EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 12, 2002
AMONG
CATEGORY 5 TECHNOLOGIES, INC.
MINDARROW SYSTEMS, INC.
AND
MINDARROW ACQUISITION CORP.
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), dated as of July
12, 2002, is among Category 5 Technologies, Inc., a Nevada corporation (the
"COMPANY"), MindArrow Systems, Inc., a Delaware corporation ("PARENT"), and
MindArrow Acquisition Corp., a Delaware corporation and a direct wholly owned
subsidiary of Parent ("MERGER SUB"). Certain capitalized and non-capitalized
terms used herein are defined in Section 9.11.
RECITALS
WHEREAS, the boards of directors of the Company, Parent and Merger Sub
each have, in light of and subject to the terms and conditions set forth herein,
approved this Agreement and the transactions contemplated hereby, including the
Merger (as defined in Section 1.1), and the boards of directors of the Company,
Parent and Merger Sub have declared the Merger advisable and fair to, and in the
best interests of, their respective stockholders;
WHEREAS, pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding shares
of stock of the Company shall be converted into shares of common stock, par
value $.001 per share, of Parent (collectively, "PARENT COMMON STOCK"), and
warrants to acquire shares of Parent Common Stock which will, by their terms,
vest only upon the achievement by the "ePenzio" division of the Company of a
certain financial target as set forth herein;
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), and that this
Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368(a) of the Code;
WHEREAS, certain stockholders of the Company and Parent will enter into
a voting agreement in the form attached hereto as EXHIBITS A1 and A2,
respectively, (each, a "VOTING AGREEMENT") pursuant to which, among other
things, such stockholders will agree to vote the shares owned by them in favor
of the Merger, subject to the terms of the applicable Voting Agreement; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Merger Sub hereby
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. At the Effective Time (as defined in Section
1.2) and upon the terms and subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and the General Corporation Law of the State of Nevada (the "NGCL"), the
Company shall be merged with and into Merger Sub (the "MERGER"). Following the
Merger, Merger Sub shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and the separate corporate existence of the Company shall cease.
SECTION 1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement,
Parent, Merger Sub and the Company shall cause the Merger to be consummated by
filing (i) a Certificate of Merger (the "CERTIFICATE OF MERGER") with the
Secretary of State of the State of Delaware (the "DELAWARE SECRETARY") in such
form as required by, and executed in accordance with, the relevant provisions of
the DGCL, and (ii) Articles of Merger (the "ARTICLES OF MERGER") with the
Secretary of State of the State of Nevada (the "NEVADA SECRETARY") in such form
as required by, and executed in accordance with, the relevant provisions of the
NGCL, as soon as practicable on or after the Closing Date (as defined in Section
1.3). The Merger shall become effective upon the later of the filing of such
Certificate of Merger with the Delaware Secretary and the filing of the Articles
of Merger with the Nevada Secretary, or at such later time as agreed in writing
by Parent and the Company and specified in the Certificate of Merger and the
Articles of Merger (the "EFFECTIVE TIME").
SECTION 1.3 CLOSING OF THE MERGER. The closing of the Merger (the
"CLOSING") will take place as soon as practicable at a time and on a date to be
specified by the parties (the "CLOSING DATE"), which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other time, date or place
as agreed to in writing by the parties hereto.
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL and NGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all of the properties, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BYLAWS. At the Effective
Time, (i) the certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable Law (as defined in Section 3.9), (ii) the bylaws of the Merger Sub,
as in effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until amended in accordance with applicable Law, and (iii)
the certificate of
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incorporation of the Merger Sub shall be amended so that Article First shall
read in its entirety as "The name of the Corporation is Category 5 Technologies,
Inc. (hereinafter called the "Corporation")".
SECTION 1.6 DIRECTORS. ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be the
initial directors of the Surviving Corporation and shall hold office from the
Effective Time in accordance with the charter and bylaws of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until their earlier death, resignation or removal.
SECTION 1.7 OFFICERS. ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be the
initial executive officers of the Surviving Corporation, each of whom, from the
Effective Time and in accordance with the charter and bylaws of the Surviving
Corporation until his successor is duly elected or appointed and qualified or
until his earlier death, resignation or removal, shall hold the office or
offices designated by the initial directors of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 CONVERSION OF SHARES.
(a) At the Effective Time, each issued and outstanding share of the
common stock, par value $.001 per share, of Merger Sub shall, by virtue of the
Merger and without any action on the part of Parent, Merger Sub or the Company,
be converted into one fully paid and non-assessable share of common stock of the
Surviving Corporation.
(b) At the Effective Time, each share of common stock, par value $.001
per share, of the Company ("COMPANY COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time (individually, a "SHARE" and
collectively, the "SHARES") (other than Shares to be cancelled in accordance
with Section 2.1(c) hereof or Shares held by stockholders duly exercising
appraisal rights under NGCL Section 92A.380 (the "DISSENTING SHARES") to the
extent such rights shall be available in connection with the Merger) shall, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or any holder thereof, be converted into the right to receive (i)
2.3 shares of Parent Common Stock (referred to herein as the "STOCK EXCHANGE
RATIO") and (ii) a warrant certificate (the "CONTINGENT WARRANT") to acquire,
pursuant to the terms of the Master Contingent Warrant Agreement (as defined
below), up to .5 shares of Parent Common Stock (with any fraction of a share to
be rounded down) (THE "CONTINGENT WARRANT SHARES"), vesting only upon the
achievement by the "ePenzio" division of the Company of an EBIDTA of at least
$8,700,000 for the one year period ending June 30, 2003 (with "EBIDTA" for this
purpose being defined as net income calculated in accordance with GAAP, plus
interest, depreciation, taxes and amortization), exercisable at an exercise
price of $0.01 per share and expiring twelve months after vesting (the
"CONTINGENT WARRANT EXPIRATION DATE") (all such shares of Parent Common Stock
plus the Contingent Warrant, together with any cash in lieu of fractional shares
of Parent Common Stock to be paid pursuant to Section 2.8, being referred to
herein as the "MERGER CONSIDERATION") payable, without interest, to the holder
of such Company Common Stock upon surrender, in the manner provided in this
Article II, of the certificate that formerly evidenced such Company Common
Stock. At
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the Effective Time, all such Shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon surrender of such certificate in accordance with
this Article II (each a "CERTIFICATE"), or the right, if any, to receive payment
from the Surviving Corporation for the "fair value" of such shares as determined
in accordance with Section 92A-460 of NGCL, payable, without interest, to the
holder of such Shares upon surrender, in the manner provided in this Article II,
of the certificate that formerly evidenced such Shares. The "MASTER CONTINGENT
WARRANT AGREEMENT" means the master contingent warrant agreement pursuant to
which the Contingent Warrants will be issued, in such form as shall be agreed to
by the Company and Parent prior to the initial filing of the documents referred
to in Section 6.1, and incorporating the terms set forth in clause (ii) above
and such additional terms as are customary and appropriate (including
anti-dilution adjustments for stock splits, combinations or similar
transactions, but not for issuances of stock below fair market value).
(c) At the Effective Time each Share of Company Common Stock held by the
Company, Parent, or any of their subsidiaries shall be cancelled and
extinguished without any consideration therefor.
(d) The Stock Exchange Ratio shall be adjusted to reflect appropriately
the effect of any stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock) reorganization, recapitalization, reclassification or other like
change with respect to Parent Common Stock or Company Common Stock occurring on
or after the date hereof and prior to the Effective Time.
SECTION 2.2 Stock Options and Warrants.
(a) As soon as practicable following the date of this Agreement, Parent
and the Company (or, if appropriate, any committee of the Board of Directors of
the Company administering the Company's stock option plans or arrangements
(collectively, the "COMPANY OPTION PLANS")) shall take such action, and the
Company shall obtain all such agreements and consents, if any, as may be
required to effect the provisions of this Section 2.2. As of the Effective Time,
each outstanding option to purchase shares of Company Common Stock (a "COMPANY
STOCK OPTION") shall by virtue of the Merger be assumed by Parent (in each case,
an "ASSUMED STOCK OPTION") as follows:
(i) In the case of any Company Stock Option to which Section 421
of the Code applies by reason of its qualification under Section 422 of the
Code, (A) the number of shares of Parent Common Stock subject to the Assumed
Stock Option shall be the product (truncated to the nearest whole share) of the
number of shares of Company Common Stock subject to the Company Stock Option
multiplied by the Stock Exchange Ratio, and (B) the exercise price per share of
Parent Common Stock under the Assumed Stock Option shall be the quotient
(rounded up to the nearest $.01) of the exercise price per share of Company
Common Stock under the Company Stock Option immediately prior to the Effective
Time divided by the Stock Exchange Ratio.
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(ii) In the case of any other Company Stock Option, (A) the
number of shares of Parent Common Stock subject to the Assumed Stock Option
shall be the product (rounded up to the nearest whole share) of the number of
shares of Company Common Stock subject to the Company Stock Option multiplied by
the Stock Exchange Ratio, and (B) the exercise price per share of Parent Common
Stock under the Assumed Stock Option shall be the quotient (truncated to the
nearest $.01) of the exercise price per share of Company Common Stock under the
Company Stock Option immediately prior to the Effective Time divided by the
Stock Exchange Ratio.
(iii) Each Assumed Stock Option shall be subject to the same
expiration date and vesting provisions as were applicable to the relevant
Company Stock Option immediately prior to the Effective Time.
(iv) As soon as practicable after the Effective Time, Parent
shall deliver to each holder of an Assumed Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto and such Assumed Stock
Option shall continue in effect on the same terms and conditions (subject to the
adjustments required by this Section 2.2 after giving effect to the Merger).
Parent shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
such Assumed Stock Option pursuant to the terms set forth in this Section 2.2.
(v) As provided in Section 6.15, all shares of Parent Common
Stock underlying each Assumed Stock Option shall be registered with the
Securities and Exchange Commission (the "SEC") on Form S--8, and with all states
where such registration is required by applicable state "blue sky" laws.
(vi) Prior to the Effective Time, the boards of directors of
Parent and the Company, or an appropriate committee of non-employee directors
thereof, shall each comply as applicable with the provisions of the SEC's No
Action Letter dated January 12, 1999 addressed to Skadden, Arps, Slate, ▇▇▇▇▇▇▇
and ▇▇▇▇ LLP relating to Rule 16b of the Securities Exchange Act of 1934 so that
the assumption of Company Stock Options pursuant to the Merger shall be an
exempt transaction for purposes of Section 16 of the Securities Exchange Act of
1934 by any officer or director of the Company who may become a covered person
for purposes of Section 16.
(b) As of the Effective Time, each warrant to purchase shares of Company
Common Stock outstanding as of the date hereof (a "COMPANY WARRANT") shall by
virtue of the Merger be assumed by Parent and the Company Warrant shall evidence
the holder's right to purchase shares of Parent Common Stock and Contingent
Warrants (in each case, an "ASSUMED WARRANT"), as set forth below. For each
Assumed Warrant, (i) the number of shares of Parent Common Stock subject to the
Assumed Warrant shall be the product (rounded up to the nearest whole share) of
the number of shares of Company Common Stock subject to the Company Warrant
multiplied by the Stock Exchange Ratio, and (ii) the exercise price per share
under the Assumed Warrant shall be the quotient (rounded to the nearest $.01) of
the exercise price per share of Company Common Stock under the Company Warrant
immediately prior to the Effective Time divided by the Stock Exchange Ratio, and
(iii) Contingent Warrants shall be
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issued upon exercise in such amount that the holder of the Assumed Warrant would
have been entitled to receive had such holder exercised the Assumed Warrant
immediately prior to the Effective Time; provided, however, that no Contingent
Warrants shall be issued upon exercise of any Assumed Warrant after the
Contingent Warrant Expiration Date. Each Assumed Warrant shall be subject to the
same expiration date and other terms as were applicable to the relevant Company
Warrant immediately prior to the Effective Time.
