (including a
description of the circumstances under which such vesting schedule can or will
be accelerated) and (ii) all holders of Options, Convertible Securities or
Equity Rights as of the date hereof, the number of shares of Common Stock
subject thereto, the vesting schedule with respect thereto (including a
description of the circumstances under which such vesting schedule can or will
be accelerated) and the exercise, conversion or exchange price per share of each
such Option, Convertible Security or Equity Right. No action is required to be
taken by the Company, its Board of Directors, the Plan Administrator (as such
term is defined in the Company Stock Plan) or any holder of Options, Purchased
Shares or Restricted Shares to effect the treatment of Options, Purchased Shares
and Restricted Shares described in Section 6.7. No Options (or any portion
thereof, and including after the Buyer's assumption thereof as described in
Section 6.7) will vest, and no Company
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Repurchase Rights will lapse or terminate with respect to any Purchased Shares
or Restricted Shares (including after conversion of such shares in the Merger
into shares of Buyer Common Stock), solely as a result of the Merger.
(d) The Company has delivered to the Buyer an instrument
duly executed by the Warrant Holder, irrevocably agreeing with the Company to
exercise the Warrant for a number of shares of Common Stock equal to the number
of shares of Series B Preferred Stock for which the Warrant was exercisable,
effective immediately prior to the Effective Time.
(e) The Company has never declared, nor is there accrued,
any dividend or other distribution with respect to any Company Stock.
3.3 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
by the Company of this Agreement, the performance by the Company of its
obligations hereunder and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject, in the case of such consummation, only to
the approvals and actions of the Company's stockholders specified in Section
3.3(b). This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by the Buyer and
Sub, constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to any applicable bankruptcy, insolvency,
reorganization or similar laws now or hereafter in effect relating to creditors'
rights generally or to general principles of equity.
(b) The affirmative vote or action by written consent of
(i) the holders of a majority of the outstanding shares of Company Stock, voting
together as a single class, and (ii) the holders of a majority of the
outstanding shares of Preferred Stock, voting together as a single class (with
each share of Preferred Stock having such number of votes equal to the whole
number of shares of Common Stock into which such share of Preferred Stock is
convertible), is the only action by the holders of any class or series of
Company Stock necessary to adopt this Agreement and approve the Merger (the
"Merger Stockholder Approval Action"). The consent of the holders of 51% of the
outstanding shares of each series of Preferred Stock, in each case consenting as
a separate series (the "Preferred Stock Conversion Consent"), is the only action
by the holders of any class or series of Company Stock, and no other
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action by the Company or any other Person is, required to effect the Preferred
Stock Conversion. The Board of Directors of the Company has unanimously (w)
approved this Agreement and the Merger, (x) determined that this Agreement and
the Merger fair to and in the best interests of the holders of Company Stock and
declared the advisability of this Agreement, (y) determined to recommend that
the Company's stockholders vote, or act by written consent, in favor of adoption
of this Agreement, and (z) fixed the date of this Agreement as the record date
for the determination of stockholders entitled to execute a written consent
adopting this Agreement (the "Record Date"). The shares of Company Stock held by
stockholders of the Company listed on the signature pages of the Voting
Agreement represent, as of the Record Date, (i) a majority of the voting power
represented by all outstanding shares of Company Stock, (ii) a majority of the
outstanding shares of Preferred Stock, voting together as a single class and
(iii) at least 51% of the voting power represented by all outstanding shares of
each series of Preferred Stock (for purposes of this clause (ii), assuming each
such series is consenting as a separate series).
(c) The execution and delivery of this Agreement by the
Company does not, and the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby will not, (i) conflict with, or result in any violation or breach of any
provision of the Certificate of Incorporation or the Bylaws, (ii) conflict with,
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a payment obligation,
termination or right of termination, cancellation or right of cancellation,
acceleration or right of acceleration, of any right or obligation or loss of any
benefit), or require the consent, approval or waiver of any third party in order
to assign to the Buyer or for the Company to continue to enjoy the benefits of
or exercise any right, under, any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which the Company is a
party or by which it or any properties or assets may be bound, or (iii) conflict
with or violate any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its properties or assets, except, in the case of (iii), for any such
violations, breaches, defaults, terminations, cancellations, accelerations or
conflicts which would not, either individually or in the aggregate, have or be
reasonably likely to have a Material Adverse Effect.
(d) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") or other Person is required to be obtained by, or given to or with
respect to, the Company in connection with the execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder or the
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consummation by the Company of the transactions contemplated hereby, except for
(i) the filing of the Certificate of Merger with the Delaware Secretary of
State, and (ii) any such other consents, approvals, orders, authorizations,
registrations, declarations or filings which, if not obtained or made, would
not, either individually or in the aggregate, have or be reasonably likely to
have a Material Adverse Effect.
3.4 Financial Statements. The Company has previously delivered to
the Buyer true and complete copies of (i) the Company's audited balance sheets
as of December 31, 1998 and December 31, 1997 and the related statements of
operations, changes in stockholders' equity and cash flows and notes to
financial statements for the years then ended, along with the audit report of
the Company's independent auditors, PricewaterhouseCoopers LLP, on such balance
sheets and statements and (ii) its unaudited balance sheet as of December 31,
1999 (the "Company Balance Sheet"), and the related statements of operations,
changes in stockholders' equity and cash flows for the year then ended
(collectively, the "Company Financial Statements"). The Company Financial
Statements have been prepared from, and are in accordance with, the books and
records of the Company and present fairly the financial position and the results
of operations of the Company as of the dates and for the years indicated, in
each case in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, subject, in the case of
Company Financial Statements referred to in clause (ii), to normal and recurring
year end adjustments which will not be material. The Company Balance Sheet is
the Company's most recent regularly prepared balance sheet, and the statement of
operations for the period then ended referred to above is the Company's most
recent regularly prepared statement of operation or income, in each case for
purposes of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 and the
rules and regulations thereunder.
3.5 Absence of Undisclosed Liabilities. As of the date of the
Company Balance Sheet, the Company had no liabilities of any nature, whether
accrued, absolute, contingent or otherwise (including, without limitation,
liabilities as guarantor or otherwise with respect to obligations of others,
written or oral customer commitments, or liabilities for taxes due or then
accrued or to become due), other than liabilities (a) adequately reflected or
reserved against on the Company Balance Sheet or (b) incurred since the date of
the Company Balance Sheet in the ordinary course of business which have not had
and are not reasonably likely to have a Material Adverse Effect.
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3.6 Accounts Receivable. All accounts receivable of the Company,
whether reflected on the Company Balance Sheet or otherwise, represent sales
actually made in the ordinary course of business. Allowances for doubtful
accounts and returns have been prepared in accordance with past practices of the
Company.
3.7 Intellectual Property.
(a) Company Intellectual Property. All trademarks,
service marks, trade names, Internet domain names, designs, logos, slogans, and
general intangibles of like nature, together with all goodwill, registrations
and applications related to the foregoing (collectively, "Trademarks"); patents
and industrial design registrations or applications (including any
continuations, divisionals, continuations- in-part, renewals, reissues, and
applications for any of the foregoing); copyrights (including any registrations
and applications therefor); computer software programs or applications (in both
source and object code form) ("Software Programs"); technical documentation
relating to the Software Programs ("Technical Documentation"); "mask works" (as
defined under 17 USC Section 901) and any registrations and applications for
"mask works"; technology, trade secrets and proprietary or other confidential
information, know-how, proprietary processes, formulae, algorithms, models, and
methodologies (collectively, "Trade Secrets"); moral rights; rights of publicity
and privacy relating to the use of the names, likenesses, voices, signatures and
biographical information of real persons; in each case that are or have been
used in (including without limitation in the development of) the Company's
business, or that are used in or necessary for the conduct of the Company's
business as currently conducted or contemplated to be conducted, are hereinafter
referred to as the "Company Intellectual Property."
(b) Applications and Registrations. Section 3.7(b) of
the Disclosure Schedule contains a true and complete list of all of the
Company's U.S. and foreign (i) patents and patent applications, (ii) Trademark
registrations and applications therefor and material unregistered Trademarks;
(iii) copyright registrations and applications therefor; and (iv) other filings
and formal actions made or taken pursuant to federal, state, local and foreign
laws by the Company to protect its interests in the Company Intellectual
Property. The Company is listed in the records of the appropriate U.S., state or
foreign registry as the sole current owner of record for each listed application
or registration. With respect to the listed applications, each such application
has been prosecuted in full compliance in all material respects with all
applicable rules, policies and procedures of the United States Patent and
Trademark Office.
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(c) Rights to Company Intellectual Property. The Company
Intellectual Property consists solely of items and rights which are: (i) owned
by the Company; (ii) in the public domain; or (iii) rightfully used by the
Company and its successors pursuant to a valid license. The Company has all
rights in the Company Intellectual Property necessary to carry out the Company's
business as currently conducted and as currently contemplated to be conducted.
(d) Third Party Claims. To the Company's knowledge, the
conduct of the Company's business as conducted in the past did not infringe
(when conducted), and as currently conducted or as currently contemplated to be
conducted does not infringe (either directly or indirectly, such as through
contributory infringement), any intellectual property right owned or controlled
by any third party. There is no pending or, to the best of the Company's
knowledge, threatened claim, suit, arbitration or other adversarial proceeding
before any court, agency, arbitral tribunal, or registration authority in any
jurisdiction (collectively, "Claims") (i) involving the Company Intellectual
Property owned by the Company, or, to the best of the Company's knowledge, the
Company Intellectual Property licensed to the Company or (ii) alleging that the
activities or the conduct of the Company's business does or will infringe upon,
violate or constitute the unauthorized use of the intellectual property rights
of any third party or challenging the ownership, use, validity, enforceability
or registrability of any Company Intellectual Property, nor to the knowledge of
the Company are there any facts which could reasonably be expected to give rise
to any such Claim. There are no settlements, forebearances to ▇▇▇, consent
judgments or orders or similar obligations other than license agreements in the
ordinary course of business which (a) restrict the Company's rights to use any
Company Intellectual Property, (b) restrict the Company's business in order to
accommodate a third party's intellectual property rights or (c) permit third
parties to use any Intellectual Property owned or controlled by the Company. To
the knowledge of the Company (x) all registered, granted or issued patents, mask
works, Trademarks and copyrights held by the Company are valid, enforceable and
subsisting and (y) there has been no denial, refusal or similar action by any
governmental authority with respect to any patent, copyright or Trademark
application filed by or on behalf of the Company. To the Company's knowledge,
there is no unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property by any third party, employee or former employee.
(e) Royalties. Except as set forth on Section 3.7(e)
of the Disclosure Schedule, to the best knowledge of the Company 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
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Company Intellectual Property, other than salaries and sales commissions paid to
employees and sales agents in the ordinary course of business.
(f) Personnel. All personnel of the Company, including
employees, agents, consultants and contractors, who have contributed to or
participated in the conception and development of any part of the Company
Intellectual Property on behalf of the Company have executed nondisclosure
agreements or employment agreements containing nondisclosure provisions, that
adequately protect the Company's proprietary interests in the Company
Intellectual Property and either (i) have been a party to a "work-for-hire"
arrangement or agreements with the Company in accordance with applicable
national and state law that has accorded the Company full, effective, exclusive
and original ownership of all tangible and intangible property thereby arising,
or (ii) have executed appropriate instruments of assignment in favor of the
Company as assignee that have conveyed to the Company effective and exclusive
ownership of all tangible and intangible property thereby arising. No current or
former partner, director, officer, or employee of the Company (or any
predecessor in interest) will, after giving effect to the transactions
contemplated herein, own or retain any rights in or to any of the Company
Intellectual Property.
(g) Third Party Agreements. Except as set forth in
Section 3.7(g) of the Disclosure Schedule, the Company is not, nor as a result
of the execution or delivery of this Agreement, or performance by the Company of
its obligations hereunder or the consummation by the Company of the transactions
contemplated hereby, will the Company be, in violation of any license,
sublicense, agreement or instrument to which the Company is a party or otherwise
bound, nor will execution or delivery of this Agreement, or performance of the
Company's obligations hereunder or the consummation by the Company of the
transactions contemplated hereby, cause the diminution, termination or
forfeiture of any of the Company's rights in the Company Intellectual Property
or require the consent of any governmental authority or third party in respect
of any such Company Intellectual Property. Each such license, sublicense,
agreement or instrument constitutes the valid and binding obligation of the
Company and, to the knowledge of the Company, each other party thereto,
enforceable in accordance with its terms, and there exists no event or condition
which will result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default by any party thereto.