SECTION 2.3 CONVERSION OF CONVERTIBLE NOTES. All Convertible Notes (as
defined in Section 3.2(b)), and any portions of Convertible Notes partially
converted, which are outstanding at the Effective Time shall thereafter be
convertible only into that number of shares of Parent Common Stock that the
holders of such Convertible Notes would have received had such holders converted
their Convertible Notes into Company Common Stock immediately prior to the
Effective Time. Prior to the Closing, the Company shall have obtained the
consent of the holders of all Convertible Notes to give effect to this Section
2.3. It shall be assumed, solely for purposes of calculating the Stock Exchange
Ratio under Section 2.1(b), that all Convertible Notes shall have been converted
in their entirety into Company Common Stock immediately prior to the Effective
Time.
SECTION 2.4 EXCHANGE FUND. Prior to the Effective Time, Parent shall
appoint its current stock transfer agent, or a commercial bank or trust company
reasonably acceptable to the Company, to act as exchange agent hereunder for the
purpose of exchanging Shares for the Merger Consideration (the "EXCHANGE
AGENT"). On or prior to the Closing Date, Parent shall deposit with the Exchange
Agent, in trust for the benefit of holders of Shares (other than Parent, the
Company and any of their respective subsidiaries and the holders of Dissenting
Shares), (i) certificates representing the Parent Common Stock issuable pursuant
to Section 2.1 and (ii) certificates representing the Contingent Warrants.
Parent agrees to make available to the Exchange Agent from time to time as
needed, sufficient cash amounts payable in lieu of fractional shares of Parent
Common Stock pursuant to Section 2.8 and any dividends and other distributions
payable pursuant to Section 2.6. Any cash and certificates of Parent Common
Stock, together with any dividends or distributions with respect thereto, and
any certificates representing the Contingent Warrants deposited with the
Exchange Agent shall hereinafter be referred to as the "EXCHANGE FUND."
SECTION 2.5 EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "CERTIFICATES") whose shares were converted
pursuant to Section 2.1(b) into Parent Common Stock (i) a letter of transmittal
which shall specify that delivery shall be effective, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent, and which letter shall be in customary form and have such other
provisions as Parent and the Company may reasonably specify; and (ii)
instructions for effecting the surrender of such Certificates in exchange for
the Merger Consideration. Upon surrender of a Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor (A) a certificate or
certificates representing that number of shares of Parent
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Common Stock representing, in the aggregate, the whole number of shares that
such holder has the right to receive pursuant to Section 2.1, (B) certificates
representing the Contingent Warrants, and (C) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.6 and cash
in lieu of fractional shares pursuant to Section 2.8, and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or will
accrue on any cash payable pursuant to Section 2.6 or Section 2.8. In the event
of a transfer of ownership of Company Common Stock which is not registered in
the transfer records of the Company, certificates evidencing, in the aggregate,
the proper number of shares of Parent Common Stock issuable pursuant to Section
2.1, certificates representing the Contingent Warrants, a check in the proper
amount of cash in lieu of any fractional shares of Parent Common Stock pursuant
to Section 2.8 and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.6, may be issued with respect to such Shares to
such a transferee if the Certificate representing such Shares is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
SECTION 2.6 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No
dividends or other distributions declared or made with respect to shares of
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock that such holder would be entitled to receive upon surrender of
such Certificate, and no cash payment in lieu of fractional shares of Parent
Common Stock shall be paid to any such holder pursuant to Section 2.8, until
such holder shall surrender such Certificate in accordance with Section 2.5.
Subject to the effect of applicable Laws, following surrender of any such
Certificate, there shall be paid to such holder of shares of Parent Common Stock
issuable in exchange therefor, without interest, (a) promptly after the time of
such surrender, the amount of any cash payable in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.8 and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (b) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender, payable with
respect to such shares of Parent Common Stock.
SECTION 2.7 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued, all Contingent Warrant Shares when issued,
and all cash paid upon conversion of any Shares in accordance with the terms of
Article I and this Article II (including any cash paid pursuant to Sections 2.6
and 2.8 but excluding cash paid by the Surviving Corporation for Dissenting
Shares pursuant to Section 2.1(b)) shall be deemed to have been issued and paid
in full satisfaction of all rights under the NGCL pertaining to such Shares.
SECTION 2.8 NO FRACTIONAL SHARES OF PARENT COMMON STOCK.
(a) No certificates or scrip of shares of Parent Common Stock
representing fractional shares of Parent Common Stock or book-entry credit of
the same shall be issued upon the surrender for exchange of Certificates and
such fractional share interests will not entitle the
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owner thereof to vote or to have any rights of a stockholder of Parent or a
holder of shares of Parent Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder
of Shares exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to the product of (i) such
fractional part of a share of Parent Common Stock multiplied by (ii) the closing
price on the NASDAQ Small Cap Market System for a share of Parent Common Stock
on the date of the Effective Time. As promptly as practicable after the
determination of the aggregate amount of cash to be paid to holders of
fractional interests, the Exchange Agent shall notify Parent and Parent shall
cause the Surviving Corporation to deposit such amount with the Exchange Agent
and shall cause the Exchange Agent to forward payments to such holders of
fractional interests subject to and in accordance with the terms hereof.
SECTION 2.9 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for twelve
months after the Effective Time shall be delivered to the Surviving Corporation
or otherwise on the instruction of the Surviving Corporation, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation and Parent for the Merger
Consideration with respect to the Shares formerly represented thereby to which
such holders are entitled pursuant to Section 2.1 and Section 2.5, any cash in
lieu of fractional shares of Parent Common Stock to which such holders are
entitled pursuant to Section 2.8 and any dividends or distributions with respect
to shares of Parent Common Stock to which such holders are entitled pursuant to
Section 2.6.
SECTION 2.10 NO LIABILITY. None of Parent, Merger Sub, the Company, the
Surviving Corporation or the Exchange Agent, or any directors, officers,
employees or agents of each of the foregoing shall be liable to any person in
respect of any Parent Common Stock, any Contingent Warrants or Contingent
Warrant Shares, any dividends or distributions with respect to shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock or
any cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
SECTION 2.11 INVESTMENT OF THE EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Parent on a daily
basis. Any interest and other income resulting from such investments promptly
shall be paid to Parent.
SECTION 2.12 LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if reasonably
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the Shares
formerly represented thereby, any
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cash in lieu of fractional shares of Parent Common Stock and unpaid dividends
and distributions on shares of Parent Common Stock deliverable in respect
thereof, pursuant to this Agreement.
SECTION 2.13 WITHHOLDING RIGHTS. Each of the Surviving Corporation,
Parent and the Exchange Agent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to this Agreement to any holder
of Shares such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code and the rules and regulations
promulgated thereunder, or any applicable Law. To the extent that amounts are so
withheld by the Surviving Corporation, Parent or the Exchange Agent, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect to which
such deduction and withholding was made by the Surviving Corporation, Parent or
the Exchange Agent, as the case may be.
SECTION 2.14 STOCK TRANSFER BOOKS. The stock transfer books of the
Company shall be closed immediately upon the Effective Time and there shall be
no further registration of transfers of Shares thereafter on the records of the
Company. On or after the Effective Time, any Certificates presented to the
Surviving Corporation, Exchange Agent (in its capacity as Exchange Agent) or
Parent for any reason shall be converted into the Merger Consideration with
respect to the Shares formerly represented thereby, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 2.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 2.6, and the
Certificates so presented shall be cancelled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule to be delivered by the
Company to Parent prior to the initial filing of the documents referred to in
Section 6.1 of this Agreement (the "COMPANY DISCLOSURE SCHEDULE") or as set
forth in the Company SEC Reports (as defined in Section 3.4) filed on or prior
to the date hereof or as permitted under Section 5.1 hereof, the Company hereby
represents and warrants to each of Parent and Merger Sub as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and its subsidiaries is, or will be as of the
Effective Time, a corporation or legal entity duly organized, validly existing
and in good standing under the applicable Laws of the jurisdiction of its
incorporation or organization and has all requisite corporate, partnership or
similar power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(b) Section 3.1 of the Company Disclosure Schedule sets forth a list of
all subsidiaries of the Company. Except as listed therein, neither the Company
nor any such subsidiary owns, directly or indirectly, beneficially or of record,
any shares of capital stock or other securities of any other entity or any other
investment in any other entity.
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(c) The Company is, and each of its subsidiaries is or will be as of the
Effective Time, duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased, or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing is not reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company and its subsidiaries taken
as a whole.
(d) The Company has heretofore delivered to Parent accurate and complete
copies of the Company's articles of incorporation and bylaws, as currently in
effect. The Company has heretofore delivered to Parent accurate and complete
copies of the charter or articles of incorporation and bylaws (or other similar
organizational and governing instruments), as currently in effect, of each of
its subsidiaries.
SECTION 3.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of: (i)
125,000,000 shares of Company Common Stock, par value $.001 per share, of which
16,592,863 shares are issued and outstanding as of the date hereof and (ii)
25,000,000 shares of preferred stock, par value $.001 per share, of which no
shares are issued and outstanding as of the date hereof. All of the outstanding
Shares are duly authorized, validly issued, fully paid and non-assessable and
are free of preemptive rights. As of the date hereof, (A) 6,000,000 Shares are
reserved for issuance under the Company's Long-Term Incentive Plan, of which
914,500 Shares are issuable upon the exercise of options granted thereunder, (B)
1,000,000 Shares are reserved for issuance under the Company's Director Option
Plan, of which 50,000 Shares are issuable upon the exercise of options granted
thereunder, (C) options to purchase 1,600,000 Shares upon the exercise of
non-plan options granted to directors and executive officers of the Company are
outstanding, and (D) 1,950,275 Shares are available for purchase pursuant to the
Company Warrants. Except as set forth in the immediately preceding sentence,
there are no Company Stock Options outstanding under any Company Option Plan and
no Shares subject to any Company Warrant.
(b) As of the date hereof, the Company has issued convertible promissory
notes in the aggregate principal amount of $820,000, which, at each holder's
option, are convertible, on a dollar-for-dollar basis, into Company Common Stock
at $2.00 per share (the "CONVERTIBLE NOTES").
(c) Except as set forth in this Section 3.2, as of the date hereof,
there are no outstanding (i) shares of capital stock or other voting securities
of the Company; (ii) securities of the Company or any of its subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company; (iii) options or other rights to acquire from the
Company or any of its subsidiaries, or obligations of the Company or any of its
subsidiaries to issue, any capital stock, voting securities, or securities
convertible into or exchangeable for capital stock or voting securities of the
Company; or (iv) equity equivalents, interests in the ownership or earnings of
the Company, or other similar rights (including stock appreciation rights)
(collectively, "COMPANY SECURITIES"). Except as set forth in Section 3.2 of the
Company Disclosure Schedule, there are no outstanding obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities. There are no
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stockholder agreements, voting trusts or other agreements or understandings to
which the Company or any of its subsidiaries is a party or to which it is bound
relating to the voting of any shares of capital stock of the Company (other than
the applicable Voting Agreement).
(d) All of the outstanding capital stock of the Company's subsidiaries
is owned by the Company, directly or indirectly, free and clear of any Lien (as
defined below) or any other limitation or restriction (including, without
limitation, any restriction on the right to vote or sell the same) except as may
be provided as a matter of Law. Except as set forth in this Section 3.2, there
are no debt or equity securities of the Company or its subsidiaries convertible
into or exchangeable for, no options or other rights to acquire from the Company
or its subsidiaries, and no other contract, understanding, arrangement, or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly of, any capital stock or other ownership interests in, or
any other securities of, any subsidiary of the Company. There are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase,
redeem, or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of the Company. None of the Company's
subsidiaries owns any capital stock of the Company. For purposes of this
Agreement, "LIEN" means, in respect of any asset (including any security) any
mortgage, lien, pledge, charge, security interest, or encumbrance of any kind in
respect of such asset.
SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby and thereby (other than, in respect of the
Merger and this Agreement, the Company Requisite Vote (as defined in Section
3.3(b))). This Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid, legal, and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
(b) As of the date hereof, the Board of Directors of the Company (the
"COMPANY BOARD"), by the requisite vote of those present (who constituted 100%
of the directors then in office), with no dissenting votes, has (i) duly and
validly authorized the execution and delivery of this Agreement and approved the
consummation of the transactions contemplated hereby, taken all corporate
actions required to be taken by the Company Board for the consummation of the
transactions contemplated hereby, including the Merger, and (ii) resolved (A)
that this Agreement and the transactions contemplated hereby, including the
Merger, taken together, are advisable and fair to, and in the best interests of,
the Company and its stockholders; and (B) to recommend that the stockholders of
the Company approve and adopt this Agreement and approve the Merger. The Company
Board has directed that this Agreement and the Merger be submitted to the
stockholders of the Company for their approval and adoption. The affirmative
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approval of the holders of Shares representing a majority of the votes that may
be cast by the holders of all outstanding Shares (voting as a single class) as
of the record date for the Company (the "COMPANY REQUISITE VOTE") is the only
vote of the holders of any class or series of capital stock of the Company
necessary to approve and adopt this Agreement and approve the Merger.
SECTION 3.4 SEC REPORTS; FINANCIAL STATEMENTS. Since June 30, 2001, the
Company has filed all forms, reports and documents with the SEC required to be
filed by it under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
(collectively, the "COMPANY SEC REPORTS"), each of which complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act, each as in effect on the dates such Company SEC Reports were
filed. None of the Company SEC Reports contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except to the extent amended prior to the date hereof by a
subsequently filed Company SEC Report. The consolidated financial statements of
the Company included in the Company SEC Reports complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC in respect thereof and fairly presented, in
conformity with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated subsidiaries, in each case as of the dates thereof
and their consolidated results of operations and changes in financial position
for the periods then ended (subject, in the case of the unaudited interim
financial statements, to the absence of certain footnote disclosure and to
normal year-end adjustments). For purposes of this Agreement, "COMPANY BALANCE
SHEET" means the consolidated balance sheet of the Company as of March 31, 2002,
as set forth in the Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 2002, and "COMPANY BALANCE SHEET DATE" means March 31,
2002. Since the Company Balance Sheet Date, there has not been any change, or
any application or request for any change, by the Company or any of its
subsidiaries in accounting principles, methods or policies for financial
accounting purposes, other than as a result of any changes under GAAP or other
relevant accounting principles.
SECTION 3.5 NO UNDISCLOSED LIABILITIES. There are no material
liabilities of the Company or any of its subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
which are required to be reflected in its financial statements (or in the notes
thereto) in accordance with GAAP, other than: (a) liabilities disclosed,
provided for or reserved against in the Company Balance Sheet or in the notes
thereto; (b) liabilities arising in the ordinary course of business after the
Company Balance Sheet Date or which arose in the ordinary course of business
prior to the Company Balance Sheet Date but were not required to be disclosed,
provided for or reserved against in the Company Balance Sheet; (c) liabilities
disclosed in the Company SEC Reports prior to the date hereof; (d) liabilities
arising under this Agreement; and (e) liabilities set forth in Section 3.5 of
the Company Disclosure Schedule.
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SECTION 3.6 ABSENCE OF CHANGES. Except as contemplated by this
Agreement, as set forth in Section 3.6 of the Company Disclosure Schedule, or as
disclosed in the Company SEC Reports filed prior to the date hereof, since the
Company Balance Sheet Date, the Company and its subsidiaries have conducted
their business in the ordinary and usual course consistent with past practice
and there has not been:
(a) any event, occurrence or development which had or is reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company and its subsidiaries taken as a whole;
(b) any declaration, setting aside or payment of any dividend or other
distribution in respect of any shares of capital stock of the Company or (except
to the Company or other subsidiaries) any subsidiary, any split, combination or
reclassification of any shares of capital stock of the Company or any
subsidiary, or any repurchase, redemption or other acquisition by the Company or
any of its subsidiaries of any securities of the Company or any of its
subsidiaries;
(c) any amendment or change to the charter, certificate or articles of
incorporation or bylaws (or other similar organizational or governing
instrument) of the Company or any of its subsidiaries or any amendment of any
term of any outstanding security of the Company or any of its subsidiaries that
would materially increase the obligations of the Company or any such subsidiary
under such security;
(d) (i) any incurrence or assumption by the Company or any of its
subsidiaries of any indebtedness for borrowed money other than under existing
credit facilities (or any renewals, replacements or extensions that do not
increase the aggregate commitments thereunder) except (A) in the ordinary and
usual course of business consistent with past practice or (B) as permitted by
Section 5.1, or (ii) any guarantee, endorsement, or other incurrence or
assumption of liability (whether directly, contingently or otherwise) by the
Company or any of its subsidiaries for the obligations of any other person
(other than any wholly owned subsidiary of the Company), other than in the
ordinary and usual course of business consistent with past practice;
(e) any creation or assumption by the Company or any of its subsidiaries
of any Lien on any material asset of the Company or any of its subsidiaries
other than in the ordinary and usual course of business consistent with past
practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by the Company or any of its subsidiaries other than
(i) as permitted by Section 5.1, (ii) loans, advances or capital contributions
to or investments in wholly owned subsidiaries of the Company, (iii) loans or
advances to employees of the Company or any of its subsidiaries in the ordinary
and usual course of business consistent with past practice or (iv) extensions of
credit to customers in the ordinary and usual course of business consistent with
past practice;
(g) any contract or agreement entered into by the Company or any of its
subsidiaries on or prior to the date hereof relating to any material acquisition
or disposition of any assets or
-13-
business, other than contracts or agreements in the ordinary and usual course of
business consistent with past practice and those contemplated by this Agreement;
(h) any modification, amendment, assignment, termination or
relinquishment by the Company or any of its subsidiaries of any contract,
license or other right (including any insurance policy naming it as a
beneficiary or a loss payable payee) that is reasonably expected to have a
Material Adverse Effect, after taking into account the benefit of the
consideration, if any, received in exchange for agreeing to such modification,
amendment, assignment, termination or relinquishment, on the Company and its
subsidiaries taken as a whole;
(i) any material change in any method of accounting or accounting
principles or practice by the Company or any of its subsidiaries, except for any
such change required by reason of a change in GAAP, which change has been
consistently applied;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any of its subsidiaries exceeding the
amounts set forth in the Company's severance plans or agreements listed in
Sections 3.13(a) or 3.18 of the Company Disclosure Schedule; (ii) entering into
of any employment, deferred compensation, severance, change of control,
consulting, termination or other similar agreement (or any change or amendment
to any such existing agreement) with any director, officer, employee, agent or
other similar representative of the Company or any of its subsidiaries
(collectively, "COMPANY EMPLOYMENT AGREEMENTS") whose annual cash compensation
exceeds $100,000 other than changes or amendments that (A) do not and will not
result in increases, in the aggregate, of more than five percent in the salary,
wages or other compensation of any such person and (B) are otherwise consistent
with clause (iv) below; (iii) increase in benefits payable under any existing
severance or termination pay policies or Company Employment Agreements; or (iv)
increase in compensation, bonus or other benefits payable to directors, officers
or employees of the Company or any of its subsidiaries other than, in the case
of clauses (ii) and (iv) only, increases prior to the date hereof in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any of its subsidiaries in the ordinary and usual
course of business consistent with past practice or merit increases in salaries
of employees at regularly scheduled times in customary amounts consistent with
past practices;
(k) any adoption, entering into, amendment, alteration or termination of
(partially or completely) any Company Benefit Plan (as defined in Section
3.13(a)(i)) or Company Employee Arrangement (as defined in Section 3.13(a)(ii))
except as contemplated by this Agreement or to the extent required by applicable
Law or GAAP;
(l) any entering into of any contract with an officer, director,
employee, agent or other similar representative of the Company or any of its
subsidiaries (other than a Company Employment Agreement described in Section
3.6(j)(ii)) that is not terminable, without penalty or other liability, upon not
more than sixty (60) calendar days' notice; or
(m) any (i) making or revoking of any material election relating to
Taxes (as defined in Section 3.16), (ii) settlement or compromise of any
material claim, action, suit, litigation,
-14-
proceeding, arbitration, investigation, audit or controversy relating to Taxes,
or (iii) change to any material methods of reporting income or deductions for
federal income Tax purposes.
SECTION 3.7 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S--4 to be filed with the
SEC by Parent in connection with the issuance of Parent Common Stock, Contingent
Warrant Shares and Contingent Warrants as required by the terms of this
Agreement pursuant to the Merger (the "S-4"), at the time the S-4 is filed with
the SEC and at the time it becomes effective under the Securities Act, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the joint proxy statement relating to the Parent
Stockholder Meeting (as defined in Section 6.3) and Company Stockholder Meeting
(as defined in Section 6.4) to be held in connection with the Merger (the "JOINT
PROXY STATEMENT") will, at the date mailed to stockholders of the Company and
Parent and at the time of the Parent Stockholder Meeting and the Company
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event in
respect of the Company, its officers and directors, or any of its subsidiaries
should occur which is required to be described in an amendment of, or a
supplement to, the S-4 or the Joint Proxy Statement, the Company shall promptly
so advise Parent and such event shall be so described, and such amendment or
supplement (which Parent shall have a reasonable opportunity to review) shall be
promptly filed with the SEC and, as required by Law, disseminated to the
stockholders of the Company and Parent. The Joint Proxy Statement, insofar as it
relates to the Parent Stockholder Meeting and the Company Stockholder Meeting,
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. No representation or
warranty is made under this Section 3.7 with respect to any statements made or
incorporated by reference in the S-4 or the Joint Proxy Statement based on
information supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference therein.
SECTION 3.8 CONSENTS AND APPROVALS. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky Laws, Antitrust Laws (as defined in Section 6.5), the
filing and acceptance for record of the Certificate of Merger as required by the
DGCL and the Articles of Merger as required by the NGCL, and such other filings,
permits, consents and approvals which, if not obtained or made, are not
reasonably expected to have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole, no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority, whether domestic or
foreign (a "GOVERNMENTAL ENTITY") is necessary for the execution and delivery by
the Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby.
SECTION 3.9 NO DEFAULT. Neither the Company nor any of its subsidiaries
is in violation of any term of its charter, certificate or articles of
incorporation or bylaws (or other similar organizational or governing
instruments). The execution, delivery and performance of
-15-
this Agreement and the consummation of the transactions contemplated hereby will
not (A) result in any violation of or conflict with, constitute a default under
(with or without due notice or lapse of time or both), require any consent,
waiver or notice under any term of, or result in the reduction or loss of any
benefit or the creation or acceleration of any right or obligation (including
any termination rights) under, (i) the charter, certificate or articles of
incorporation or bylaws (or other similar organizational or governing
instruments) of the Company or any of its subsidiaries, (ii) any material
agreement, material note, material bond, material mortgage, material indenture,
material contract, material lease, material Company Permit (as defined in
Section 3.12) or other material obligation or material right to which the
Company or any of its subsidiaries is a party or by which any of the assets or
properties of the Company or any of its subsidiaries is bound, or (iii) subject
to Section 3.8, any applicable domestic or foreign law, order, writ, injunction,
decree, ordinance, award, stipulation, statute, judicial or administrative
doctrine, rule or regulation adopted or entered by a Governmental Entity
("LAW"), except in the case of clause (ii) and (iii) where any of the foregoing
is not reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and its subsidiaries taken as a whole, or (B)
result in the creation of (or impose any obligation on the Company or any of its
subsidiaries to create) any Lien upon any of the material assets or properties
of the Company or any of its subsidiaries pursuant to any such term.