(h) Protection. The Company has taken reasonable measures
to protect the confidentiality of its Trade Secrets. To the best of the
Company's knowledge, there has been no misuse or misappropriation of any Company
Trade Secret by any person or entity. Without limitation of the foregoing,
except as set forth
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in Section 3.7(h) of the Disclosure Schedule, the source code and system
documentation relating to the Software Programs owned by the Company (i) have at
all times been maintained in strict confidence, (ii) have been disclosed by the
Company only to employees who have had a "need to know" the contents thereof in
connection with the performance of their duties to the Company and who have
executed appropriate nondisclosure agreements, (iii) have not been licensed or
disclosed to any third party, and (iv) are not the subject of any escrow or
similar agreement giving any third party rights in such source code and/or
system documentation upon the occurrence of certain events.
(i) Third-Party Software. Section 3.7(i) of the
Disclosure Schedule contains a complete list of (i) all software libraries,
compilers and other third-party software sold with, incorporated into or used in
the development of the Software Programs and (ii) all material software systems
and applications used by the Company in the operation of its business other than
off-the-shelf software. Section 3.7(i) of the Disclosure Schedule also lists all
license agreements by which the Company is bound for the use of such software
and, if any such software is not licensed, the basis of the use of such software
by the Company. All use of each such software item by the Company has been in
full compliance in all material respects with the respective license agreement
or other right of use listed for such item in Section 3.7(i) of the Disclosure
Schedule.
(j) Integrity. Except with respect to demonstration or
trial copies, to the best knowledge of the Company no portion of any Software
Program contains or will contain any "back door," "time bomb," "Trojan horse,"
"worm," "drop dead device," "virus" or other software routines or hardware
components designed to permit unauthorized access; to disable or erase software,
hardware, or data; or to perform any other similar actions.
(k) Adequacy of Technical Documentation. The Technical
Documentation includes the source code (with comments) for all Software
Programs, as well as any additional documentation and other materials that may
be necessary to render such Software Programs understandable and usable to a
person ordinarily skilled in such matters. The Technical Documentation also
includes any programs (including compilers), "workbenches," tools and higher
level (or "proprietary") languages necessary for the development, maintenance
and/or implementation of the Software Programs.
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(1) Year 2000.
(i) All of (a) the internal systems used in the
business or operations of the Company, including without limitation computer
hardware systems, software, applications, firmware, equipment containing
embedded microchips and other embedded systems, and (b) the software, hardware,
firmware and other technology that constitute part of the products and services
manufactured, marketed, licensed, sold or offered for license or sale by the
Company to third parties are Year 2000 Compliant (as defined below).
(ii) The Company is not aware of any failure to be
Year 2000 Compliant of any third-party system used in connection with the
business, products, services or operations of the Company, including without
limitation any system belonging to any of the Company's vendors, co-venturers,
service providers or customers.
(iii) The Company has not provided any
representation, warranty or guarantee for any product sold or licensed, or
service provided, by the Company to the effect that such product or service (a)
complies with or accounts for the fact of the year change from December 31, 1999
to January 1, 2000, (b) will not be adversely affected with respect to
functionality, interoperability, connectivity, performance, reliability or
volume capacity (including without limitation the processing storage, recall and
reporting of data) by virtue of the year change from December 31, 1999 to
January 1, 2000 or (c) is otherwise Year 2000 Compliant.
(iv) The Company has received satisfactory written
assurances and warranties from all of its key vendors, co-venturers, service
providers and customers that are material to the ongoing operation of the
business of the Company that past and future products, software, equipment,
components, or systems provided by such parties are (or in the case of future
products, will be) Year 2000 Compliant.
(v) The Company has conducted Year 2000 audits with
respect to (a) each of the Software Programs, (b) each of the internal systems
used in the business, products, services and operations of the Company,
including without limitation computer hardware systems, software, applications,
firmware, equipment containing embedded microchips and other embedded systems,
and (c) all of the software, applications, hardware, firmware and other
technology which constitute part of the products and services manufactured,
marketed, performed, sold or licensed to third parties by the Company.
(vi) For purposes of this Agreement, "Year 2000
Compliant" means that the applicable system, product, service or item (a) will
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accurately receive, record, store, provide, recognize, recall and process all
date and time data from, during, into and between the years 1999, 2000 and 2001,
and all years thereafter; (b) will accurately perform all date-dependent
calculations and operations (including without limitation, mathematical
operations, sorting, comparing and reporting) from, during, into and between the
years 1999, 2000 and 2001, and all years thereafter; and (c) will not
malfunction, cease to function or provide invalid or incorrect results as a
result of (1) the change of years from 1999 to 2000 or from 2000 to 2001, (2)
date data, including date data which represents or references different
centuries or dates during 1999, 2000 and 2001 or (3) the occurrence of any
particular date; in each case without human intervention, provided, in each
case, that all software, applications, hardware and other systems used in
conjunction with such system or item that are not owned or licensed by the
Company correctly exchange date data with or provide date data to such system or
item.
3.8 Absence Of Changes. Since December 31, 1998, there has not
been:
(a) any event or occurrence which would be reasonably
likely to have a Material Adverse Effect;
(b) any transaction, commitment, contract or agreement
entered into by the Company or any relinquishment by the Company of any contract
or other right in any case having a value of or involving aggregate payments or
value in excess of $50,000 other than in the ordinary course of business;
(c) any redemption or other acquisition of any capital
stock of the Company by the Company or any declaration, setting aside, or
payment of any dividend or distribution of any kind with respect to any shares
of capital stock of the Company;
(d) any increase in compensation, bonus or other benefits
payable or to become payable by the Company to any of its directors, officers or
employees, other than in the ordinary course of business;
(e) any entering into or granting by the Company of any
new employment agreement providing for annual compensation over $100,000, any
new employee benefit, deferred compensation or other similar employee benefit
arrangement, or any new consulting arrangement providing for annual compensation
over $100,000 and any grant of any severance or termination rights to any
director, officer or employee of the Company or any increase in benefits payable
under existing severance or termination pay policies or employment agreements;
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(f) any change in accounting policies, principles,
methods or practices, including any material change with respect to reserves
(whether for bad debts, contingent liabilities or otherwise) of the Company;
(g) any making by the Company of any loan or advance to
any stockholder, officer, director or consultant (other than expense advances
made in the ordinary course of business), or any other loan or advance otherwise
than in the ordinary course of business;
(h) except for inventory or equipment acquired in the
ordinary course of business, any acquisition by the Company of all or any part
of the assets, properties, capital stock or business of any other person or
entity;
(i) any destruction of, damage to or loss of any assets
material to the business of the Company (whether or not covered by insurance);
(j) a material adverse change in a material customer,
supplier, licensee or licensor relationship (including, without limitation any
cancellation, termination or adverse modification or threatened cancellation,
termination or adverse modification of any such relationship;
(k) claim of wrongful discharge or claim of other unlawful
labor practice or action made or brought against the Company;
(l) any litigation commenced or, to the Company's
knowledge, threatened against the Company or any litigation commenced or
threatened by the Company;
(m) except in the ordinary course of business, any sale,
abandonment or any other disposition of any of the Company's assets or
properties;
(n) any disposition or lapse of rights with respect to
any Company Intellectual Property or any disclosure to third parties with
respect thereto except under valid and binding confidentiality agreements,
copies of which have previously been delivered to the Buyer; or
(o) any commitment, understanding or agreement by the
Company or any of its directors, officers or employees to do any of the things
described in the preceding clauses (a) through (n).
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3.9 Tax Matters.
(a) The Company has filed all Tax Returns required to be
filed by it, and all such Tax Returns are correct and complete. The Company has
timely paid all Taxes due and owing and has established adequate reserves in its
financial statements for any Taxes accrued but not yet due and owing. The
Company has complied in all respects with all applicable laws, rules and
regulations relating to Taxes required to be withheld or collected, including,
without limitation, Taxes required to be withheld pursuant to Sections 1441 and
1442 of the Code and Taxes required to be withheld from employee wages. There
are no Tax liens on any assets of the Company except liens for current Taxes not
yet due.
(b) There has not been any audit of any Tax Return filed
by the Company and no audit of any such Tax Return is in progress and the
Company has not been notified by any tax authority that any such audit is
contemplated or pending. No Tax deficiency or claim for additional Taxes has
been asserted or, to the Company's knowledge, threatened to be asserted against
the Company by any taxing authority. No extension of time with respect to any
date on which a Tax Return was or is to be filed by the Company is in force, and
no waiver or agreement by the Company is in force for the extension of time for
the assessment or payment of any Tax. The Company has not been informed by any
jurisdiction that the jurisdiction believes that the Company was required to
file any Tax Return that was not filed.
(c) The Company has not agreed to, and is not required
to, make any adjustments under Section 481(a) of the Code by reason of a change
in accounting method or otherwise.
(d) The Company (i) is not a "consenting corporation"
within the meaning of Section 341(f) of the Code, and none of the assets of the
Company are subject to an election under Section 341(f) of the Code; (ii) has
not been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code; or (iii) has no actual or potential liability for
any Taxes of any person (other than the Company) under Treasury Regulation
Section 1.1502-6 (or any similar provision of law in any jurisdiction), or as a
transferee or successor, by contract, or otherwise; and (iv) has been a valid "C
corporation" for federal, state and local tax purposes at all times since
inception.
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(e) The Company (i) is not or has never been a member of
a group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns or (ii) is a party to or bound by
any Tax indemnity, Tax sharing or Tax allocation agreement.
(f) The Company has delivered to the Buyer correct and
complete copies of all of its Tax Returns.
(g) For purposes of this Agreement, the term "Tax"
includes all federal, state, local and foreign taxes or assessments, including
income, sales, gross receipts, excise, use, value added, royalty, franchise,
payroll, withholding, property and import taxes and any additions to tax,
interest or penalties applicable thereto. For purposes of this Agreement, the
term "Tax Return" means any report, return, statement, declaration or other
written information required to be supplied to a taxing authority in connection
with Taxes (collectively "returns") and any amended returns.
(h) No state or federal "net operating loss" of the
Company determined as of the Closing Date is subject to limitation on its use
pursuant to Section 382 of the Code or comparable provisions of state law as a
result of any ownership change within the meaning of Section 382(g) of the Code
or comparable provisions of any state law occurring prior to the Closing Date.
3.10 Compliance with Laws.
(a) The Company has all material licenses, permits,
franchises, orders or approvals of any federal, state, local or foreign
governmental or regulatory body required for the conduct of the Company's
business as currently conducted (collectively, "Permits"). All Permits are in
full force and effect and no proceeding is pending or, to the Company's
knowledge, threatened to revoke or limit any Permit.
(b) The Company is not in violation of any applicable
law, ordinance or regulation or any order, judgment, injunction, decree or other
requirement of any court, arbitrator or governmental or regulatory body, except
for violations that would not, individually or in the aggregate, have a Material
Adverse Effect. Since its organization, the Company has not received written
notice of, and there has not been any citation, fine or penalty imposed against
the Company for, any such violation or alleged violation.
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3.11 Actions and Proceedings. There are no outstanding orders,
awards, judgments, injunctions, decrees or other requirements of any court,
arbitrator or governmental or regulatory body against the Company. There are no
actions, suits, investigations or claims or legal, administrative or arbitration
proceedings pending or, to the knowledge of the Company, threatened against the
Company that, individually or in the aggregate, would, or would be reasonably
likely to, have a Material Adverse Effect. To the Company's knowledge, there is
no fact, event or circumstance now in existence that could be expected to give
rise to any action, suit, claim, proceeding or investigation that, individually
or in the aggregate, would, or would be reasonably likely to, have a Material
Adverse Effect.
3.12 Contracts and Other Agreements. Section 3.12 of the
Disclosure Schedule sets forth a list of the following contracts and other
agreements to which the Company is a party or by or to which any of its assets,
properties or securities are bound or subject (each, a "Material Contract"):
(a) any agreement or series of related agreements
requiring aggregate payments by or to the Company of more than $50,000;
(b) any agreement with or for the benefit of any current
or former officer, director, holder of any security, employee or consultant of
the Company under which the Company has any obligations as of the date hereof;
(c) any agreement with any labor union or association
representing any employee of the Company;
(d) 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);
(e) any agreement for the sale of any of the assets or
properties of the Company other than in the ordinary course of business or for
the grant to any person of any options, rights of first refusal, or preferential
or similar rights to purchase any such assets or properties;
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(f) 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 $50,000;
(g) any agreement which contains covenants of the Company
not to compete 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 in
any line of business of the Company;
(h) any agreement with customers or suppliers for the
sharing of fees, the rebating of charges or other similar arrangements;
(i) any agreement obligating the Company to deliver
maintenance services or future product enhancements or containing a "most
favored nation" pricing clause;
(j) any agreement relating to the acquisition by the
Company of any operating business or the capital stock of any other Person;
(k) 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);
(l) any agreements, notes or other instruments relating
to or evidencing outstanding indebtedness of the Company for borrowed money
(including capitalized lease obligations);
(m) any lease, sublease or other agreement under which the
Company is lessor or lessee of any real property or equipment or other tangible
property;
(n) any agreement with a change of control provision or
otherwise requiring any consent, approval, waiver or other action by any Person
in connection with the Merger;
(o) any stock option agreement, restricted stock
agreement, employment or severance agreement, phantom stock plan or bonus,
incentive or similar agreement, arrangement or understanding;
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(p) any agreement involving the assignment, transfer,
license (whether as licensee or licensor) or pledge or encumbrance of any
Company Intellectual Property;
(q) any distribution or sales representative agreement or
agreement appointing any agent; and
(r) any other material agreement whether or not made in
the ordinary course of business.