SECTION 3.10 REAL PROPERTY.
(a) The Company has provided Parent with the address, general use of,
and period of ownership or occupancy of all of the real property the Company and
its subsidiaries use or occupy or have the right to use or occupy, now or in the
future, pursuant to any lease, sublease, or other occupancy agreement other than
daily usage arrangements in connection with its Internet preview sessions and
Internet training workshops (none of which arrangements are, individually or in
the aggregate, material to the business, assets or properties of the Company and
its subsidiaries taken as a whole) (the "COMPANY LEASED FACILITIES"). No real
property is owned, leased or used by the Company or its subsidiaries in the
course of their respective businesses other than the Company Leased Facilities.
(b) With respect to each Company Leased Facility:
(i) the Company will make available to Parent a true,
correct, and complete copy of the lease, sublease or other occupancy
agreement for such Company Leased Facility (and all modifications,
amendments, and supplements thereto and all side letters to which
Company or any of its subsidiaries is a party affecting the obligations
of any party thereunder) (each such agreement is referred to herein as a
"COMPANY REAL PROPERTY LEASE");
(ii) to the Company's knowledge, the Company or its
subsidiary using or occupying such Company Leased Facility has a good
and valid leasehold interest in such Company Leased Facility free and
clear of all Liens, except (x) Taxes and general and special assessments
not in default and payable without penalty and interest, and (y)
easements, covenants and other restrictions that do not materially
impair the current
-16-
use, occupancy or value of the Company's or such subsidiary's interest
in such real property;
(iii) to the Company's knowledge, each Company Real
Property Lease constitutes the valid and legally binding obligation of
the parties thereto, enforceable in accordance with its terms, and is in
full force and effect;
(iv) all rent and other sums and charges payable by the
Company or its subsidiary using or occupying such Company Leased
Facility as tenant under the Company Real Property Lease covering such
Company Leased Facility are current, and no event or condition giving
rise to a right to terminate or uncured default on the part of the
tenant or, to the Company's knowledge, the landlord, exists under such
Company Real Property Lease. No party to such Company Real Property
Lease has given written notice to the Company or such subsidiary or made
a claim in writing against the Company or such subsidiary in respect of
any breach or default thereunder; and
(v) neither the Company nor its subsidiary using or
occupying such Company Leased Facility has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered its leasehold
interest in such Company Leased Facility.
SECTION 3.11 LITIGATION. Except as disclosed in the Company SEC Reports
or in Section 3.11 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or, to the Company's knowledge, investigation, pending or, to
the Company's knowledge, threatened which is reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company and
its subsidiaries taken as a whole. Except as disclosed in Section 3.11 of the
Company Disclosure Schedule or the Company SEC Reports, none of the Company or
its subsidiaries is subject to any outstanding order, writ, injunction or decree
which is reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company and its subsidiaries taken as a whole. To
the Company's knowledge, there is no action, suit, proceeding or investigation
pending or threatened against any current or former officer, director, employee
or agent of the Company or any of its subsidiaries (in his or her capacity as
such) which is reasonably expected to give rise to a claim for contribution or
indemnification against the Company or any of its subsidiaries. Notwithstanding
the foregoing, any stockholder litigation or litigation by any Governmental
Entity, in each case brought or threatened against the Company or any officer,
director, employee or agent of the Company in any respect of this Agreement or
the transactions contemplated hereby, shall not be deemed to have, or contribute
to, a Material Adverse Effect on the Company and its subsidiaries taken as a
whole.
SECTION 3.12 COMPLIANCE WITH APPLICABLE LAW; PERMITS. The Company and
its subsidiaries hold all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "COMPANY PERMITS"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which are not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and its subsidiaries taken as a whole. The Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except where the
-17-
failure to comply is not reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company and its subsidiaries taken
as a whole. The businesses and operations of the Company and its subsidiaries
comply in all respects with all Laws applicable to the Company or its
subsidiaries (including data protection Laws applicable to any foreign
subsidiary), except where the failure to so comply is not reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company
and its subsidiaries taken as a whole.
SECTION 3.13 EMPLOYEE PLANS.
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
true, correct, and complete list of:
(i) all "employee benefit plans," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), under which the Company or any of its subsidiaries has any
obligation or liability, contingent or otherwise, including, but not
limited to, (i) all severance plans or arrangements; and (ii) any
supplemental or U.S. non-qualified retirement plans or arrangements (the
"COMPANY BENEFIT PLANS"); and
(ii) all employment, consulting, termination, severance
or individual compensation agreements (other than any such agreement
which is terminable within ninety (90) days without liability or at any
time without liability exceeding two weeks' salary for each year of
employment or, in the case of employees whose annual cash compensation
exceeds $100,000, three months' salary, or is legally mandated by
applicable non-U.S. law); all stock award, stock option, stock purchase
or other equity-based (including phantom stock or stock appreciation
rights) plans or arrangements; all bonus or other incentive compensation
plans or agreements (including, but not limited to, any such plan or
agreement covering any officer or employee whose annual cash
compensation exceeds $70,000); all salary continuation or deferred
compensation plans or agreements (including, but not limited to, any
such plan or agreement covering any current or former officer or
employee whose annual cash compensation exceeds $70,000); in each case,
as to which the Company or any of its subsidiaries has any obligation or
liability (contingent or otherwise) (the "COMPANY EMPLOYEE
ARRANGEMENTS").
(b) In respect of each Company Benefit Plan, a complete and correct copy
of each of the following documents (if applicable) has been provided to Parent:
(i) the most recent plan documents and related trust documents, and all
amendments thereto; (ii) the most recent summary plan description, and all
summaries of material modifications; (iii) the three (3) most recent Forms 5500
(including schedules and attachments); (iv) the most recent Internal Revenue
Service ("IRS") determination letter, if any; and (v) the most recent actuarial
reports (including for purposes of Financial Accounting Standards Board report
nos. 87, 106 and 112).
(c) Except as disclosed in Section 3.13(c) of the Company Disclosure
Schedule, none of the Company Benefit Plans or Company Employee Arrangements is
subject to Title IV of
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ERISA, constitutes a defined benefit retirement plan or is a multi-employer plan
described in Section 3(37) of ERISA, and the Company and its subsidiaries do not
have any material obligation or liability (contingent or otherwise) in respect
of any such plans to the extent such plans constitute a defined benefit
retirement plan or a multi-employer plan described in Section 3(37) of ERISA.
Neither the Company nor its subsidiaries now contributes to, or has ever been
obligated to contribute to, a multi-employer plan described in Section 3(37) of
ERISA. The Company and its subsidiaries are not members of a group of trades or
businesses (other than that consisting of the Company and its subsidiaries)
under common control or treated as a single employer pursuant to Section 414 of
the Code.
(d) Except as set forth in Section 3.13(d) of the Company Disclosure
Schedule, the Company Benefit Plans and their related trusts intended to qualify
under Sections 401(a) and 501(a) of the Code, respectively, have received a
favorable determination letter from the IRS and the Company has no knowledge
that any event has occurred since the date of such letter that could cause the
IRS to revoke such determination. Any voluntary employee benefit association
which provides benefits to current or former employees of the Company and its
subsidiaries, or their beneficiaries, is and has been qualified under Section
501(c)(9) of the Code.
(e) All contributions or other payments required to have been made by
the Company and its subsidiaries to or under any Company Benefit Plan or Company
Employee Arrangement by applicable Law or the terms of such Company Benefit Plan
or Company Employee Arrangement (or any agreement relating thereto) have been,
in all material respects, timely and properly made or have been accrued in the
Company's financial statements.
(f) The Company Benefit Plans and Company Employee Arrangements have
been maintained and administered in accordance with their terms and applicable
Laws and all required returns, reports, and filings (including, but not limited
to annual reports on Form 5500) have been timely filed, except where the failure
to so maintain and administer such Company Benefit Plans and Company Employee
Arrangements or make such filings is not reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company and
its subsidiaries taken as a whole. No individual who has performed services for
the Company or any of its subsidiaries has been improperly excluded from
participation in any Company Benefit Plan or Company Employee Arrangement,
except where the exclusion of any such individuals is not reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company
and its subsidiaries taken as a whole.
(g) There are no pending or, to the Company's knowledge, threatened,
actions, claims, or proceedings against or relating to any Company Benefit Plan
or Company Employee Arrangement (other than routine benefit claims by persons
claiming benefits thereunder), and, to the knowledge of the Company, there are
no facts or circumstances which could form a reasonable basis for any of the
foregoing, except for such actions, claims or proceedings which are not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and its subsidiaries taken as a whole.
(h) The Company and its subsidiaries do not have any material obligation
or liability (contingent or otherwise) to provide post-retirement life insurance
or health benefits coverage for
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current or former officers, directors, or employees of the Company or any of its
subsidiaries except (i) as may be required under Part 6 of Title I of ERISA (or
similar state or local law) at the sole expense of the participant or the
participant's beneficiary, (ii) a medical expense reimbursement account plan
pursuant to Section 125 of the Code, or (iii) through the last day of the
calendar month in which the participant terminates employment with the Company
or any subsidiary of the Company.
(i) Except as set forth in Section 3.13(i) of the Company Disclosure
Schedule, none of the assets of any Company Benefit Plan is stock of the Company
or any of its affiliates, or property leased to or jointly owned by the Company
or any of its affiliates.
(j) Except as disclosed in Section 3.13(j) of the Company Disclosure
Schedule or in connection with equity compensation, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due to any employee (current,
former, or retired) of the Company or any of its subsidiaries, (ii) increase any
benefits under any Company Benefit Plan or Company Employee Arrangement
(determined without regard to the "materiality" limits set forth in the
definitions of such terms), or (iii) result in the acceleration of the time of
payment of, vesting of, or other rights in respect of any such benefits.
(k) Except as set forth in Section 3.13(k) of the Company Disclosure
Schedule, the Company has no employees outside of the United States.
(l) The aggregate number of shares of Company Common Stock purchasable
under all outstanding purchase rights under each Company Option Plan does not
exceed the maximum number of shares remaining available for issuance under such
plan.
(m) Neither the Company, nor, to the best knowledge of the Company, any
other plan "fiduciary" or "party in interest" (as such terms are defined in
Sections 3(21) and 3(14) of ERISA) of any Company Benefit Plans has engaged in
any transaction in violation of Sections 404 or 406 of ERISA or any "prohibited
transaction," as such term is defined in Section 4975 of the Code, for which no
exemption exists under Section 408 of ERISA, Section 4975 of the Code, or has
engaged in any transaction that may result in the imposition of any excise Tax
under Sections 4971 through 4980E of the Code, or otherwise incurred a liability
for any excise Tax, other than excise Taxes that have been paid or have
otherwise been disclosed in Section 3.13(m) of the Company Disclosure Schedule.
(n) Except as required by Law or as otherwise set forth in Section
3.13(n) of the Company Disclosure Schedule, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, bonus or otherwise) becoming due to any current or
former director, officer or employee of the Company or its any of its
subsidiaries under any Company Benefit Plan, Company Employee Arrangement or
otherwise, (ii) materially increase any benefits otherwise payable under any
Company Benefit Plan or Company Employee Arrangement, (iii) result in the
acceleration of the time of payment or vesting of any such benefits, or (iv)
create a right to receive payments upon a subsequent
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termination of employment. There are no contracts or arrangements providing for
payments that could subject any person to liability for tax under Section 4999
of the Code. No Company Benefit Plan or Company Employee Arrangement, or other
contract or arrangement, provides for the payment by the Company or its
subsidiaries of any amount, either alone or in combination with any other
amounts, for which the deduction by the Company would be disallowed under
Section 162(m) or 280G of the Code or otherwise.
(o) Each Company Benefit Plan or Company Employee Arrangement that is a
"group health plan," as defined in Section 607(1) of ERISA, has been operated in
material compliance with the health care continuation provisions of Part 6 of
Title I of ERISA and Section 4980B of the Code at all times.
SECTION 3.14 LABOR MATTERS.
(a) The Company and its subsidiaries are not parties to any labor or
collective bargaining agreement, and no employees of the Company or any of its
subsidiaries are represented by any labor organization. There are no
representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the Company's knowledge, threatened in
writing to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority. Within the last twelve months, to
the Company's knowledge, there have been no organizing activities involving the
Company or any of its subsidiaries in respect of any group of employees of the
Company or any of its subsidiaries.
(b) There are no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor disputes pending or,
to the Company's knowledge, threatened in writing, against or involving the
Company or any of its subsidiaries. There are no unfair labor practice charges,
grievances or complaints pending or, to the Company's knowledge, threatened in
writing, by or on behalf of any employee or group of employees of the Company or
any of its subsidiaries which, if individually or collectively resolved against
the Company or any of its subsidiaries, would reasonably be expected to have a
Material Adverse Effect on the Company and its subsidiaries taken as a whole.
(c) There are no complaints, charges or claims against the Company or
any of its subsidiaries pending or, to the Company's knowledge, threatened to be
brought or filed with any Governmental Entity or arbitrator based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by the Company or any of its
subsidiaries which, if individually or collectively resolved against the Company
or any of its subsidiaries, would reasonably be expected to have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole, and, to the
knowledge of the Company, there are no facts or circumstances which could form a
reasonable basis for any of the foregoing.
(d) There has been no "mass layoff" or "plant closing" as defined by the
Worker Adjustment and Retraining Notification Act, as amended ("WARN"), in
respect of the Company or any of its subsidiaries within the six months prior to
the Effective Time.
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(e) All employees of the Company and its subsidiaries possess all
applicable passports, visas, permits and other authorizations required by all
applicable immigration or similar Laws to be employed by and to perform services
for and on behalf of the Company and its subsidiaries, except where the failure
to possess such passports, visas, permits or other authorizations would not,
individually or in the aggregate, reasonably be expected to materially affect
the conduct of business by the Company or its subsidiaries. The Company and its
subsidiaries, and their employees, have complied in all material respects with
all applicable immigration and similar Laws.
SECTION 3.15 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement:
(i) "ENVIRONMENTAL LAW" means all federal, state, local
or foreign Law, or other legal requirement regulating or prohibiting the
Release of any Hazardous Material into the indoor or outdoor
environment, or pertaining to the protection of natural resources or
wildlife, the environment or public and employee health and safety or
pollution or the exposure to a Hazardous Material;
(ii) "HAZARDOUS MATERIAL" means any substance, material
or waste which is regulated pursuant to any applicable Environmental Law
as a "hazardous waste," "hazardous material," "hazardous substance,"
"contaminant," "toxic waste," "toxic substance," "source material,"
"special nuclear material," "byproduct material," "high-level
radioactive waste," "low-level radioactive waste," "spent nuclear
material," or "radio frequency" and includes petroleum, petroleum
products and petroleum byproducts and waste; and
(iii) "RELEASE" means any release, spill, emission,
leaking, pumping, dumping, injections, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment,
or into or out of any property currently or formerly owned, operated or
leased by the applicable party or its subsidiaries.
(b) Except as set forth in Section 3.15 of the Company Disclosure
Schedule: (i) the Company and each of its subsidiaries have obtained and are in
compliance with all Company Permits issuable and issued pursuant to any
Environmental Law; (ii) as of the date hereof, there are no administrative,
civil or criminal actions, suits, demands, notices, investigations, writs,
injunctions, decrees, orders or judgments outstanding or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries based
upon or arising out of any Environmental Law; (iii) neither the Company nor any
of its subsidiaries has caused, has received notice of, or has knowledge of any
Release or threatened Release of a Hazardous Material on or from the assets
owned or operated by the Company or any of its subsidiaries; (iv) neither the
Company nor any of its subsidiaries has any current liability in connection with
any Release of a Hazardous Material; and (v) none of the operations of the
Company or any of its subsidiaries involves the treatment, storage, or disposal
of a Hazardous Material on any property owned, leased or operated by the Company
or any of its subsidiaries.
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SECTION 3.16 TAX MATTERS.
(a) Each of the Company and its subsidiaries has timely filed (or has
had timely filed) all material Tax Returns (as defined below) required to be
filed by it (or on its behalf). All such Tax Returns are complete and correct in
all material respects. The Company and its subsidiaries have paid all material
Taxes due for the periods covered by such Tax Returns. The most recent Company
SEC Reports reflect an adequate reserve for all Taxes payable by the Company and
its subsidiaries for all Taxable periods and portions thereof through the date
of such Company SEC Reports. The Company has previously delivered (or, in the
case of foreign Tax Returns and audit reports, will deliver) to Parent copies of
(i) all federal, state, foreign and other material income and franchise Tax
Returns filed by the Company and its subsidiaries relating to any taxable
periods of the Company or any of its subsidiaries that remains subject to audit
under applicable statutes of limitations; and (ii) any audit report issued
within the last three years (or otherwise in respect of any audit or
investigation in progress) relating to Taxes due from or in respect of the
Company or its subsidiaries.
(b) No material deficiencies for any Taxes have been proposed, asserted,
or assessed against the Company or its subsidiaries that have not been fully
paid or adequately provided for in the appropriate financial statements of the
Company, no requests for waivers of the time to assess any Taxes are pending,
and no power of attorney still in effect in respect of any Taxes has been
executed or filed with any taxing authority. No material issues relating to
Taxes have been raised by the relevant taxing authority during any presently
pending audit or examination.
(c) No material Liens for Taxes exist in respect of any assets or
properties of the Company or its subsidiaries, except for statutory Liens for
Taxes not yet due.
(d) Except as set forth in Section 3.16(d) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to or is
bound by any Tax sharing agreement, Tax indemnity obligation, or similar
agreement, arrangement, or practice in respect of Taxes (whether or not written)
(including any advance pricing agreement, closing agreement, or other agreement
relating to Taxes with any taxing authority).
(e) Neither the Company nor any of its subsidiaries (i) has ever been a
member of an affiliated group within the meaning of Section 1504(a) of the Code
(or any similar or analogous group defined under a similar or analogous state,
local or foreign Law) other than an affiliated group the common parent of which
is the Company, or (ii) has any liability under Treasury Regulation Section
1.1502-6 (or any predecessor or successor thereof or analogous or similar
provision under state, local or foreign Law), as a transferee or successor, by
contract or otherwise for Taxes of any affiliated group of which the Company is
not the common parent.
(f) Neither the Company nor any of its subsidiaries has taken or agreed
to take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
(g) Except as set forth in Section 3.16(g) of the Company Disclosure
Schedule, there are no employment, severance, or termination agreements or other
compensation arrangements
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currently in effect which provide for the payment of any amount (whether in cash
or property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement that individually or collectively (either alone
or upon the occurrence of any additional or subsequent event), could give rise
to a payment which is nondeductible by reason of Section 280G of the Code.
(h) The Company and its subsidiaries have complied in all material
respects with all Laws applicable to the payment and withholding of Taxes and
have duly and timely withheld from employee salaries, wages and other
compensation and have paid over to the appropriate taxing authority all material
amounts required to be so withheld and paid over for all periods under all
applicable Laws.
(i) No federal, state, local, or foreign audits or other administrative
proceedings or court proceedings are presently pending in respect of any Taxes
or Tax Returns of the Company or its subsidiaries and neither the Company nor
its subsidiaries have received a written notice of any pending audit or
proceeding in respect of any Taxes or Tax Returns.
(j) Except as set forth in Section 3.16(j) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has agreed to or is
required to make any adjustment under Section 481(a) of the Code or any similar
provision of state, local or foreign Law by reason of a change in accounting
method initiated by the Company or its subsidiaries or has any knowledge that a
taxing authority has proposed any such adjustment or change in Tax accounting
method, or has any application pending with any taxing authority requesting
permission for any changes in Tax accounting methods that relate to the business
or operations of the Company or its subsidiaries.
(k) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (i) in the two
years prior to the date of this Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
For purposes of this Agreement, "TAX" or "TAXES" means all federal,
state, local or foreign taxes, charges, fees, imposts, duties, levies, gaming or
other assessments, including, all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property, and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, together with any
interest and any penalties, fines, additions to tax or additional amounts
imposed by any taxing authority (domestic or foreign) and shall include any
transferee liability in respect of Taxes, any liability in respect of Taxes
imposed by contract, Tax sharing agreement, Tax indemnity agreement or any
similar agreement. "TAX RETURNS" means any report, return, document,
declaration, or any other information or filing required to be supplied to any
taxing authority or jurisdiction (domestic or foreign) in respect of Taxes,
including, information returns, any document in respect of or accompanying
payments or estimated Taxes, or in respect of or accompanying requests for the
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extension of time in which to file any such report, return document,
declaration, or other information, including amendments thereof and attachments
thereto.
SECTION 3.17 ABSENCE OF QUESTIONABLE PAYMENTS. To the Company's
knowledge, neither the Company nor any of its subsidiaries nor any director,
officer, agent, employee or other person acting on behalf of the Company or any
of its subsidiaries, has used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any other domestic or
foreign Law. To the Company's knowledge, neither the Company nor any of its
subsidiaries nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its subsidiaries has accepted or received any
unlawful contributions, payments, gifts or expenditures.
SECTION 3.18 Material Contracts.
(a) Set forth in Section 3.18(a) of the Company Disclosure Schedule is a
list of the following contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which the Company
or any of its subsidiaries is a party affecting the obligations of any party
thereunder) to which the Company or any of its subsidiaries is a party or by
which any of its assets or properties is bound that are material to the
business, assets or properties of the Company and its subsidiaries taken as a
whole: (i) executory employment, executory severance, material product design or
development, executory personal services, material consulting, executory
non-competition or material indemnification contracts (including, any material
contract to which the Company or any of its subsidiaries is a party involving
employees of the Company or any of its subsidiaries), but excluding normal
indemnification provisions under license or sale contracts; (ii) licensing,
merchandising or distribution agreements involving the payment of more than
$100,000 per year; (iii) contracts granting a right of first refusal or first
negotiation involving in excess of $100,000; (iv) partnership or joint venture
agreements; (v) any agreements for the acquisition, sale or lease of material
assets or properties of the Company (by merger, purchase or sale of assets or
stock or otherwise) entered into since June 30, 2001 involving a payment in
excess of $100,000; (vi) contracts or agreements with any Governmental Entity
involving the payment of more than $50,000 per year; (vii) loan or credit
agreements, mortgages, indentures or other agreements or instruments evidencing
indebtedness for borrowed money by the Company or any of its subsidiaries or any
such agreement pursuant to which indebtedness for borrowed money may be
incurred, in each case involving in excess of $100,000; (viii) agreements that
purport to limit, curtail or restrict the ability of the Company or any of its
subsidiaries to compete in any geographic area or line of business; (ix)
assembly (packaging), testing, or supply agreements, in each case, involving in
excess of $100,000 per year; (x) agreements, written or oral, with any officers,
directors, stockholders of the Company or any member of the immediate family of
any officer, director, or stockholder of the Company; and (xi) commitments and
agreements to enter into any of the foregoing (collectively, together with any
such contracts entered into in accordance with Section 5.1, the "COMPANY
MATERIAL CONTRACTS"). Section 3.18(a) of the Company Disclosure Schedule sets
forth a list of all Company Material Contracts and the Company has heretofore
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made available to Parent true, correct, and complete copies of all such Company
Material Contracts.