True and complete copies of all Material Contracts (and all amendments, waivers
or other modifications thereto) have been furnished or made available to the
Buyer. Each Material Contract is valid, subsisting, in full force and effect,
binding upon the Company and, to the Company's knowledge, the other parties
thereto in accordance with their terms, and the Company is not in default under
any of them, nor, to the Company's knowledge, is any other party to any Material
Contract in default thereunder, nor, to the Company's knowledge, does any
condition exist that with notice or lapse of time or both would constitute a
default thereunder, except, in each of the foregoing cases, such defaults as
would not, either individually or in the aggregate, have, or be reasonably
likely to have, a Material Adverse Effect.
3.13 Bank Accounts and Powers of Attorney. Section 3.13 of the
Disclosure Schedule identifies all bank and brokerage accounts of the Company,
whether or not such accounts are held in the name of the Company, lists the
respective signatories therefor and lists the names of all persons holding a
power of attorney from the Company with respect to such accounts.
3.14 Properties.
(a) The Company owns and has good title to all of its
assets and properties reflected as owned on the Company Balance Sheet, free and
clear of any lien, claim or other encumbrance, except for (i) assets and
properties disposed of, or subject to purchase or sales orders, in the ordinary
course of business since the date of the Company Balance Sheet, (ii) liens or
other encumbrances securing the liens of materialmen, carriers, landlords and
like persons, all of which are not yet due and payable and (iii) statutory liens
for Taxes not yet delinquent.
(b) The Company does not own any real property and does
not have any options or contractual obligations to purchase or acquire any
interest in real property. The Company has a valid leasehold interest in all of
the buildings, structures and leasehold improvements, and owns or has a valid
leasehold interest in
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all equipment and other tangible property, used in the conduct of its business
as currently conducted, all of which are in good and sufficient operating
condition and repair, ordinary wear and tear excepted. There is no equipment
located on the premises of the Company or used in the business of the Company
that is on loan from another party.
3.15 Customers, Distributors and Suppliers. Section 3.15 of the
Disclosure Schedule sets forth (a) all representatives or distributors of the
Company (whether pursuant to commission, royalty or other arrangement), (b) the
five largest customers of the Company in terms of revenue recognized during the
period from January 1, 1999 through December 31, 1999 and (c) the ten largest
suppliers of Company in terms of costs recognized for the purchase of products
or services during the period from January 1, 1999 through December 31, 1999
(collectively, the "Distributors, Customers and Suppliers"). The Company does
not know of any plan or intention of any of the Distributors, Customers or
Suppliers, and the Company has not received any written or oral threat from any
of the Distributors, Customers or Suppliers, to terminate, cancel or otherwise
adversely modify its relationship with the Company or to decrease materially or
limit its products to or services to the Company or its usage, purchase or
distribution of the services or products of the Company.
3.16 Employee Benefit Plans.
(a) Definitions. The following terms shall have the
meanings set forth below:
(i) "Affiliate" shall mean any other person or
entity controlled by or under common control with the Company within the meaning
of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "DOL" shall mean the United States Department
of Labor.
(iii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(iv) "Employee" shall mean any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
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expatriation, visas, work permit or similar agreement or contract between the
Company or any Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the United States Internal
Revenue Service;
(vii) "Pension Plan" shall refer to each Company
Employee Plan that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA;
(viii) "Company Employee Plan" shall refer to any
plan, program, policy, practice, contract, agreement or other arrangement
providing for compensation, deferred compensation, incentive compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
formal or informal, funded or unfunded, including without limitation, each
"employee benefit plan", within the meaning of Section 3(3) of ERISA that 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, and pursuant to which
the Company or any Affiliate has any liability, contingent or otherwise;
(b) Schedule. Section 3.16(b) of the Company Disclosure
Schedule contains an accurate and complete list of each Company Employee Plan
and each Employee Agreement. Neither the Company nor any Affiliate has any plan
or commitment, to establish any new Company Employee Plan or written Employee
Agreement, or to modify any Company Employee Plan or Employee Agreement (except
to the extent required by law).
(c) Documents. The Company has provided or made available
to The Buyer true and complete copies of (i) all documents comprising each
written Company Employee Plan and each written Employee Agreement, including all
amendments thereof and any trust agreements, insurance contracts, and other
funding agreements; (ii) the two most recent annual reports (Series 5500 and all
schedules thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; (iii) the most recent actuarial
reports, if any, prepared for each of the Company Employee Plans for which such
report is required or was prepared and the most recent certified financial
statements for each of the Company Employee Plans, if any, for which such report
is required or was prepared; (iv) the most recent summary plan description
together with the most recent summary of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; and (v) all IRS
determination letters and rulings, if any,
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relating to Company Employee Plans and copies of all material applications and
correspondence to or from the IRS or the DOL with respect to any Company
Employee Plan.
(d) Employee Plan Compliance. (i) The Company and each
Affiliate has performed in all material respects all obligations required to be
performed by it under each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in material compliance with all applicable laws, statutes, orders,
rules and regulations, including but not limited to ERISA or the Code; (ii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Section 406 of ERISA, that is not otherwise exempt, has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the knowledge of Company, threatened or anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the assets of
any Company Employee Plan; (iv) each Company Employee Plan (other than any
401(k) or option plan) can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without material
liability to the Company, the Surviving Corporation or any of its Affiliates
(other than for ordinary administration expenses typically incurred in a
termination event and benefits accrued through the effective date of such
amendment, termination or discontinuance); (v) to the knowledge of the Company
there are no inquiries or proceedings pending or threatened by the IRS or DOL
with respect to any Company Employee Plan; (vi) neither the Company nor any
Affiliate is subject to any material penalty or tax with respect to any Company
Employee Plan under Section 406(i) of ERISA or Section 4975 through 4980 of the
Code; and (vii) all contributions, premiums or other payments due and owing from
the Company or its Affiliates with respect to any Company Employee Plan have
been timely paid or adequately provided for on the Company Balance Sheet.
(e) Pension Plan Qualification Funding.
(i) With respect to each Pension Plan, if any,
which is intended to be qualified under Section 401(a) of the Code, (A) such
Pension Plan has received a favorable determination opinion, notification or
advisory letter as to its qualification from the IRS, or has remaining a period
of time under applicable law in which to apply for such a letter, and (B)
nothing has occurred, whether by action or failure to act, which would cause the
loss or denial of such qualification.
(ii) No Pension Plan is or has been subject to
Section 302 or Title IV of ERISA or Section 412 of the Code.
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(f) No Post-Employment Obligations. Except as required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or
other applicable law or pursuant to a Pension Plan, no Company Employee Plan
provides, or has any liability to provide, life insurance, medical benefits, or
other employee benefits to any Employee upon his or her retirement or
termination of employment for any reason, except for benefits accrued through
the date of termination and as may be required by statute, and neither the
Company nor any Affiliate has ever represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) that such Employee(s) would be provided with medical welfare benefits
upon their retirement or termination of employment, except to the extent
required by statute.
(g) Effect of Transaction. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not, constitute an event under any Company Employee Plan, Employee Agreement,
trust or loan or applicable law that will result in any payment (whether of
severance pay, unemployment compensation, golden parachute, bonus or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee. No amount
payable under any Company Employee Plan or Employee Agreement or otherwise will
fail to be deductible for federal income tax purposes by virtue of Section 280G
of the Code.
3.17 Employee Relations. The Company has approximately 54
full-time equivalent employees. The Company is not delinquent in payments to any
of its employees or consultants for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them to the date hereof
or amounts required to be reimbursed to such employees. Upon termination of the
employment of any employees, neither the Company nor the Buyer or the Surviving
Corporation will be liable to any of such employees for severance pay or any
other payments (other than accrued salary, vacation or sick pay in accordance
with the Company's normal policies) as a result of any oral or written
agreements made by the Company prior to the Closing. True and complete
information as to the name, current job title, base salary, bonus potential,
commissions and termination obligations of all current directors, officers,
employees or consultants of the Company, has been previously furnished to the
Buyer.
3.18 Employment Matters. The Company is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
employees. No work stoppage or labor strike against the Company is pending or,
to the Company's
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knowledge, threatened. The Company is not involved in or, to the Company's
knowledge, threatened with, any labor dispute, grievance, or litigation relating
to labor, safety or discrimination matters involving any of the Company's
employee, including, without limitation, charges of unfair labor practices or
discrimination complaints. To the Company's knowledge, it has not 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, (i) any collective bargaining agreement or union contract with respect to
employees and no collective bargaining agreement is being negotiated by the
Company or (ii) any statutory works council or other agreement, statute, rule or
regulation that mandates employee approval, participation, consultation or
consent with regard to the transactions contemplated hereby.
3.19 Employee Conflicts. To the Company's knowledge, no
employee of the Company (a) is in violation of any term of any employment
contract, inventions disclosure agreement, confidentiality agreement,
non-competition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by the Company because
of the nature of the business conducted or presently proposed to be conducted by
the Company or relating to the use of trade secrets or proprietary information
of others or (b) has given notice to the Company nor is the Company otherwise
aware, that any such employee intends to terminate his or her employment with
the Company.
3.20 Management Relationships. No executive officer or
director of the Company owns any interest in (a) any property or assets of the
Company (except as a stockholder), (b) any current competitor, customer or
supplier of the Company, or (c) any Person which is currently a party to any
material contract or agreement with the Company, other than holdings of less
than 1% of a class of a company's publicly traded securities and ownership
interests held by investment funds affiliated with the Company's directors (and
personal ownership interests of such directors and their families related to the
ownership interests of such funds).
3.21 Insurance. Section 3.21 of the Company Disclosure
Schedule sets forth a list of all policies or binders of fire, liability,
product liability, workmen's compensation, vehicular, directors' and officers'
and other insurance held by or on behalf of the Company. Such policies and
binders are in full force and effect, are reasonably believed by the Company to
be adequate for the businesses engaged in by the Company, as applicable, and are
in conformity in all material respects with the requirements of all leases or
other agreements to which the Company is a party and are valid and enforceable
in accordance with their terms. The Company is not in default with respect to
any provision contained in any such policy or binder nor has
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the Company failed to give any notice or present any claim under any such policy
or binder in due and timely fashion. There are no outstanding unpaid claims
under any such policy or binder. The Company has not received notice of
cancellation or non-renewal of any such policy or binder.
3.22 Brokers and Finders; Third Party Expenses.
(a) No Person has acted as broker, finder, agent,
investment banker, financial adviser or similar intermediary on behalf of the
Company or any stockholder of the Company in connection with this Agreement or
the transactions contemplated hereby, and there are no other brokerage
commissions, investment banking or financial adviser fees, finders' fees or
similar fees or commissions payable in connection herewith based on any
agreement, arrangement or understanding with the Company or any Affiliate,
director or stockholder of the Company, or any action taken by any of them.
(b) Section 3.22(b) of the Disclosure Schedule sets
forth a reasonable estimate of the amount of all fees and expenses, including
without limitation of attorneys and accountants, expected to be payable by the
Company to any third parties in connection with this Agreement or the
transactions contemplated hereby.
3.23 Hazardous Materials.
(a) To the Company's knowledge, there has been no
generation, use, handling, storage or disposal of any Hazardous Materials (as
defined in this Section 3.23) in violation of any applicable Environmental Law
(as defined in this Section 3.23) at any site owned or premises leased by the
Company during the period of the Company's lease or prior thereto, nor has there
been or is there any release of any Hazardous Materials on or at any such site
or premises during such period or prior thereto in violation of any applicable
Environmental Law or which created or will create an obligation on the part of
the Company to report or remediate such release. "Hazardous Materials" means any
"hazardous waste" as defined in either the United States Resource Conservation
and Recovery Act or regulations adopted pursuant to said Act, and any "hazardous
substances" or "hazardous materials" as defined in the United States
Comprehensive Environmental Response, Compensation and Liability Act.
"Environmental Laws" means all national, federal, state, and local laws and
regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to releases or
threatened releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, release,
disposal, transport or
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handling of Hazardous Materials, and all laws and regulations with regard to
recordkeeping, notification, disclosure and reporting requirements respecting
Hazardous Materials.
(b) The Company has previously furnished or made
available to the Buyer copies of any environmental audits or risk assessments,
site assessments, documentation regarding off-site disposal of Hazardous
Materials, spill control plans and material correspondence with any governmental
agency available to it regarding the foregoing.