(b) To the Company's knowledge, each of the Company Material Contracts
constitutes the valid and legally binding obligation of the Company or its
subsidiaries, enforceable in accordance with its terms, and is in full force and
effect. There is no material default under any Company Material Contract either
by the Company (or its subsidiaries) or, to the Company's knowledge, by any
other party thereto, and no event has occurred that with the giving of notice,
the lapse of time, or both would constitute a material default thereunder by the
Company (or its subsidiaries) or, to the Company's knowledge, any other party.
As of the date hereof, to the Company's knowledge, no party has notified the
Company in writing that it intends to terminate or fail to extend any contract
between such person and the Company within one year of the date of this
Agreement, except for any such termination or failure as would not have a
Material Adverse Effect on the Company and its subsidiaries taken as a whole.
(c) To the Company's knowledge, no party to any such Company Material
Contract has given notice to the Company of or made a claim against the Company
in respect of any material breach or default thereunder by the Company or a
subsidiary.
(d) Except as set forth in Section 3.18(d) of the Company Disclosure
Schedule, no consent of any third party is required under any Company Material
Contract as a result of or in connection with, and the enforceability of any
Company Material Contract will not be affected in any manner by, the execution,
delivery, and performance of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 3.19 SUBSIDIES. Section 3.19 of the Company Disclosure Schedule
sets forth a list of all material grants, material subsidies and similar
material arrangements directly or indirectly between or among the Company or any
of its subsidiaries, on the one hand, and any Governmental Entity or any other
person, on the other hand. Except as set forth on Section 3.19 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has
requested, sought, applied for or entered into any material grant, material
subsidy or similar material arrangement directly or indirectly from or with any
Governmental Entity or any other person.
SECTION 3.20 INTELLECTUAL PROPERTY.
(a) As used herein, the term "INTELLECTUAL PROPERTY" means domestic and
foreign (i) inventions (whether patentable or unpatentable), all improvements
thereto, and patents, patent applications, and patent disclosures, together with
all reissuances, continuations, continuations-in-part, revisions, extensions,
and reexaminations thereof; (ii) trademarks, service marks, trade dress, trade
names, logos, corporate names, domain names, and all applications and
registrations therefor and renewals thereof, and all goodwill associated
therewith; (iii) copyrightable works and copyrights and all applications and
registrations therefor, and renewals thereof; (iv) proprietary software
(including data and related documentation) and proprietary databases; (v) trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and
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techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals); (vi) mask works; (vii) copies and tangible embodiments of the
foregoing (in whatever form or medium); and (viii) related ownership, use and
other intellectual property and intangible asset rights in and to the foregoing
(including the right to ▇▇▇ for past, present and future infringements or
misappropriations thereof).
(b) To the Company's knowledge, and except as are not reasonably
expected to have a Material Adverse Effect on the Company and its subsidiaries
taken as a whole: (i) each item of Intellectual Property owned or controlled by
the Company and its subsidiaries (collectively, the "COMPANY INTELLECTUAL
PROPERTY") comprised of registered copyrights, copyright applications, patents,
patent applications, registered trademarks, and trademark applications are in
compliance with applicable legal requirements relating to the registration or
maintenance of such item (including payment of filing, examination and
maintenance fees and proofs of working or use, as applicable) other than any
requirement that if, not satisfied, would not result in a revocation of or
otherwise materially affect the enforceability of the item of Company
Intellectual Property in question, and the Company has taken reasonable steps to
protect such Company Intellectual Property; (ii) the Company and its
subsidiaries own or have the right to use, free and clear of all Liens, all
Company Intellectual Property necessary for the operation of the businesses of
the Company and its subsidiaries as presently conducted and as presently
proposed to be conducted; (iii) each material item of Company Intellectual
Property owned or used by the Company and its subsidiaries immediately prior to
the Effective Time will be owned or available for use by the Surviving
Corporation or its relevant subsidiary immediately subsequent to the Effective
Time; (iv) the Company and its subsidiaries have taken all action deemed by the
Company or its relevant subsidiary to be necessary or reasonable, but in no
event less than all commercially reasonable action, to protect and preserve the
confidentiality of all Company Intellectual Property consisting of trade
secrets; (v) the Company has had and continues to have a requirement that all
employees, agents and contractors of the Company and its subsidiaries must
execute a non-disclosure agreement which includes an agreement to assign to the
Company or its subsidiaries all rights to Company Intellectual Property
originated or invented by such employee relating to the business of the Company
or its relevant subsidiary; and (vi) no trade secret or confidential know-how
material to the business of the Company or any of its subsidiaries as currently
operated has been disclosed or authorized to be disclosed to any third party,
other than pursuant to a non-disclosure agreement that protects the Company's or
such subsidiary's proprietary interests in and to such trade secrets and
confidential know-how.
(c) Except as set forth in Section 3.20(c) of the Company Disclosure
Schedule, to the Company's knowledge, neither the Company nor any of its
subsidiaries has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property rights of third parties, and
neither the Company nor any of its subsidiaries has received any charge,
complaint, claim or notice alleging any such interference, infringement,
misappropriation or violation that remains unresolved and, if decided adversely
to the Company, would be reasonably likely to have a Material Adverse Effect on
the Company and subsidiaries taken as a whole. No third party has, to the
Company's knowledge, interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
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Company or its subsidiaries, except where such actions are not reasonably
expected to have a Material Adverse Effect on the Company and its subsidiaries
taken as a whole.
(d) Section 3.20(d) of the Company Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that the
Company or any of its subsidiaries uses pursuant to license, sublicense,
agreement or permission (other than software generally available on commercially
reasonable terms) that either (i) if such license, sublicense, agreement or
permission were denied, would reasonably be expected to have a Material Adverse
Effect on the Company or its subsidiaries taken as a whole, or (ii) includes any
unsatisfied obligation to pay any royalty or other amount or any obligation to
pay a royalty or other amount, whether fixed or determined based on usage,
following the Effective Time in excess of $25,000. To the Company's knowledge,
in respect of each such item of used Intellectual Property:
(i) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable and in full
force and effect;
(ii) the licenses, sublicenses, agreements or
permissions will in all material respects continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms
following the Effective Time;
(iii) no party to the license, sublicense, agreement or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder such as would have
a Material Adverse Effect on the Company and its subsidiaries taken as a
whole; and
(iv) no party to the license, sublicense, agreement or
permission has repudiated any provision thereof.
(e) Except as set forth in Section 3.20(e) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has granted to any
third party (i) any licenses (other than implied patent licenses pursuant to
sales of products or services in the ordinary course of business) in any patents
owned by the Company or any of its subsidiaries or (ii) any exclusive licenses
in any other Company Intellectual Property.
(f) Except as may have been given in connection with licenses set forth
in Section 3.20(e) of the Company Disclosure Schedule or given in the ordinary
course of business, neither the Company nor any of its subsidiaries has entered
into any material agreement to indemnify any other person against any charge of
infringement or misappropriation of any Company Intellectual Property.
(g) The execution, delivery and performance by the Company of this
Agreement, and the consummation of the transactions contemplated hereby, will
not (i) result in the loss or impairment of, or give rise to any right of any
third party to terminate or alter, any of the Company's or any of its
subsidiaries' rights to own any Company Intellectual Property except as are not
reasonably expected to have a Material Adverse Effect on the Company and its
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subsidiaries taken as a whole, nor (ii) require the consent of any Governmental
Entity or other third party in respect of any such Company Intellectual Property
that, if not obtained, is reasonably expected to have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole.
SECTION 3.21 OPINION OF COMPANY FINANCIAL ADVISOR. vFinance Investments
(the "COMPANY FINANCIAL ADVISOR") has delivered to the Company Board its
opinion, dated the date of this Agreement, to the effect that, as of such date,
the Stock Exchange Ratio is fair to the stockholders of the Company from a
financial point of view, and as of the date of the Closing, such opinion has not
been withdrawn or modified.
SECTION 3.22 BROKERS. Except as set forth in Section 3.22 of the Company
Disclosure Schedule, no broker, finder, investment banker or other person (other
than the Company Financial Advisor, a true and correct copy of whose engagement
letter has been provided to Parent) is entitled to any brokerage, finder's or
other fee or commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company or any of its affiliates.
SECTION 3.23 NGCL SECTION 78-438. The Company Board has taken all action
required so that the restrictions contained in Section 78-438 of the NGCL
applicable to a "business combination" (as defined in NGCL Section 78-416) will
not apply to the execution, delivery or performance of this Agreement, the
applicable Voting Agreement, or the consummation of the Merger. No other
antitakeover Laws of any state are applicable to this Agreement, such Voting
Agreement or the transactions contemplated hereby or thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered by Parent to
the Company prior to the execution of this Agreement (the "PARENT DISCLOSURE
SCHEDULE") or as set forth in the Parent SEC Reports (as defined in Section 4.4)
filed prior to the date hereof or as permitted under Section 5.2 hereof, Parent
and Merger Sub hereby represent and warrant to the Company as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of Parent, Merger Sub and Parent's other subsidiaries is, or
will be as of the Effective Time, a corporation or legal entity duly organized,
validly existing and, except as set forth in Section 4.1(a) of the Parent
Disclosure Schedule, in good standing under the applicable Laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate, partnership or similar power and authority to own, lease and operate
its properties and to carry on its business as now being conducted.
(b) Section 4.1(b) of the Parent Disclosure Schedule sets forth a list
of all subsidiaries of Parent. Except as listed therein, neither Parent, Merger
Sub nor any such other subsidiary of
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Parent owns, directly or indirectly, beneficially or of record, any shares of
capital stock or other securities of any other entity or any other investment in
any other entity.
(c) Parent is, and each of its subsidiaries is or will be as of the
Effective Time, duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased, or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing is not reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent and its subsidiaries taken as a
whole.
(d) Parent has heretofore delivered to the Company accurate and complete
copies of Parent's certificate of incorporation and bylaws, as currently in
effect. Parent has heretofore delivered to the Company accurate and complete
copies of the charter or certificate of incorporation and bylaws (or other
similar organizational and governing instruments), as currently in effect, of
each of its subsidiaries.
SECTION 4.2 CAPITALIZATION OF PARENT AND ITS SUBSIDIARIES.
(a) The authorized capital stock of Parent consists of: (i) 75,000,000
shares of Parent Common Stock, par value $.001 per share, of which 27,712,680
shares are issued and outstanding as of the date hereof ("PARENT SHARES") and
(ii) 4,750,000 shares of preferred stock, par value $.001 per share, (A) of
which 1,750,000 shares have been designated as Series B Convertible Preferred
Stock, of which no shares are issued and outstanding as of the date hereof, and
(B) of which 3,000,000 shares have been designated as Series C Convertible
Preferred Stock, of which no shares are issued and outstanding as of the date
hereof. All of the outstanding Parent Shares are duly authorized, validly
issued, fully paid and non-assessable and are free of preemptive rights. As of
the date hereof, (x) 2,475,000 shares of Parent Common Stock are reserved for
issuance under Parent's 1999 Stock Option Plan (the "1999 OPTION PLAN"), of
which 2,465,837 shares of Parent Common Stock are issuable upon the exercise of
options granted thereunder, (y) 1,997,500 shares of Parent Common Stock are
available for issuance under Parent's 2000 Stock Incentive Plan (the "2000
INCENTIVE PLAN," and together with the 1999 Option Plan, the "PARENT OPTION
PLANS"), of which 1,803,000 shares of Parent Common Stock are issuable upon the
exercise of options granted thereunder (the options described in clauses (x) and
(y) being referred to collectively as the "PARENT STOCK OPTIONS"), and (z)
11,920,107 shares of Parent Common Stock are available for purchase pursuant to
outstanding warrants (the "PARENT WARRANTS"). Except as set forth in the
immediately preceding sentence, there are no Parent Stock Options outstanding
under any Parent Option Plan and no shares of Parent Common Stock subject to any
Parent Warrant.