3.24 Certain Business Practices. The Company has not (i) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
payments related to a political activity, (ii) made any unlawful payment to any
foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (iii) consummated any transaction or
made any payment or entered into any agreement or arrangement or taken any other
action in violation of Section 1128B(b) of the Social Security Act, as amended,
or (iv) to its knowledge, made any other unlawful payment.
3.25 Stockholder Composition. As of the Record Date, the
Company has 61 record holders of Company Stock, which, to the Company's
knowledge, except for 30 holders, are all Accredited Investors. The Company has
obtained, or will obtain promptly (and in any event within seven days after the
date hereof), agreements from certain of its holders of Options, in form and
substance reasonably satisfactory to the Buyer, restricting the exercise of such
Options (each an "Optionholder Lock-Up Agreement"), and has taken or will take
all other actions necessary, so that as of the Record Date and immediately prior
to the Effective Time there will be no more than 35 holders of Company Stock who
or which are not Accredited Investors. For purposes of this Section 3.25, the
number of holders of Company Stock shall be calculated in the same manner as the
number of "purchasers" is calculated pursuant to Rule 501(e) under the
Securities Act (for this purpose excluding clause (iv) of subparagraph (1) of
such Rule).
3.26 Information Statement. The information supplied by the
Company for inclusion in the Consent Solicitation/Information Statement (the
"Consent Solicitation/Information Statement") to be sent to the stockholders of
the Company in connection with the solicitation of written consents to adopt
this Agreement and to effect the Preferred Stock Conversion ("Written Consents")
will not, on the date the Consent Solicitation/Information Statement is first
mailed or otherwise provided to stockholders of the Company or at the Effective
Time, contain
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any statement which, at such time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the
Consent Solicitation/Information Statement not false or misleading or necessary
to correct any statement in any earlier communication with respect to the
solicitation of the Written Consents which has become false or misleading.
3.27 Termination of Existing Agreements with Holders of
Company Stock. The Company has taken or, prior to Closing, will have taken all
action, and has obtained the written consent, approval or agreement of any
Person, required to terminate in their entirety, effective at the Effective
Time, all agreements or instruments between or among the Company and any
stockholders of the Company, including without limitation the Second Amended and
Restated Rights Agreement entered into as of June 2, 1999, but excluding
agreements relating to the employment of any Company Stockholder by the Company
(including any Proprietary Information and Inventions Agreement) and any
agreements entered into pursuant to the Company Stock Plan (such terminated
agreements being referred to as the "Existing Company Stockholder Agreements"),
so that as of the Effective Time, the Existing Company Stockholder Agreements
shall be void and of no further force or effect and no Person shall have any
rights or obligations whatsoever thereunder.
3.28 Certain Waivers. The Company has obtained agreements from
the Company employees listed on Schedule 4 hereto ("Key Employees"), in favor of
the Company and the Buyer and in form and substance satisfactory to the Buyer
(the "Key Employee Agreements"), copies of which have previously been delivered
to the Buyer, (i) accepting employment with the Buyer after the Effective Time
on the terms set forth therein and (ii) waiving, to the extent provided therein,
certain rights of accelerated vesting under the Company Stock Plan, any Option
Agreement, Purchase Agreement or Stock Issuance Agreement.
3.29 Disclosure. The representations and warranties and
statements of the Company contained in this Agreement (together with the
Disclosure Schedule) do not contain any untrue statement of a material fact, and
do not omit to state any material fact necessary to make such representations,
warranties and statements, in light of the circumstances under which they are
made, not misleading. There is no fact specifically relating to the Company and
known to the Company that has not been disclosed to the Buyer in this Agreement
(including the Disclosure Schedule) that has had or is reasonably likely to have
a Material Adverse Effect.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company as follows:
4.1 Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and all of the outstanding capital stock of
Sub is directly owned by The Buyer. Each of the Buyer and the Sub is duly
qualified or licensed as a foreign corporation to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or licensed which,
individually or in the aggregate, would not, and would not reasonably be likely
to, have a Buyer Material Adverse Effect. The Buyer has all requisite corporate
power and authority to own, lease and operate its assets and to carry on its
business as now being and as heretofore conducted.
4.2 Capitalization.
(a) The authorized capital stock of The Buyer consists
of 100,000,000 shares of Buyer Common Stock and 10,000,000 shares of preferred
stock, $.0001 par value per share ("Buyer Preferred Stock"). As of December 31,
1999: (i) (A) 22,025,716 shares of Buyer Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
no shares of Buyer Common Stock were held in the treasury of the Buyer or by
Subsidiaries of the Buyer, (B) 2,531,266 shares of Buyer Common Stock were
reserved for issuance pursuant to outstanding awards granted under the Buyer's
1996 Stock Plan and 1999 Equity Incentive Plan (collectively, the "Buyer Stock
Plans") and 553,078 shares of Buyer Common Stock were reserved for issuance
pursuant to future grants of awards under the Buyer Stock Plans, (C) 20,000
shares of Buyer Common Stock were reserved for issuance pursuant to outstanding
stock options granted under the Buyer's 1999 Non-Employee Director Option Plan
(the "Non-Employee Director Stock Plan") and 480,000 shares of Buyer Common
Stock were reserved for issuance pursuant to future grants of stock options
under the Non-Employee Director Stock Plan, and (D) 957,616 shares of Buyer
Common Stock were reserved for issuance under the Buyer's Employee Stock
Purchase Plan; and (ii) no shares of Buyer Preferred Stock were issued or
outstanding. No material change in such capitalization has occurred between
December 31, 1999 and the date of this Agreement. All shares of Buyer Common
Stock subject to issuance as specified above, upon issuance on the
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terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable.
(b) The issuance of the Merger Shares pursuant to the
Merger has been duly authorized by all necessary corporate action and, when
issued in accordance with this Agreement, the Merger Shares will be duly
authorized, validly issued, fully paid and nonassessable.
4.3 Authority; No Conflict; Required Filings and Consents.
(a) Each of the Buyer and Sub has all requisite
corporate power and authority to enter into this Agreement (and, in the case of
the Buyer, the Escrow Agreement and the Registration Rights Agreement), to
perform its obligations hereunder (and, in the case of the Buyer, thereunder)
and to consummate the transactions contemplated hereby (and, in the case of the
Buyer, thereby). The execution and delivery by each of the Buyer and Sub of this
Agreement (and, in the case of the Buyer, the Escrow Agreement and the
Registration Rights Agreement), the performance by each of the Buyer and Sub of
its obligations hereunder (and, in the case of the Buyer, thereunder) and the
consummation by each of the Buyer and Sub of the transactions contemplated
hereby (and, in the case of the Buyer, thereby) have been duly authorized by the
boards of directors of the Buyer and Sub and by the Buyer as the sole
stockholder of Sub, and no other corporate proceedings on the part of the Buyer
or Sub are necessary to authorize this Agreement or for the Buyer or Sub to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Buyer and Sub and constitutes (and, the Escrow
Agreement and the Registration Rights Agreement, when executed and delivered by
the Buyer will constitute) the valid and binding obligation of the Buyer and Sub
(in the case of Sub, solely with respect to this Agreement), enforceable in
accordance with its terms.
(b) The execution and delivery of this Agreement by the
Buyer and Sub does not (and, in the case of the Buyer, the execution and
delivery by the Buyer of the Escrow Agreement and the Registration Rights
Agreement will not), the performance by each of the Buyer and Sub of its
obligations hereunder (and, in the case of the Buyer, thereunder) and the
consummation by each of the Buyer and Sub of the transactions contemplated
hereby (and in the case of the Buyer, thereby) will not, (i) conflict with, or
result in any violation or breach of any provision of the Amended and Restated
Certificate of Incorporation of the Buyer or the certificate of incorporation of
Sub, the Amended and Restated Bylaws of the Buyer or the by-laws of Sub, (ii)
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or
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acceleration of any obligation or loss of any benefit) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which the Buyer is a party or by
which the Buyer or any of its properties or assets may be bound, or (iii)
assuming the truth and accuracy as of the date hereof and as of the Effective
Time of the Company's representations and warranties contained in clause (i) of
Section 3.2(c), and Sections 3.4 and 3.25, and the truth and accuracy of the
representations and warranties of the Company Stockholders contained in the
Investment Representation and Affiliate Lock-Up Agreements and the Non-Affiliate
Investment Representation Agreements, conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Buyer or any of its properties
or assets, except, in the case of (ii) and (iii), for any such violations,
breaches, defaults, terminations, cancellations, accelerations or conflicts
which would not, in the aggregate, have or result in a Buyer Material Adverse
Effect.
(c) Assuming the truth and accuracy as of the date
hereof and as of the Effective Time of the Company's representations and
warranties contained in clause (i) of Section 3.2(c), and Sections 3.4 and 3.25,
and the truth and accuracy of the representations and warranties of the Company
Stockholders contained in the Investment Representation and Affiliate Lock-Up
Agreements and the Non-Affiliate Investment Representation Agreements, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to the
Buyer or Sub in connection with the execution and delivery by the Buyer or Sub
of this Agreement, the Escrow Agreement, or the Registration Rights Agreement,
the performance by the Buyer or Sub, as applicable, of their obligations
hereunder or thereunder, or the consummation by the Buyer or Sub, as applicable,
of the transactions contemplated hereby or thereby, except for the (i) filing of
the Certificate of Merger with the Delaware Secretary of State, (ii) the filing
of a Form D under the Securities Act pursuant to Rule 503 under the Securities
Act, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required (A) under applicable state
securities laws and (B) in connection with the Registration Rights Agreement,
(iv) filings with the Nasdaq National Market in connection with the listing on
the Nasdaq National Market of the Merger Shares, (v) filings under the Exchange
Act, and (vi) such other consents, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not, individually or in the aggregate, have or be reasonably likely to have, a
Buyer Material Adverse Effect.
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4.4 Filings; Financial Statements.
(a) The Buyer has made available to the Company all
registration statements, prospectuses, reports and documents filed by the Buyer
with the SEC since April 22, 1999 (collectively, the "Buyer SEC Reports"). The
Buyer SEC Reports (i) at the time filed, complied in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, as the
case may be, 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 in such Buyer SEC Reports or necessary in
order to make the statements in such Buyer SEC Reports, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements
(including, in each case, any related notes) contained in the Buyer SEC Reports,
complied, as of their respective dates, in all material respects with all
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved and fairly presented the consolidated financial position of the Buyer
and its Subsidiaries as at the respective dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
4.5 Consent Solicitation/Information Statement. The
information supplied by the Buyer for inclusion in the Consent
Solicitation/Information Statement will not, on the date the Consent
Solicitation/Information Statement is first mailed or otherwise provided to
stockholders of the Company, or at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Consent
Solicitation/Information Statement not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of Written Consents which has become false or misleading.
4.6 Brokers and Finders. No Person (other than ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co., whose fees and expenses will be paid by the Buyer) has acted as
broker, finder, agent, investment banker, financial adviser or similar
intermediary on behalf of the Buyer or Sub in connection with this Agreement or
the transactions contemplated
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hereby, and there are no brokerage commissions, investment banking or financial
adviser fees, finders' fees or similar fees or commissions payable in connection
herewith based on any agreement, arrangement or understanding with the Buyer or
Sub, or any action taken by either of them.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company will
(except to the extent that the Buyer shall otherwise consent in writing), carry
on its business in the usual, regular and ordinary course in substantially the
same manner as previously conducted, pay or perform its obligations when due,
and, to the extent consistent with such business, use all reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with it,
to the end that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Except as expressly contemplated by this Agreement, the Company
will not, without the prior written consent of the Buyer:
(a) Grant any additional Options, accelerate, amend or
change the period of vesting or exercisability of any Options or the vesting
schedule with respect to any Option Shares or Restricted Shares or authorize
cash payments in cancellation of any Options, or amend or waive any term or
provision of any Option Agreement, Stock Issuance Agreement, Optionholder
Lock-Up Agreement or Key Employee Agreement;
(b) Transfer or license to any person or entity or
otherwise extend, amend or modify any rights to any Company Intellectual
Property;
(c) Declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or redeem or
otherwise acquire, directly or indirectly, any shares of its capital stock;
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(d) Issue, deliver or sell or authorize or propose the
issuance, delivery or sale of any shares of its capital stock or securities
directly or indirectly convertible into, or exercisable or exchangeable for,
shares of its capital stock, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue, any such shares or securities, other than the issuance of shares of
Common Stock issuable upon the exercise of Options outstanding on the date
hereof, the Warrant or upon conversion of shares of Preferred Stock;
(e) Merge or consolidate with another Person, or acquire
or purchase an equity or similar interest in or a substantial portion of the
assets of another corporation, partnership or other business organization or
otherwise acquire any assets outside the ordinary course of business consistent
with past practices or otherwise enter into any material contract, commitment or
transaction outside the ordinary course of business consistent with past
practices;
(f) Sell, lease, license, waive, release, transfer,
encumber or otherwise dispose of any of its properties or assets, except in the
ordinary course of business consistent with past practices;
(g) (i) Incur, assume or prepay any indebtedness or any
other liabilities other than in the ordinary course of business consistent with
past practices; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person or entity; (iii) make any loans, advances (other than travel
advances consistent with current Company policy) or capital contributions to, or
investments in, any other person; (iv) authorize or make capital expenditures in
excess of the amounts currently budgeted therefor as set forth in Section 5.1 of
the Disclosure Schedule; or (v) permit any insurance policy naming the Company
as a beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business consistent with past practices;
(h) (i) Increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any director, officer or employee,
except for normal increases in salaried compensation in the ordinary course of
business consistent with past practices; (ii) grant any severance or termination
pay to, or enter into any employment or severance agreement, with any director,
officer or employee; (iii) enter into any collective bargaining agreement; (iv)
establish, adopt, enter into or amend any Company Employee Plan, except as
required by law;
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(i) Take any action with respect to, or make any
material change in its accounting or tax policies or procedures in effect on the
date of the Company Balance Sheet, except as may be required by changes in
generally accepted accounting principles upon the advice of its independent
accountants;
(j) Revalue any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable, other than
revaluations in the ordinary course of business consistent with past practices
not exceeding $50,000 in the aggregate;
(k) Amend or propose to amend the Certificate of
Incorporation or Bylaws;
(l) Amend, take or fail to take any action that would
constitute a violation of or default under, or waive and right under, any
Material Contract, or waive or release any other material claim or right; or
(m) Make or rescind any material election relating to
Taxes, settle any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or file any amended Tax
Return or claim for refund.
(n) Enter into any contract, agreement, commitment,
arrangement or understanding with respect to any of the actions described in
Sections (a) through (m) above, or take (or fail to take) any action which would
be reasonably likely to make any of the representations or warranties contained
in this Agreement untrue or incorrect in any material respect as of the date of
this Agreement or the Closing Date.
5.2 Audited 1999 Financial Statements. As soon as practicable
and in any event within five business days prior to the Closing, the Company
will deliver to the Buyer the Company's audited balance sheet as of December 31,
1999 (the "Audited Balance Sheet") and the related statement of operations,
changes in stockholders' equity and cash flows and notes to financial statements
for the year then ended, along with the audit report of the Company's
independent auditors, PricewaterhouseCoopers LLP, on such balance sheets and
statements.
5.3 Cooperation. Subject to compliance with applicable law,
from the date hereof until the Effective Time, each of the Company and the Buyer
shall confer on a regular and frequent basis to report on material operational
matters and the general status of ongoing operations.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
(a) During the period from the date of this Agreement
until the earlier of (i) the termination of this Agreement in accordance with
its terms and (ii) the Effective Time, the Company will not, directly or
indirectly, through any officer, director, employee, stockholder, representative
or agent of the Company (and the Company shall cause such officers, directors,
employees, stockholders, representatives and agents not to, directly or
indirectly), (i) solicit, initiate, facilitate or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock or similar transactions
involving the Company, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any information concerning the Company to any
person or entity relating to, any Acquisition Proposal, or (iii) agree to,
approve or recommend any Acquisition Proposal.
(b) The Company shall notify the Buyer immediately (and
no later than 24 hours) after receipt by the Company (or its advisors) of any
Acquisition Proposal or any request for information concerning the Company in
connection with an Acquisition Proposal or for access to the properties, books
or records of the Company by any person or entity that informs the Company that
it is considering making, or has made, an Acquisition Proposal. Such notice to
the Buyer shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact. The Company shall keep the Buyer informed of all
material developments and the status of any Acquisition Proposal, or any request
for information in connection with any Acquisition Proposal or for access to the
properties, books or records of the Company by any person or entity that is
considering making, or has made, an Acquisition Proposal. The Company shall
provide the Buyer with copies of all documents received from or delivered or
sent to any person or entity that is considering making or has made, an
Acquisition Proposal.
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6.2 Approval of Stockholders; Consent Solicitation/Information
Statement; Blue Sky.
(a) The Company shall, subject to and in accordance with
the Certificate of Incorporation, Bylaws and the DGCL, as promptly as
practicable following the date of this Agreement, (i) solicit from the holders
of outstanding shares of Preferred Stock, the Preferred Stock Conversion
Consent, (ii) submit this Agreement to the holders of outstanding shares of
Company Stock as of the Record Date for adoption by written consent in lieu of a
meeting pursuant to Section 228 of the DGCL and (iii) use all reasonable efforts
to obtain, and promptly notify the Buyer upon obtaining, the Preferred Stock
Conversion Consent and the Merger Stockholder Approval Action.
(b) As promptly as practical after the execution of this
Agreement, the Company and the Buyer shall prepare, and the Company shall mail
or otherwise provide to the holders of Company Stock, the Consent
Solicitation/Information Statement. The Consent Solicitation/Information
Statement shall include the recommendation of the Board of Directors of the
Company in favor of adoption of this Agreement by the Company's stockholders.
The respective forms of written consent and Investment Representation Agreement
to be executed by the Company's stockholders shall be enclosed with the Consent
Solicitation/Information Statement. The Company shall furnish the Buyer with all
information concerning the Company and the holders of Company Stock and shall
take such other action as the Buyer may reasonably request in connection with
the Consent Solicitation/Information Statement and the issuance of the shares of
the Buyer Common Stock pursuant to the Merger to assure that such issuance is
exempt from registration under the Securities Act. In addition, the Company
agrees that the Consent Solicitation/Information Statement, the form of written
consent and all other materials to be provided to the Company's stockholders in
connection with obtaining the Merger Stockholder Approval Action and the
Preferred Stock Conversion Consent shall be subject to prior review of and
approval by the Buyer and its counsel, such approval not to be unreasonably
withheld. If at any time prior to the Effective Time any event or circumstance
relating to the Company, the Buyer, Sub or any of their respective affiliates,
officers or directors should be discovered by such party which should be set
forth in an amendment or a supplement to the Consent Solicitation/Information
Statement, such party shall promptly inform the other thereof and take
appropriate action in respect thereof.
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(c) The Buyer shall use all reasonable efforts to take
any action required to be taken under state securities or "blue sky" laws in
connection with the issuance of the shares of Buyer Common Stock in the Merger.
6.3 Access to Information. Upon reasonable notice, during
normal business hours during the period prior to the Effective Time, each party
shall (a) afford to the officers, directors, employees, accountants, counsel and
other representatives of the other party, reasonable access to all its
properties, plants, personnel, books, contracts, commitments and records (other
than privileged documents) and (b) all other information concerning its
business, properties and personnel as the other party may reasonably request
during such period. During such period, each party will hold any such
information which is non-public in confidence in accordance with the Mutual
Non-Disclosure Agreement, dated December 2, 1999 (the "Confidentiality
Agreement"), between the Buyer and the Company. No information or knowledge
obtained in any investigation pursuant to this Section 6.3 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
6.4 Supplements to Disclosure Schedule. From time to time
prior to the Closing, the Company shall give prompt notice to the Buyer and
thereafter promptly supplement or amend the Disclosure Schedule with respect to
any matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule. No supplement or amendment of the Disclosure Schedule made
pursuant to this Section 6.4 shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless the Buyer specifically
agrees thereto in writing.
6.5 Legal Conditions to Merger. Each of the Buyer and, the
Company will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on itself with respect to the Merger
(which actions shall include, without limitation, furnishing all information
required in connection with approvals of or filings with any other Governmental
Entity) and will promptly cooperate with and furnish information to each other
in connection with any such requirements imposed upon any of them in connection
with the Merger. Each of the Buyer and the Company will take (or cause to be
taken) all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity required to be obtained or made by the
Buyer or the Company in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
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6.6 Listing Application. The Buyer will prepare and submit to
the Nasdaq National Market an additional listing application covering the Merger
Shares and will use all reasonable efforts to obtain approval for listing such
shares upon official notice of issuance.
6.7 Company Stock Plan.
(a) At the Effective Time, the Company Stock Plan and
each outstanding Option, whether vested or unvested, will be assumed by the
Buyer and become and represent an option to acquire, on the same terms and
conditions (including vesting provisions, except to the extent modified or
waived pursuant to a Key Employee Agreement) as were applicable to such Option
prior to the Effective Time, a number of shares of Buyer Common Stock (rounded
down to the nearest whole number) determined by multiplying (i) the number of
shares of Common Stock subject to such Option immediately prior to the Effective
Time by (ii) the Exchange Ratio, at an exercise price per share (rounded up to
the nearest whole cent) equal to the exercise price per share of Common Stock
subject to such Option immediately prior to the Effective Time, divided by the
Exchange Ratio. It is the intention of the parties hereto that each Option so
assumed by the Buyer will, to extent permitted by applicable laws, qualify as an
"incentive stock option" within the meaning of Section 422 of the Code to the
extent such Option qualified as such immediately prior to the Effective Time.
Within 20 days after the Effective Time, the Buyer will deliver to each Person
who, immediately prior to the Effective Time, was a holder of an outstanding
Option, an instrument evidencing the assumption of such Option by the Buyer as
provided in this Section 6.7. The Buyer will use reasonable efforts to cause the
issuance of shares of Buyer Common Stock issuable upon exercise of any Options
to have been registered at, or as promptly as reasonably practicable (and in any
event not later than 60 days) following, the Effective Time, pursuant to an
effective registration statement on Form S-8 under the Securities Act.
(b) At the Effective Time the Company will assign to the
Buyer any Company Repurchase Rights to the extent necessary to vest and continue
in the Buyer such Company Repurchase Rights with respect to any Purchased Shares
or Restricted Shares which are converted in the Merger into shares of Buyer
Common Stock. Accordingly, the vesting provisions and Company Repurchase Rights
with respect to Purchased Shares and Restricted Shares shall not be affected by
the Merger, and such vesting provisions and Company Repurchase Rights shall
apply with respect to the shares of Buyer Common Stock into which such Purchased
Shares and Restricted Shares are converted at the Effective Time, except to the
extent such provisions or rights have been modified or waived pursuant to a Key
Employee Agreement.
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6.8 Consents. Each of the Buyer and the Company shall use
reasonable efforts to obtain all necessary consents, waivers and approvals under
any of the Buyer's or the Company's material agreements, contracts, licenses,
leases or commitments in connection with the Merger.
6.9 Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each of the parties agrees to use reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable and available to a party to carry out the purposes of this Agreement
or to vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of either of Sub or the Company,
each party to this Agreement shall take or cause to be taken all such action.
6.10 Voting Agreement. Concurrently with the execution and
delivery of this Agreement, each stockholder of the Company named on the
signature pages of the Voting Agreement is entering into such Agreement.
6.11 Financial Statement Preparation and Review. The Company
will use all reasonable efforts to cause its respective management and
independent auditors to facilitate on a timely basis (i) the preparation of
financial statements (including pro forma financial statements to be prepared by
the Buyer, if required) to comply or enable the Buyer to comply with applicable
SEC regulations (including without limitation Regulation D under the Securities
Act) both before and after the Effective Time, (ii) the review of any audit or
review work papers including the examination of selected audited financial
statements and data, and (iii) the delivery of such representations from each
party's independent accountants as may be reasonably requested by the other
party or its accountants.
6.12 Company Director and Officer Indemnification; Insurance.
(a) After the Effective Time, The Buyer will, and will
cause the Surviving Corporation to indemnify and hold harmless the present and
former officers, directors, employees and agents of the Company in respect to
acts or omissions occurring on or prior to the Effective Time to the extent
provided under the Company's Certificate of Incorporation and Bylaws in each
case as in effect on the date hereof; provided that such indemnification shall
be subject to any limitation imposed from time to time under applicable law and
shall not be available with respect to an action initiated by an indemnification
party (other than an action to
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enforce this provision); and provided further that indemnification by the Buyer
pursuant to this Section 6.12 shall be provided only to the extent any
directors' and officers' liability insurance policy of the Company does not
provide coverage and actual payment.
(b) The Surviving Corporation shall, and the Buyer shall
cause the Surviving Corporation to, maintain in effect for not less than three
years after the Effective Time the policies of directors' and officers'
liability insurance maintained by the Company as of the date hereof with respect
to matters occurring prior to or at the Effective Time; provided, however, that
(i) the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous to
the insured persons with an insurance company or companies, the claims paying
ability of which is substantially equivalent to the claims paying ability of the
insurance company or companies providing such insurance coverage as of the date
hereof for directors and officers of the Company, and (ii) the Surviving
Corporation shall not be required to pay an annual premium for such insurance in
excess of four times the last annual premium paid prior to the date hereof, but
in such case shall purchase as much coverage as possible for such amount.
(c) The provisions of this Section 6.12 are intended to
be for the benefit of, and shall be enforceable by, each indemnified or insured
party referred to above in this Section 6.12.
6.13 Tax-Free Reorganization. From and after the date of this
Agreement, each Party shall use reasonable efforts to cause the Merger to
qualify, and shall not knowingly take actions or cause actions to be taken which
could reasonably be expected to prevent the Merger from qualifying, as a
tax-free reorganization under Section 368(a) of the Code.