(b) Except as set forth in this Section 4.2, as of the date hereof,
there are no outstanding (i) shares of capital stock or other voting securities
of Parent; (ii) securities of Parent or any of its subsidiaries convertible into
or exchangeable for shares of capital stock or voting securities of Parent;
(iii) options or other rights to acquire from Parent or any of its subsidiaries,
or obligations of Parent or any of its subsidiaries to issue, any capital stock,
voting securities, or securities convertible into or exchangeable for capital
stock or voting securities of Parent; or (iv) equity equivalents, interests in
the ownership or earnings of Parent, or other similar rights (including
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stock appreciation rights) (collectively, "PARENT SECURITIES"). Except as set
forth in Section 4.2 of the Parent Disclosure Schedule, there are no outstanding
obligations of Parent or any of its subsidiaries to repurchase, redeem or
otherwise acquire any Parent Securities. Except as set forth in Section 4.2 of
the Parent Disclosure Schedule, there are no stockholder agreements, voting
trusts or other agreements or understandings to which Parent or any of its
subsidiaries is a party or to which it is bound relating to the voting of any
shares of capital stock of Parent (other than the applicable Voting Agreement).
(c) All of the outstanding capital stock of Parent's subsidiaries is
owned by Parent, directly or indirectly, free and clear of any Lien or any other
limitation or restriction (including, without limitation, any restriction on the
right to vote or sell the same) except as may be provided as a matter of Law.
Except as set forth in this Section 4.2, there are no debt or equity securities
of Parent or its subsidiaries convertible into or exchangeable for, no options
or other rights to acquire from Parent or its subsidiaries, and no other
contract, understanding, arrangement, or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly of, any capital stock
or other ownership interests in, or any other securities of, any subsidiary of
Parent. There are no outstanding contractual obligations of Parent or its
subsidiaries to repurchase, redeem, or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any subsidiary of Parent. None
of Parent's subsidiaries owns any capital stock of Parent.
SECTION 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Each of Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and no other corporate proceedings on the part
of Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby or thereby (other than, in
respect of the Merger and this Agreement, the Parent Requisite Vote (as defined
in Section 4.3(b))). This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and constitutes a valid, legal and
binding agreement of each of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar Laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) As of the date hereof, the Board of Directors of Parent (the "PARENT
BOARD"), by the requisite vote of those present (who constituted 100% of the
directors then in office), with no dissenting votes, and the Board of Directors
of Merger Sub, and Parent, as the sole stockholder of Merger Sub, have duly and
validly authorized the execution and delivery of this Agreement and approved the
consummation of the transactions contemplated hereby, and taken all corporate
actions required to be taken by such Boards of Directors and by Parent, as the
sole stockholder of Merger Sub, for the consummation of the transactions
contemplated hereby, including the Merger, and the Parent Board has resolved (i)
that this Agreement and the transactions contemplated hereby, including the
Merger, taken together, are advisable and fair to, and in the
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best interests of, Parent and its stockholders; and (ii) to recommend that the
stockholders of Parent approve and adopt this Agreement, approve the Merger, the
Reverse Split, the 2000 Incentive Plan Amendment (as defined in Section 6.20)
and the Restated Certificate (as defined in Section 6.16) (collectively, the
"PROPOSALS") and elect each of the Director Nominees (as defined in Section
6.14). The Parent Board has directed (x) that the Proposals be submitted to the
stockholders of Parent for their approval and adoption and (y) that the Director
Nominees be submitted to the stockholders of Parent for election. The
affirmative approval of the holders of Parent Shares representing a majority of
the votes that may be cast by the holders of all outstanding Parent Shares as of
the record date for Parent is the only vote of the holders of any class or
series of capital stock of Parent necessary to approve and adopt the Proposals.
The affirmative vote of the holders of Parent Shares representing a plurality of
the votes that may be cast by the holders of all outstanding Parent Shares as of
the record date for Parent is the only vote of the holders of any class or
series of capital stock of Parent necessary to elect each of the Director
Nominees. For purposes of this Agreement, the votes required to be taken by
holders of all outstanding Parent Shares as set forth in the preceding two
sentences are collectively referred to as the "PARENT REQUISITE VOTE."
SECTION 4.4 SEC REPORTS; FINANCIAL STATEMENTS. Since September 30, 2001,
Parent has filed all forms, reports and documents with the SEC required to be
filed by it under the Securities Act and the Exchange Act (collectively, the
"PARENT SEC REPORTS"), each of which complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, each as in
effect on the dates such Parent SEC Reports were filed. None of the Parent SEC
Reports contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, except to the
extent amended prior to the date hereof by a subsequently filed Parent SEC
Report. The consolidated financial statements of Parent included in the Parent
SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC in
respect thereof and fairly presented, in conformity with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto), the consolidated financial position of Parent and its
consolidated subsidiaries, in each case as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject, in the case of the unaudited interim financial
statements, to the absence of certain footnote disclosure and to normal year-end
adjustments). For purposes of this Agreement, "PARENT BALANCE SHEET" means the
consolidated balance sheet of Parent as of March 31, 2002, as set forth in
Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2002, and "PARENT BALANCE SHEET DATE" means March 31, 2002. Since the Parent
Balance Sheet Date, there has not been any change, or any application or request
for any change, by Parent or any of its subsidiaries in accounting principles,
methods or policies for financial accounting purposes, other than as a result of
any changes under GAAP or other relevant accounting principles.
SECTION 4.5 NO UNDISCLOSED LIABILITIES. There are no material
liabilities of Parent or any of its subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, which are
required to be reflected in its financial
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statements (or in the notes thereto) in accordance with GAAP, other than: (a)
liabilities disclosed, provided for or reserved against in the Parent Balance
Sheet or in the notes thereto; (b) liabilities arising in the ordinary course of
business after the Parent Balance Sheet Date or which arose in the ordinary
course of business prior to the Parent Balance Sheet Date but were not required
to be disclosed, provided for or reserved against in the Parent Balance Sheet;
(c) liabilities disclosed in the Parent SEC Reports prior to the date hereof;
(d) liabilities arising under this Agreement; and (e) liabilities set forth in
Section 4.5 of the Parent Disclosure Schedule.
SECTION 4.6 ABSENCE OF CHANGES. Except as contemplated by this
Agreement, as set forth in Section 4.6 of the Parent Disclosure Schedule, or as
disclosed in the Parent SEC Reports filed prior to the date hereof, since the
Parent Balance Sheet Date, Parent and its subsidiaries have conducted their
business in the ordinary and usual course consistent with past practice and
there has not been:
(a) any event, occurrence or development which had or is reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent and its subsidiaries taken as a whole;
(b) any declaration, setting aside or payment of any dividend or other
distribution in respect of any shares of capital stock of Parent or (except to
Parent or other subsidiaries) any subsidiary, any split, combination or
reclassification of any shares of capital stock of Parent or any subsidiary, or
any repurchase, redemption or other acquisition by Parent or any of its
subsidiaries of any securities of Parent or any of its subsidiaries;
(c) any amendment or change to the charter, certificate or articles of
incorporation or bylaws (or other similar organizational or governing
instrument) Parent or any of its subsidiaries or any amendment of any term of
any outstanding security of Parent or any of its subsidiaries that would
materially increase the obligations of Parent or any such subsidiary under such
security;
(d) (i) any incurrence or assumption by Parent or any of its
subsidiaries of any indebtedness for borrowed money other than under existing
credit facilities (or any renewals, replacements or extensions that do not
increase the aggregate commitments thereunder) except (A) in the ordinary and
usual course of business consistent with past practice or (B) as permitted by
Section 5.2, or (ii) any guarantee, endorsement, or other incurrence or
assumption of liability (whether directly, contingently or otherwise) by Parent
or any of its subsidiaries for the obligations of any other person (other than
any wholly owned subsidiary of Parent), other than in the ordinary and usual
course of business consistent with past practice;
(e) any creation or assumption by Parent or any of its subsidiaries of
any Lien on any material asset of Parent or any of its subsidiaries other than
in the ordinary and usual course of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by Parent or any of its subsidiaries other than (i) as
permitted by Section 5.2, (ii) loans, advances or capital contributions to or
investments in wholly owned subsidiaries of Parent, (iii)
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loans or advances to employees of Parent or any of its subsidiaries in the
ordinary and usual course of business consistent with past practice or (iv)
extensions of credit to customers in the ordinary and usual course of business
consistent with past practice;
(g) any contract or agreement entered into by Parent or any of its
subsidiaries on or prior to the date hereof relating to any material acquisition
or disposition of any assets or business, other than contracts or agreements in
the ordinary and usual course of business consistent with past practice and
those contemplated by this Agreement;
(h) any modification, amendment, assignment, termination or
relinquishment by Parent or any of its subsidiaries of any contract, license or
other right (including any insurance policy naming it as a beneficiary or a loss
payable payee) that is reasonably expected to have a Material Adverse Effect,
after taking into account the benefit of the consideration, if any, received in
exchange for agreeing to such modification, amendment, assignment, termination
or relinquishment, on Parent and its subsidiaries taken as a whole;
(i) any material change in any method of accounting or accounting
principles or practice by Parent or any of its subsidiaries, except for any such
change required by reason of a change in GAAP, which change has been
consistently applied;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of Parent or any of its subsidiaries exceeding the amounts
set forth in Parent's severance plans or agreements listed in Sections 4.13(a)
or 4.18 of the Parent Disclosure Schedule; (ii) entering into of any employment,
deferred compensation, severance, change of control, consulting, termination or
other similar agreement (or any change or amendment to any such existing
agreement) with any director, officer, employee, agent or other similar
representative of Parent or any of its subsidiaries (collectively, "PARENT
EMPLOYMENT AGREEMENTS") whose annual cash compensation exceeds $100,000 other
than changes or amendments that (A) do not and will not result in increases, in
the aggregate, of more than five percent in the salary, wages or other
compensation of any such person and (B) are otherwise consistent with clause
(iv) below; (iii) increase in benefits payable under any existing severance or
termination pay policies or Parent Employment Agreements; or (iv) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of Parent or any of its subsidiaries other than, in the case of
clauses (ii) and (iv) only, increases prior to the date hereof in compensation,
bonus or other benefits payable to directors, officers or employees of Parent or
any of its subsidiaries in the ordinary and usual course of business consistent
with past practice or merit increases in salaries of employees at regularly
scheduled times in customary amounts consistent with past practices;
(k) any adoption, entering into, amendment, alteration or termination of
(partially or completely) any Parent Benefit Plan (as defined in Section
4.13(a)(i)) or Parent Employee Arrangement (as defined in Section 4.13(a)(ii))
except as contemplated by this Agreement or to the extent required by applicable
Law or GAAP;
(l) any entering into of any contract with an officer, director,
employee, agent or other similar representative of Parent or any of its
subsidiaries (other than a Parent Employment
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Agreement described in Section 4.6(j)(ii)) that is not terminable, without
penalty or other liability, upon not more than sixty (60) calendar days' notice;
or
(m) any (i) making or revoking of any material election relating to
Taxes, (ii) settlement or compromise of any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or (iii) change to any material methods of reporting income
or deductions for federal income Tax purposes.