6.14 Employee Matters.
(a) Employees of the Company whose employment with the
Company is continued by the Buyer, or who are retained as employees of the
Buyer, after the Effective Time, will receive salary and benefits consistent
with the Buyer's practices and policies in effect from time to time.
(b) The Company covenants and agrees that prior to the
Closing it will obtain from each Key Employee a signed addendum or supplement
acknowledging and agreeing that from and after the Effective Time the term
"Company" in the existing Employee Proprietary Information and Inventions
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Agreement of such Key Employee includes The Buyer and any of its Affiliates
(each a "Key Employee Addendum").
6.15 Ancillary Agreements. Concurrently with the Closing, the
Buyer and the Stockholder Representative will execute and deliver the Escrow
Agreement and the Buyer will execute and deliver the Registration Rights
Agreement substantially in the form of Exhibit E hereto (the "Registration
Rights Agreement").
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approvals; Preferred Stock
Conversion. This Agreement shall have been adopted by the requisite Merger
Stockholder Approval Action, the Preferred Stock Conversion Consent shall have
been obtained by the Company and the Preferred Stock Conversion shall have
occurred in accordance with the terms of the Certificate of Incorporation.
(b) Approvals. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any
Governmental Entity required to consummate the Merger shall have been filed,
occurred or been obtained.
(c) No Injunctions or Restraints; Illegality. No order,
ruling or injunction issued by any court of competent jurisdiction or other
Governmental Entity restraining, enjoining or otherwise prohibiting the
consummation of the Merger shall have been issued and then be in effect
(provided, that the Buyer and the Company shall use their reasonable efforts to
have any such order, ruling or injunction vacated or lifted); nor shall there be
any statute, rule or regulation enacted, enforced or deemed applicable to the
Merger which makes the consummation of the Merger illegal.
(d) Escrow Agreement. The Buyer, the Stockholder
Representative and the Escrow Agent shall have executed and delivered the Escrow
Agreement.
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7.2 Additional Conditions to Obligations of the Buyer and Sub.
The obligations of the Buyer and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by the Buyer and Sub:
(a) Representations and Warranties. (i) The aggregate
effect of all inaccuracies in the representations and warranties of the Company
set forth in this Agreement (measured as of the date hereof and, except to the
extent such representations and warranties speak as of an earlier date, as of
the Closing Date as though made on and as of the Closing Date), without taking
into account any qualifications as to materiality or Material Adverse Effect
contained in such representations and warranties (except with respect to the
representations and warranties in Sections 3.5, 3.8(a), 3.26 and 3.29), does
not, and is not reasonably likely to, have a Material Adverse Effect and (ii)
the representations and warranties of the Company contained in Sections 3.1, 3.2
and 3.3(a), (b) and (c)(i) shall be true and correct in all material respects as
of the date hereof, and, except to the extent such representations and
warranties speak as of an earlier date, as of the Closing Date as though made on
and as of the Closing Date, except for changes contemplated by this Agreement;
and the Buyer shall have received a certificate, signed on behalf of the Company
by the President and Chief Financial Officer of the Company, to such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date; and
the Buyer shall have received a certificate, signed on behalf of the Company by
the President and Chief Financial Officer of the Company, to such effect.
(c) No Litigation. There shall not be pending or
threatened in writing any suit, action or proceeding by any Governmental Entity
or other Person (i) seeking to prevent the consummation of the Merger or seeking
significant damages in connection therewith or (ii) which otherwise is
reasonably likely to have a Buyer Material Adverse Effect.
(d) Blue Sky Laws. The Buyer shall have received all
state securities or "blue sky" permits and other authorizations necessary to
issue shares of Buyer Common Stock pursuant to the Merger.
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(e) Stockholder Composition. As of the Record Date there
shall not have been, and immediately prior to the Effective Time there shall not
be, more than 35 holders of Company Stock who or which are not Accredited
Investors. For purposes of this Section 7.2(e), the number of holders of Company
Stock shall be calculated in the same manner as the number of "purchasers" is
calculated pursuant to Rule 501(e) under the Securities Act (for this purpose
excluding clause (iv) of subparagraph (1) of such Rule).
(f) Opinion. The Company shall have delivered to the
Buyer the opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, dated the Closing Date,
covering the matters set forth on Exhibit F hereto.
(g) Resignations. All officers and directors of the
Company who the Company has requested resign, shall have resigned.
(h) Third Party Consents. All notices to, and consents,
approvals or waivers of, Persons who or which are not Governmental Entities
under the agreements, instruments or documents listed in Section 3.3(c) of the
Disclosure Schedule shall have been given or obtained in a form and manner
reasonably acceptable to the Buyer.
(i) Key Employees. (A) The Key Employee Agreement with
each of the Key Employees shall be in full force and effect, no Key Employee
shall have disavowed such agreement or otherwise indicated to the Company or the
Buyer that such Key Employee does not intend to continue or accept employment
with the Company or the Buyer after the Effective Time on the terms set forth in
the Key Employee Agreement with such Key Employee and (B) each Key Employee
shall have executed and delivered a Key Employee Addendum which shall be in full
force and effect.
(j) Other Required Employees. At least 30 of the 36
Company employees previously identified by the Buyer to the Company in a letter
dated the date hereof referencing this Section of this Agreement (the "Other
Required Employees") who the Buyer has offered continued employment with the
Company after the Effective Time pursuant to an offer letter prepared by the
Buyer, shall have accepted such offer of employment by executing and delivering
such offer letter to the Buyer, and shall not have disavowed such letter or
otherwise indicated that they do not intend to continue employment with the
Company after the Effective Time pursuant to the terms of such offer letter.
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(k) Customers. After the date hereof, not more than one
of the Company's customers which has paid the Company more than $1 million shall
have terminated, or notified the Company in writing of its intention to
terminate, its relationship with the Company.
7.3 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. (i) The aggregate
effect of all inaccuracies in the representations and warranties of the Buyer
set forth in this Agreement (measured as of the date hereof and, except to the
extent such representations and warranties speak as of an earlier date, as of
the Closing Date as though made on and as of the Closing Date), without taking
into account any qualifications as to materiality or Buyer Material Adverse
Effect contained in such representations and warranties (except with respect to
the representations and warranties in Sections 4.4 and 4.5), does not, and is
not reasonably likely to, have a Buyer Material Adverse Effect and (ii) the
representations and warranties of the Company contained in Sections 4.1, 4.2 and
4.3(a) and (b)(i) shall be true and correct in all material respects as of the
date hereof, and, except to the extent such representations and warranties speak
as of an earlier date, as of the Closing Date as though made on and as of the
Closing Date, except for changes contemplated by this Agreement; and the Company
shall have received a certificate, signed on behalf of the Buyer by the Chief
Financial Officer of the Buyer, to such effect.
(b) Performance of Obligations of the Buyer and Sub. The
Buyer and Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate, signed on behalf of the
Buyer by the Chief Financial Officer of the Buyer, to such effect.
(c) Registration Rights Agreement. The Buyer shall have
executed and delivered the Registration Rights Agreement.
(d) Listing. The Merger Shares shall have been approved
for listing on the Nasdaq National Market upon official notice of issuance.
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(e) Opinion of Buyer Counsel. The Buyer shall have
delivered to the Company the opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, or other counsel for the Buyer reasonably acceptable to the Company, dated
the Closing Date covering the matters set forth on Exhibit G hereto.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival of Company Obligations.
(a) Subject to Section 8.3(a), the representations,
warranties, covenants and agreements of the Company in this Agreement shall
survive the Effective Time for a period of one year and shall terminate and be
of no further force or effect as of 5:00 p.m., Texas time, on the first
anniversary of the Effective Time.
(b) No investigation by, or furnishing of information
to, the Buyer shall affect the right of the Buyer to rely on the
representations, warranties, covenants and agreements of the Company set forth
herein.
8.2 Company Stockholder Obligation to Indemnify.
(a) After the Effective Time, subject to Sections 8.1
and 8.3, the Company Stockholders shall indemnify and hold harmless the Buyer
and the Surviving Corporation and their respective directors, officers,
employees, agents, affiliates and assigns (collectively, the "Buyer Indemnified
Persons") from and against all losses, liabilities, damages, deficiencies, costs
or expenses, including interest and penalties imposed or assessed by any
judicial, administrative or, subject to Section 11.12, arbitral body, and
reasonable attorneys' fees, whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing, net of any actual recoveries under existing insurance policies,
amounts actually received pursuant to indemnification from third parties or in
the case of third party claims, any amount actually recovered by the party or
parties seeking indemnification or their Affiliates pursuant to counterclaims
made by any of them directly relating to facts giving rise to such third-party
claims (collectively, "Losses"), suffered or incurred by any Buyer Indemnified
Person based upon, arising out of or otherwise in respect of any inaccuracy in
or breach of any representation or warranty (for purposes of this Section 8.2,
disregarding, in determining the existence of a misrepresentation or breach of
warranty, any requirement in a representation or
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warranty that an event or fact be material or have, or be reasonably likely to
have, a Material Adverse Effect (except with respect to the representations and
warranties contained in Sections 3.5, 3.8(a), 3.26 and 3.29), in order for such
event or fact to constitute a misrepresentation or breach of warranty), or any
breach of any covenant or agreement, of the Company in this Agreement.
(b) No indemnification shall be payable pursuant to
Section 8.2(a) with respect to any inaccuracy or breach of any representation or
warranty or breach of any covenant or agreement after termination thereof in
accordance with Section 8.1, except with respect to claims made prior to such
termination pursuant to Section 8.7 but not then resolved (such representation,
warranty, covenant or agreement surviving with respect to such claim until
resolution of such claim).
(c) The terms and conditions of this Article VIII
constitute essential terms and conditions of this Agreement and the Merger, and
adoption of this Agreement by the Company Stockholders shall constitute the
express agreement of each Company Stockholder with respect to (i) the
obligations of the Company Stockholders pursuant to this Article VIII and (ii)
the appointment of ▇▇▇▇ ▇▇▇▇▇▇ to act as the representative of the Company
Stockholders (the "Stockholder Representative") pursuant to the terms and
conditions of this Agreement and the Escrow Agreement. Without limitation of the
foregoing, as an essential term of this Agreement and the Merger, the Company
Stockholders acknowledge that their indemnification obligations are solely in
their capacity as former stockholders of the Company, and, accordingly, an
obligation to indemnify any Buyer Indemnified Person pursuant to this Section
8.2 shall not itself cause any current or former officer, director, employee or
agent of the Company to be entitled to any indemnification from the Company
pursuant to the Company's Certificate of Incorporation, By-laws or any agreement
with the Company.
8.3 Limitations on Company Stockholder Indemnification.
(a) The limitations of Sections 8.1(a), 8.2(b), 8.3(b),
8.3(c), 8.3(d) and 8.3(e) shall not apply in the case of a fraudulent or
intentional misrepresentation by the Company.
(b) The Company Stockholders shall have no
indemnification obligation pursuant to Section 8.2 unless and until the
aggregate amount of Losses incurred or suffered by the Buyer Indemnified Persons
exceeds $1,000,000, after which, subject to Sections 8.3(c) and 8.3(d), the
obligation of the Company Stockholders shall be to indemnify the Buyer
Indemnified Persons for the entire amount of such Losses (including such initial
$1,000,000).
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(c) The indemnification obligations of the Company
Stockholders pursuant to Section 8.2 shall be several, and not joint, in
proportion to their respective Ownership Percentage Interests as set forth on
the Closing Stockholder Schedule referred to in Section 2.1(a).
(d) The Escrow Shares shall be the sole and exclusive
recourse of the Buyer Indemnified Persons to satisfy the indemnification
obligations of the Company Stockholders pursuant to Section 8.2(a), and the
Company Stockholders shall have no further obligation to indemnify Buyer
Indemnified Persons pursuant to Section 8.2(a) after all the Escrow Shares have
been redelivered to the Buyer pursuant to the Escrow Agreement. For purposes of
satisfying the indemnification obligations of the Company stockholders, the
Escrow Shares shall be valued at $42.45 per share, subject to appropriate
adjustment for splits, combinations and the like affecting Buyer Common Stock.
(e) After the Effective Time, subject to Section 8.3(a),
this Article VIII shall set forth the sole and exclusive remedy and recourse of
the Buyer Indemnified Persons with respect to any representation, warranty,
covenant or agreement of the Company contained herein.
8.4 Survival of Buyer Obligations.
(a) Subject to Section 8.6(a), the representations,
warranties, covenants and agreements of the Buyer in this Agreement shall
survive the Effective Time for a period of one year and shall terminate and be
of no further force or effect as of 5:00 p.m., Texas time, on the first
anniversary of the Effective Time.
(b) The covenants and agreements of the Buyer in this
Agreement shall survive the Effective Time and shall be fully effective and
enforceable for the periods therein indicated or where not indicated, forever.
(c) No investigation by, or furnishing of information
to, the Company shall affect the right of the Company to rely on the
representations, warranties, covenants and agreements of the Buyer set forth
herein.
8.5 Buyer Obligation to Indemnify.
(a) After the Effective Time, subject to Sections 8.4
and 8.6, the Buyer shall indemnify and hold harmless the Company Stockholders
from and against all Losses suffered or incurred by any Company Stockholder
based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any
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representation or warranty (for purposes of this Section 8.5, disregarding, in
determining the existence of a misrepresentation or breach of warranty, any
requirement in a representation or warranty that an event or fact be material or
have, or be reasonably likely to have, a Material Adverse Effect (except with
respect to the representations and warranties contained in Sections 4.4 and
4.5), in order for such event or fact to constitute a misrepresentation or
breach of warranty), or any breach of any covenant or agreement, of the Buyer in
this Agreement.
(b) No indemnification shall be payable pursuant to
Section 8.5(a) with respect to any inaccuracy or breach of any representation or
warranty or breach of any covenant or agreement after termination thereof in
accordance with Section 8.4, except with respect to claims made prior to such
termination pursuant to Section 8.7 but not then resolved (such representation,
warranty, covenant or agreement surviving with respect to such claim until
resolution of such claim).
8.6 Limitations on Buyer Indemnification.
(a) The limitations of Sections 8.4(a), 8.5(b), 8.6(b),
8.6(c) and 8.6(d) shall not apply in the case of a fraudulent or intentional
misrepresentation or breach by the Buyer or in the case of a breach of the
representation set forth in Section 4.2(b).
(b) The Buyer shall have no obligation to indemnify any
Company Stockholder pursuant to Section 8.5 until the aggregate amount of the
Losses incurred or suffered by the Company Stockholders exceed $1,000,000, after
which, subject to Section 8.6(c), the obligation of the Buyer shall be to
indemnify the Company Stockholders for the entire amount of such Losses
(including such initial $1,000,000).
(c) The Buyer shall have no further obligation to
indemnify any Company Stockholder pursuant to Section 8.5(a) after an amount
equal to the product of (i) the initial number of Escrow Shares deposited in
escrow on the Closing Date pursuant to Section 2.3(b), multiplied by (ii) $42.45
has been paid to the Company Stockholders.
(d) After the Effective Time, subject to Section 8.6(a),
this Article VIII shall set forth the sole and exclusive remedy and recourse of
the Company Stockholders with respect to any representation, warranty, covenant
or agreement of the Buyer contained herein.
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8.7 Procedures Relating to Indemnification. (a) An indemnified
person or entity under Sections 8.2 or 8.5 (the "Indemnified Party") shall give
prompt written notice to the indemnifying party (the "Indemnifying Party") of
any Loss in respect of which such Indemnified Party is seeking indemnification
under Sections 8.2 or 8.5, specifying in reasonable detail the nature of such
Loss, the section or sections of this Agreement to which the Loss relates, and
the amount of such Loss (or if not then determinable, its best estimate of the
amount of such Loss), except that any delay or failure so to notify the
Indemnifying Party shall only relieve the Indemnifying Party of its obligations
hereunder to the extent, if at all, that it is prejudiced by reason of such
delay or failure. Any such notice to be given by or to any Indemnified Party
under Section 8.5 shall be given by or to the Stockholder Representative (as
defined in Section 8.8).
(b) If a Loss is suffered or incurred for or on account
of or arises from or in connection with any demand, claim, suit, action, cause
of action, investigation or inquiry by a person not party to this Agreement (a
"Third Party Claim"), the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all expenses. The Indemnified Party shall have the
right to employ separate counsel in such Third Party Claim and participate in
such defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Party. The Indemnifying Party shall not, without the
Indemnified Party's prior written consent, settle or compromise any Third Party
Claim or consent to the entry of any judgment with respect to any Third Party
Claim which would have an adverse effect on the Indemnified Party, except that
the Indemnifying Party may, without the Indemnified Party's prior written
consent, compromise or settle any such Third Party Claim or consent to entry of
any judgment with respect to any Third Party Claim which requires solely money
damages paid by the Indemnifying Party, and which includes as an unconditional
term thereof the release by the claimant or the plaintiff of the Indemnified
Party from all liability in respect of such Third Party Claim. If the
Indemnifying Party fails to assume the defense of any Third Party Claim within
30 business days after notice thereof, the Indemnified Party shall have the
right to undertake the defense, compromise or settlement of such Third Party
Claim for the account of the Indemnifying Party, subject to the right of the
Indemnifying Party to assume the defense of such Third Party Claim with counsel
reasonably satisfactory to the Indemnified Party at any time prior to the
compromise, settlement or final determination thereof. No Indemnified Party
shall, without the Indemnifying Party's prior written consent, settle or
compromise any Third Party Claim or consent to the entry of any judgment with
respect to any Third Party Claim unless such Indemnified Party has undertaken
the defense, compromise or settlement in accordance with this Section 8.7(b) and
the consent compromise or settlement of such Third Party Claim
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requires solely money damages to be paid by the Indemnifying Party, and which
includes as an unconditional term thereof the release by the claimant or the
plaintiff of the Indemnifying Party from all liability in respect of such Third
Party Claim. If an Indemnifying Party refuses to pay, in whole or in part, any
Loss suffered or incurred for or on account of or arising from or in connection
with any Third Party Claim with respect to which an Indemnified Party has
undertaken the defense, compromise or settlement in accordance with this Section
8.7(b) within 30 business days of receipt of notice from such Indemnified Party
of such Loss, the matter shall be resolved in accordance with Section 11.12.
(c) With respect to any Loss (other than any Loss
suffered or incurred for or on account of or arising from or in connection with
any Third Party Claim), the Indemnifying Party shall have 30 business days from
receipt of notice from the Indemnified Party of such Loss within which to
respond thereto. If the Indemnifying Party does not respond within such 30
business day period, the Indemnifying Party shall be deemed to have accepted
responsibility to make payment and shall have no further right to contest the
validity of such Loss. If the Indemnifying Party notifies the Indemnified Party
within such 30 business day period that it rejects such Loss, in whole or in
part, the matter shall be resolved in accordance with Section 11.12.
8.8 Stockholder Representative.
(a) In order to administer the transactions contemplated
by this Agreement and the Escrow Agreement, including the indemnification
obligations of the Company Stockholders under this Article VIII, the Company
Stockholders hereby designate and appoint ▇▇▇▇ ▇▇▇▇▇▇ as their sole and
exclusive representative for purposes of the Merger Agreement and the Escrow
Agreement and as attorneys-in-fact and agent for and on behalf of each
Stockholder (in such capacity, the "Stockholder Representative"), and ▇▇▇▇
▇▇▇▇▇▇ accepts such appointment as Stockholder Representative.
(b) The Company Stockholders hereby authorize the
Stockholder Representative to represent the Company Stockholders, and their
successors, with respect to all matters arising under this Agreement and the
Escrow Agreement, including without limitation, (i) to take all action necessary
in connection with the indemnification obligations of the Stockholders under
this Article VIII, including the defense or settlement of any claims and the
making of payments with respect thereto, (ii) to give and receive all notices
required to be given by or to any Company Stockholder under this Agreement and
the Escrow Agreement, (iii) to execute the Escrow Agreement for and on behalf of
the Company Stockholders, and
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(iv) to take any and all additional action as is contemplated to be taken by or
on behalf of the Company Stockholders by the Stockholder Representative pursuant
to this Agreement and the Escrow Agreement.
(c) In the event that ▇▇▇▇ ▇▇▇▇▇▇ or any substitute
Stockholder Representative dies, becomes unable to perform his responsibilities
as Stockholder Representative or resigns from such position, the Company
Stockholders having an aggregate Ownership Percentage Interest, as set forth on
the Closing Stockholder Schedule referred to in Section 2.1(a), greater than 50%
shall select another representative to fill such vacancy and such substituted
Stockholder Representative shall be deemed to be the Stockholder Representative
for all purposes of this Agreement and the Escrow Agreement.
(d) All decisions and actions by the Stockholder
Representative, including without limitation any agreement between the
Stockholder Representative and the Buyer or the Escrow Agent relating to
indemnification obligations of the Stockholders under this Article VIII,
including the defense or settlement of any claims and the making of payments
with respect hereto, shall be binding upon all of the Company Stockholders, and
no Company Stockholders shall have the right to object, dissent, protest or
otherwise contest the same. The Stockholder Representative shall incur no
liability to the Company Stockholders with respect to any action taken or
suffered by the Stockholder Representative in reliance upon any notice,
direction, instruction, consent, statement or other documents believed by him to
be genuinely and duly authorized, nor for any other action or inaction with
respect to the indemnification obligations of the Company Stockholders under
this Article VIII, including the defense or settlement of any claims and the
making of payments with respect thereto, except to the extent resulting from the
Stockholder Representative's own willful misconduct or gross negligence. The
Stockholder Representative may, in all questions arising under this Agreement or
the Escrow Agreement rely on the advice of counsel, and shall not be liable to
the Company Stockholders for anything done, omitted or suffered in good faith by
the Stockholder Representative. The Company Stockholders shall severally
indemnify the Stockholder Representative and hold him or her harmless against
any loss, liability or expense incurred without gross negligence or bad faith on
the part of the Stockholder Representative and arising out of or in connection
with the acceptance or administration of his or her duties hereunder.
(e) The Buyer and the Escrow Agent shall be able to rely
conclusively on the instructions and decisions of the Stockholder Representative
with respect to the indemnification obligations of the Company Stockholders
under this Article VIII, including the defense or settlement of any claims or
the making of
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payments with respect thereto, or as to any other actions required or permitted
to be taken by the Stockholder Representative hereunder, and no party hereunder
shall have any cause of action against the Buyer or the Escrow Agent to the
extent the Buyer or the Escrow Agent has relied upon the instructions or
decisions of the Stockholder Representative.
(f) The Company Stockholders acknowledge and agree that
the Stockholder Representative may incur costs and expenses on behalf of the
Company Stockholders in his capacity as Stockholder Representative
("Representative Expenses"). Each of the Stockholders agrees to pay the
Stockholder Representative, promptly upon demand by the Stockholder
Representative therefor, a percentage of any Representative Expenses equal to
such Company Stockholder's Ownership Percentage Interest as set forth on the
Closing Stockholder Schedule referred to in Section 2.1(a), provided that no
Company Stockholder shall be required to pay, in the aggregate, Representative
Expenses in an amount in excess of the value of such Company Stockholder's
Ownership Percentage Interest in the Escrow Shares initially deposited in escrow
pursuant to Section 2.3(b) (valuing the Escrow Shares for this purpose at $42.45
per share, subject to splits, combinations and the like affecting Buyer Common
Stock).
ARTICLE IX
TERMINATION; FEES AND EXPENSES
9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, (with respect to Sections 9.1(b) through 9.1(e), by
written notice by the terminating party to the other party) whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of the Company:
(a) by mutual written consent of the Buyer and the
Company;
(b) by the Buyer or the Company if the Merger shall not
have been consummated by February 28, 2000, provided that the right to terminate
this Agreement under this Section 9.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such date;
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(c) by the Buyer or the Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, ruling or injunction or taken any other action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger (provided that the party seeking to terminate pursuant to this Section
9.1(c) shall have complied with its obligations under Section 6.6 and used
reasonable efforts to have any such order, ruling, injunction or other action
vacated or lifted);
(d) by the Buyer, if (i) any Company Stockholder party
to the Voting Agreement breaches the Voting Agreement, (without limitation of
other actions or failures to act by any Company Stockholder that may constitute
a breach of the Voting Agreement, such Company Stockholder will be deemed to
have breached the Voting Agreement if such Company Stockholder has not, within
five business days of receiving the Consent Solicitation/Information Statement,
including the form of Written Consent, executed and delivered to the Company
such Written Consent with respect to all of such Company Stockholder's Company
Stock); or (ii) the Company or any director, officer, employee or stockholder of
the Company takes any action prohibited by or otherwise breaches Section 6.1; or
(e) by the Buyer or the Company, if there has been a
breach on the part of the other party of any representation, warranty, covenant
or agreement set forth in this Agreement which is incurable, or which shall not
have been cured prior to February 25, 2000 (and which breach would result in the
condition to Closing in Section 7.2(a) or (b) or 7.3(a) or (b), as the case may
be, not being satisfied as of the Closing).
9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall immediately become
void and there shall be no liability or obligation hereunder on the part of the
Buyer, Sub, the Company or their respective officers, directors, stockholders or
affiliates, except (a) this Section 9.2 and Section 9.3 shall remain in full
force and effect and survive any termination of this Agreement and (b) such
termination shall not relieve a Party from liability for breach of this
Agreement (which may include, as part of such liability, fees and expenses
incurred by the other Party in connection with this Agreement) prior to such
termination (in the case of the Company, in addition to any fee which may be or
become payable pursuant to Section 9.3).
9.3 Fees and Expenses.
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(a) Except as set forth in Article VIII, Section 9.2(b)
and this Section 9.3, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including attorneys' and
accountants' fees) shall be paid by the party incurring such expenses, whether
or not the Merger is consummated.
(b) If (i) the Buyer shall have terminated this
Agreement pursuant to Section 9.1(d) or 9.1(e), and within six months after any
such termination, the Company shall have, directly or indirectly, entered into a
definitive agreement for, or shall have consummated, an Acquisition Transaction,
then, in any such case, the Company shall immediately pay the Buyer a
termination fee of $7,500,000.
(c) As used in this Agreement, "Acquisition Transaction"
means either (i) a transaction or a merger or other business combination
involving the Company pursuant to which any person (or group of persons) other
than the Buyer or its Affiliates (a "Third Party"), acquires 50% or more of the
outstanding equity securities of the Company or the entity surviving such merger
or business combination, (ii) any other transaction pursuant to which any Third
Party acquires control of assets (including for this purpose the outstanding
equity securities of any subsidiaries of the Company) of the Company having a
fair market value (as determined by the Board of Directors of the Buyer, in good
faith) equal to 50% or more of the fair market value of all the assets of the
Company, and its Subsidiaries, taken as a whole, immediately prior to such
transaction or (iii) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
ARTICLE X
DEFINITIONS AND INTERPRETATION
10.1 Certain Definitions. For purposes of this Agreement,
except as otherwise provided or unless the context clearly requires otherwise:
"Accredited Investor" shall mean an Accredited Investor as
defined in Rule 501(a) of the Rules and Regulations under the Securities Act of
1933, as amended.
"Affiliate" of specified Person shall mean any Person who
would be an affiliate of the specified Person pursuant to Rule 12b-2 under the
Securities Exchange Act of 1934, as amended.
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"Buyer Material Adverse Effect" shall mean a material adverse
effect on (i) the assets (including tangible assets), properties, liabilities,
business, financial condition or results of operations of the Buyer and its
Subsidiaries taken as a whole, excluding, for purposes of determining whether
there has been or is reasonably likely to be such an adverse effect, any effect
to the extent (A) attributable to conditions affecting the United States economy
generally or the economy of any nation or region in which the Buyer conducts a
material amount of business (unless such conditions adversely affect the Buyer
in a materially disproportionate matter), (B) attributable to conditions
affecting any industry in which the Buyer competes (unless such conditions
adversely affect the Buyer in a materially disproportionate manner) or (C)
principally attributable to the direct effect of the public announcement of this
Agreement on the Buyer's relationship with its current customers (provided that
with respect to this clause (C), the Buyer shall bear the burden of proof in any
proceeding with regard to establishing that such an effect is so principally
attributable) or (ii) the ability of the Buyer or Sub to timely perform its
obligations under this Agreement and consummate the Merger, excluding, for
purposes of determining whether there has been or is reasonably likely to be
such effect, any effect to the extent attributable to any breach by the Company
of any covenant or obligation set forth in this Agreement.
"Confidentiality Agreement" shall mean the Mutual
Non-Disclosure Agreement dated December 2, 1999 between the Company and The
Buyer.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Governmental Entity" shall mean a legislative body, court,
arbitral tribunal, administrative agency or commission or other governmental or
other regulatory authority or agency.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, assets (including tangible assets), financial condition,
prospects or results of operations of the Company, excluding, for purposes of
determining whether there has been or is reasonably likely to be such an adverse
effect, any effect to the extent (A) attributable to conditions affecting the
United States economy generally or the economy of any nation or region in which
the Company conducts a material amount of business (unless such conditions
adversely affect the Company in a materially disproportionate matter), (B)
attributable to conditions affecting any industry in which the Company competes
(unless such conditions adversely affect the Company in a materially
disproportionate manner) or (C) principally attributable to the direct effect of
the public announcement of this Agreement on the Company's relationship with its
current customers (provided that with respect to this clause (C),
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the Company shall bear the burden of proof in any proceeding with regard to
establishing that such an effect is so principally attributable) or (ii) the
ability of the Company to timely perform its obligations under this Agreement
and consummate the Merger, excluding, for purposes of determining whether there
has been or is reasonably likely to be such effect, any effect to the extent
attributable to any breach by the Buyer of any covenant or obligation set forth
in this Agreement.
"Person" shall mean any individual, corporation, limited
liability company, partnership, joint venture, trust, association, organization,
Governmental Entity or other entity.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Stock Issuance Agreement" shall mean a Stock Issuance
Agreement evidencing an issuance of Common Stock under the Stock Issuance
Program provided for in Article Three of the Company Stock Plan.
"Subsidiary" with respect to any party shall mean any
corporation, limited liability company, partnership, or other business
association or entity, at least a majority of the voting securities or economic
interests of which is directly or indirectly owned or controlled by such party
or by any one or more of its subsidiaries.
10.2 Interpretation.
(a) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
(c) The words "hereof", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement,
and article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
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(d) The plural of any defined term shall have a meaning
correlative to such defined term, and words denoting any gender shall include
all genders. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's successors and permitted
assigns.
(f) A reference to any legislation or to any provision
of any legislation shall include any amendment, modification or re-enactment
thereof, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(g) 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
provision of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Press Releases and Announcements. It is expected that
after the execution hereof, the Buyer and the Company will make joint
announcements regarding this Agreement. No Party shall (and each Party will
assure that its officers, directors, employees, Affiliates and agents do not)
issue any press release or announcement or make any disclosure to any other
Person (other than its counsel, financial advisors and accountants and, in the
case of the Company, its stockholders in connection with seeking the Merger
Stockholder Approval Action and obtaining the Preferred Stock Conversion Consent
relating to the subject matter of this Agreement without the prior written
approval of the Buyer and the Company; provided, however, that a Party may,
without any requirement of approval or consent by any other Party, make any
public disclosure it believes in good faith is required by applicable law,
regulation, legal process or, in the case of the Buyer, the requirements of any
stock market on which the Buyer's Common Stock is listed or quoted (in which
case the Party making the disclosure shall advise the other Party of such
disclosure and provide it with a copy of such disclosure).
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11.2 [Intentionally Omitted]
11.3 Entire Agreement. This Agreement (including the
Schedules, Exhibits and other documents referred to herein), together with the
Escrow Agreement and the Confidentiality Agreement, constitute the entire
agreement among the Parties and supersedes all other prior understandings,
agreements or representations by or among the Parties, both written or oral,
that may have related in any way to the subject matter hereof.
11.4 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 Sub may
assign its rights, interests and obligations hereunder to another Affiliate.
11.5 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
11.6 Notices. Any notice, request, instruction or other
document to be given hereunder by any party to another party shall be in writing
and shall be deemed given when delivered personally, upon receipt of a
transmission confirmation (with a confirming copy sent by overnight courier) if
sent by facsimile or like transmission, and on the next business day when sent
by Federal Express, United Parcel Service, Express Mail, or other reputable
overnight courier, to the party at the following addresses (or such other
addresses for a party as shall be specified by like notice):
(a) If to The Buyer or Sub, to:
Net Perceptions, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
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With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company, to:
Knowledge Discovery One, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
11.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
11.8 Amendments and Waivers. The Parties may mutually amend
any provision of this Agreement at any time prior to the Effective Time;
provided, however, that any amendment effected subsequent to the approval of the
Agreement by holders of a majority of the Company's Common Stock shall be
subject to the restrictions contained in the DGCL. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by all of the Parties. No waiver by any Party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or
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covenant hereunder or affect in any way rights arising by virtue of any prior or
subsequent such occurrence.
11.9 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.
11.10 Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
11.11 Enforcement. The Parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law (subject to Section 11.12) or in
equity. In addition, each of the Parties hereto (a) consents to submit itself to
the personal jurisdiction of any Federal or state court located in the State of
Delaware in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement prior to the Effective Time or,
after the Effective Time, to enforce any arbitral award rendered pursuant to
Section 11.12, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal or state court sitting in the State of Delaware.
11.12 Arbitration. After the Effective Time, except with
respect to an action seeking specific performance or another equitable remedy,
any dispute relating to or arising out of this Agreement, or to a breach of this
Agreement, arising among the parties or their successors, shall be settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"). The arbitration proceeding, including the
rendering of an award, shall take place in Boston, Massachusetts and be
administered by the AAA. The parties agree to act in good faith to mutually
select an arbitrator. If within forty-five (45) days after submission of any
dispute to arbitration, the parties cannot mutually agree on one arbitrator, the
parties shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator, who shall be the sole arbitrator to hear the
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dispute. The decision of the arbitrator shall be binding on the parties hereto
or their successors and any judgment rendered by such arbitrator may be enforced
by any court of competent jurisdiction. Each Party shall bear its own expenses
in connection with such arbitration unless (a) otherwise ordered by the
arbitrator or (b) the arbitration relates to a claim for indemnification under
Sections 8.2 or 8.5 and (i) the arbitrator decides that the Indemnified Party
seeking indemnification is entitled to less than one-half of the amount of the
Loss sought at the time the matter was submitted to arbitration, in which case,
the Indemnified Party shall pay its own expenses, the fee of each arbitrator,
the administrative fee of the AAA, and the reasonable attorney's fees and costs
incurred by the other party in, and to prepare for, the arbitration or (ii) the
arbitrator decides that the Indemnified Party seeking indemnification is
entitled to one-half or more of the amount of the Loss sought at the time the
matter was submitted to arbitration, in which case, the Indemnifying Party shall
pay its own expenses, the fee of each arbitrator, the administrative fee of the
AAA, and the reasonable attorney's fees and costs incurred by the other party
in, and to prepare for, the arbitration, and, in the case of (ii), (A) if the
Indemnified Party is a Buyer Indemnified Person, all such expenses, fees and
costs shall be deemed Losses for purposes of Section 8.2 and (B) if the
Indemnified Party is a Company Stockholder then all such expenses, fees and
costs shall be deemed losses for purposes of Section 8.5.
[End of Agreement except for signature page]
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IN WITNESS WHEREOF, this Agreement has been executed as of the
date first above written.
NET PERCEPTIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
KENTUCKY ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
KNOWLEDGE DISCOVERY ONE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President, Chief Operating Officer
and Chief Financial Officer
STOCKHOLDER REPRESENTATIVE,
SOLELY FOR PURPOSES OF SECTION 6.15 AND
ARTICLE VIII:
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, solely in his capacity
as Stockholder Representative
(Signature Page to Agreement and Plan of Merger)
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AMENDMENT
This Amendment, dated as of February 3, 2000 (this "Amendment"),
amends the Agreement and Plan of Merger, dated as of January 15, 2000 (the
"Merger Agreement"), by and among Net Perceptions, Inc., Kentucky Acquisition
Corporation and Knowledge Discovery One, Inc. Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to them in the Merger
Agreement. All references herein to sections shall be understood to be
references to sections of the Merger Agreement.
WHEREAS, the parties hereto desire to correct an inconsistency
between certain provisions of the Merger Agreement; and
WHEREAS, Section 11.8 of the Merger Agreement provides that the
Merger Agreement may be amended at any time prior to the Effective Time by a
signed writing of the parties.
NOW, therefore, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Amendment. Section 2.3(b) is hereby replaced in its entirety
as follows:
(b) At the Closing (after the Effective Time), the Buyer shall (i)
deliver (or cause to be delivered) to each Company Stockholder a certificate
representing a number of whole shares of Buyer Common Stock equal to the number
of shares of Common Stock held by such Company Stockholder immediately prior to
the Effective Time multiplied by the Exchange Ratio, less a number of whole
shares of Buyer Common Stock equal to such Company Stockholder's Ownership
Percentage Interest (as set forth on the Closing Stockholder Schedule) in the
Escrow Shares and (ii) deposit (or cause to be deposited) in
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escrow on behalf of such Company Stockholder a number of shares of Buyer Common
Stock equal to such Company Stockholder's Ownership Percentage Interest (as set
forth on the Closing Stockholder Schedule) in the Escrow Shares, to be held and
released in accordance with an escrow agreement among the Buyer, the Stockholder
Representative (as defined in Section 8.8) and the Escrow Agent referred to
therein (the "Escrow Agent") substantially in the form of Exhibit C hereto (the
"Escrow Agreement"), which shares shall be included in and represented by the
single certificate for the Escrow Shares which shall be delivered to the Escrow
Agent in accordance with the Escrow Agreement.
2. Parties in Interest. This Amendment shall be binding upon and
inure solely to the benefit of each party hereto and its respective successors
and assigns. Nothing in this Amendment, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Amendment.
3. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
4. Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, this Amendment has been executed as of the
date first above written.
NET PERCEPTIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
KENTUCKY ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
KNOWLEDGE DISCOVERY ONE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President, Chief Operating Officer
and Chief Financial Officer
(Signature Page to Amendment)
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