SECTION 4.7 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Parent or Merger Sub specifically for inclusion or incorporation
by reference in (i) the S-4, at the time the S-4 is filed with the SEC and at
the time it becomes effective under the Securities Act, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(ii) the Joint Proxy Statement will, at the date mailed to stockholders of the
Company and Parent and at the time of the Parent Stockholder Meeting and the
Company Stockholder Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event in respect of Parent, its officers and directors, or any of its
subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the S-4 or the Joint Proxy Statement, Parent shall promptly
so advise the Company and such event shall be so described, and such amendment
or supplement (which the Company shall have a reasonable opportunity to review)
shall be promptly filed with the SEC and, as required by Law, disseminated to
the stockholders of the Company and Parent. The S-4 will comply as to form in
all material respects with the provisions of the Securities Act and the rules
and regulations thereunder. No representation or warranty is made under this
Section 4.7 with respect to any statements made or incorporated by reference in
the S-4 or the Joint Proxy Statement based on information supplied by the
Company specifically for inclusion or incorporation by reference therein.
SECTION 4.8 CONSENTS AND APPROVALS. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky Laws, Antitrust Laws, the filing and acceptance for
record of the Certificate of Merger as required by the DGCL and the Articles of
Merger as required by the NGCL, and such other filings, permits, authorizations,
consents and approvals which, if not obtained or made, are not reasonably
expected to have a Material Adverse Effect on Parent and its subsidiaries taken
as a whole, no filing with or notice to, and no permit, authorization, consent
or approval of, any Governmental Entity is necessary for the execution and
delivery by Parent or Merger Sub of this Agreement or the consummation by Parent
or Merger Sub of the transactions contemplated hereby.
SECTION 4.9 NO DEFAULT. Neither Parent nor any of its subsidiaries is in
violation of any term of its charter, certificate or articles of incorporation
or bylaws (or other similar organizational or governing instruments). Except as
set forth in Section 4.9 of the Parent Disclosure Schedule, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (A) result in any violation of or
conflict with, constitute a default under (with or without due notice or lapse
of time or both),
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require any consent, waiver or notice under any term of, or result in the
reduction or loss of any benefit or the creation or acceleration of any right or
obligation (including any termination rights) under, (i) the charter,
certificate or articles of incorporation or bylaws (or other similar
organizational or governing instruments) of Parent or any of its subsidiaries,
(ii) any material agreement, material note, material bond, material mortgage,
material indenture, material contract, material lease, material Parent Permit
(as defined in Section 4.12) or other material obligation or material right to
which Parent or any of its subsidiaries is a party or by which any of the assets
or properties of Parent or any of its subsidiaries is bound, or (iii) subject to
Section 4.8, any applicable Law, except in the case of clause (ii) and (iii)
where any of the foregoing is not reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent and its subsidiaries taken
as a whole, or (B) result in the creation of (or impose any obligation on Parent
or any of its subsidiaries to create) any Lien upon any of the material assets
or properties of Parent or any of its subsidiaries pursuant to any such term.
SECTION 4.10 REAL PROPERTY.
(a) Parent has provided the Company with the address, general use of,
and period of ownership or occupancy of all of the real property Parent and its
subsidiaries use or occupy or have the right to use or occupy, now or in the
future, pursuant to any lease, sublease, or other occupancy agreement (the
"PARENT LEASED FACILITIES"). No real property is owned, leased or used by Parent
or its subsidiaries in the course of their respective businesses other than the
Parent Leased Facilities.
(b) Except as set forth in Section 4.10 of the Parent Disclosure
Schedule, with respect to each Parent Leased Facility:
(i) Parent will make available to the Company a true,
correct, and complete copy of the lease, sublease or other occupancy
agreement for such Parent Leased Facility (and all modifications,
amendments, and supplements thereto and all side letters to which Parent
or any of its subsidiaries is a party affecting the obligations of any
party thereunder) (each such agreement is referred to herein as a
"PARENT REAL PROPERTY LEASE");
(ii) to Parent's knowledge, Parent or its subsidiary
using or occupying such Parent Leased Facility has a good and valid
leasehold interest in such Parent Leased Facility free and clear of all
Liens, except (x) Taxes and general and special assessments not in
default and payable without penalty and interest, and (y) easements,
covenants and other restrictions that do not materially impair the
current use, occupancy or value of Parent's or such subsidiary's
interest in such real property;
(iii) to Parent's knowledge, each Parent Real Property
Lease constitutes the valid and legally binding obligation of the
parties thereto, enforceable in accordance with its terms, and is in
full force and effect;
(iv) all rent and other sums and charges payable by
Parent or its subsidiary using or occupying such Parent Leased Facility
as tenant under such Parent
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Real Property Lease covering the Parent Leased Facility are current, no
event or condition giving rise to a right to terminate or uncured
default on the part of the tenant or, to Parent's knowledge, the
landlord, exists under such Parent Real Property Lease. No party to such
Parent Real Property Lease has given written notice to Parent or such
subsidiary or made a claim in writing against Parent or such subsidiary
in respect of any breach or default thereunder; and
(v) neither Parent nor its subsidiary using or occupying
such Parent Leased Facility has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered its leasehold interest in such
Parent Leased Facility.
SECTION 4.11 LITIGATION. Except as disclosed in the Parent SEC Reports
or in Section 4.11 of the Parent Disclosure Schedule, there is no suit, claim,
action, proceeding or, to Parent's knowledge, investigation, pending or, to
Parent's knowledge, threatened which is reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent and its
subsidiaries taken as a whole. Except as disclosed in Section 4.11 of the Parent
Disclosure Schedule or the Parent SEC Reports, none of Parent, Merger Sub or
Parent's other subsidiaries is subject to any outstanding order, writ,
injunction or decree which is reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent and its subsidiaries taken as
a whole. To Parent's knowledge, there is no action, suit, proceeding or
investigation pending or threatened against any current or former officer,
director, employee or agent of Parent or any of its subsidiaries (in his or her
capacity as such) which is reasonably expected to give rise to a claim for
contribution or indemnification against Parent or any of its subsidiaries.
Notwithstanding the foregoing, any stockholder litigation or litigation by any
Governmental Entity, in each case brought or threatened against Parent, Merger
Sub or any officer, director, employee or agent of Parent or Merger Sub in any
respect of this Agreement or the transactions contemplated hereby, shall not be
deemed to have, or contribute to, a Material Adverse Effect on Parent and its
subsidiaries taken as a whole.
SECTION 4.12 COMPLIANCE WITH APPLICABLE LAW; PERMITS. Parent and its
subsidiaries hold all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "PARENT PERMITS"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which are not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent and its subsidiaries taken as a whole. Parent and its
subsidiaries are in compliance with the terms of the Parent Permits, except
where the failure to comply is not reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent and its subsidiaries taken
as a whole. The businesses and operations of Parent and its subsidiaries comply
in all respects with all Laws applicable to Parent or its subsidiaries
(including all data protection Laws applicable to any foreign subsidiary),
except where the failure to so comply is not reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent and its
subsidiaries taken as a whole.
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SECTION 4.13 EMPLOYEE PLANS.
(a) Section 4.13(a) of the Parent Disclosure Schedule sets forth a true,
correct, and complete list of:
(i) all "employee benefit plans," as defined in Section
3(3) of ERISA, under which Parent or any of its subsidiaries has any
obligation or liability, contingent or otherwise, including, but not
limited to, (i) all severance plans or arrangements; and (ii) any
supplemental or U.S. non-qualified retirement plans or arrangements (the
"PARENT BENEFIT PLANS"); and
(ii) all employment, consulting, termination, severance
or individual compensation agreements (other than any such agreement
which is terminable within ninety (90) days without liability or at any
time without liability exceeding two weeks' salary for each year of
employment or, in the case of employees whose annual cash compensation
exceeds $100,000, three months' salary, or is legally mandated by
applicable non-U.S. law); all stock award, stock option, stock purchase
or other equity-based (including phantom stock or stock appreciation
rights) plans or arrangements; all bonus or other incentive compensation
plans or agreements (including, but not limited to, any such plan or
agreement covering any officer or employee whose annual cash
compensation exceeds $70,000); all salary continuation or deferred
compensation plans or agreements (including, but not limited to, any
such plan or agreement covering any current or former officer or
employee whose annual cash compensation exceeds $70,000); in each case,
as to which Parent or any of its subsidiaries has any obligation or
liability (contingent or otherwise) (the "PARENT EMPLOYEE
ARRANGEMENTS").
(b) In respect of each Parent Benefit Plan, a complete and correct copy
of each of the following documents (if applicable) will be provided to the
Company: (i) the most recent plan documents and related trust documents, and all
amendments thereto; (ii) the most recent summary plan description, and all
summaries of material modifications; (iii) the three (3) most recent Forms 5500
(including schedules and attachments); (iv) the most recent IRS determination
letter, if any; and (v) the most recent actuarial reports (including for
purposes of Financial Accounting Standards Board report nos. 87, 106 and 112).
(c) Except as disclosed in Section 4.13(c) of the Parent Disclosure
Schedule, none of the Parent Benefit Plans or Parent Employee Arrangements is
subject to Title IV of ERISA, constitutes a defined benefit retirement plan or
is a multi-employer plan described in Section 3(37) of ERISA, and Parent and its
subsidiaries do not have any material obligation or liability (contingent or
otherwise) in respect of any such plans to the extent such plans constitute a
defined benefit retirement plan or a multi-employer plan described in Section
3(37) of ERISA. Neither Parent nor its subsidiaries now contributes to, or has
ever been obligated to contribute to, a multi-employer plan described in Section
3(37) of ERISA. Parent and its subsidiaries are not members of a group of trades
or businesses (other than that consisting of Parent and its subsidiaries) under
common control or treated as a single employer pursuant to Section 414 of the
Code.
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(d) Except as set forth in Section 4.13(d) of the Parent Disclosure
Schedule, the Parent Benefit Plans and their related trusts intended to qualify
under Sections 401(a) and 501(a) of the Code, respectively, have received a
favorable determination letter from the IRS and Parent has no knowledge that any
event has occurred since the date of such letter that could cause the IRS to
revoke such determination. Any voluntary employee benefit association which
provides benefits to current or former employees of Parent and its subsidiaries,
or their beneficiaries, is and has been qualified under Section 501(c)(9) of the
Code.
(e) All contributions or other payments required to have been made by
Parent and its subsidiaries to or under any Parent Benefit Plan or Parent
Employee Arrangement by applicable Law or the terms of such Parent Benefit Plan
or Parent Employee Arrangement (or any agreement relating thereto) have been, in
all material respects, timely and properly made or have been accrued in Parent's
financial statements.
(f) The Parent Benefit Plans and Parent Employee Arrangements have been
maintained and administered in accordance with their terms and applicable Laws
and all required returns, reports, and filings (including, but not limited to
annual reports on Form 5500) have been timely filed, except where the failure to
so maintain and administer such Parent Benefit Plans and Parent Employee
Arrangements or make such filings is not reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent and its
subsidiaries taken as a whole. No individual who has performed services for
Parent or any of its subsidiaries has been improperly excluded from
participation in any Parent Benefit Plan or Parent Employee Arrangement, except
where the exclusion of any such individuals is not reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent and its
subsidiaries taken as a whole.
(g) There are no pending or, to Parent's knowledge, threatened, actions,
claims, or proceedings against or relating to any Parent Benefit Plan or Parent
Employee Arrangement (other than routine benefit claims by persons claiming
benefits thereunder), and, to the knowledge of Parent, there are no facts or
circumstances which could form a reasonable basis for any of the foregoing,
except for such actions, claims or proceedings which are not reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect on Parent
and its subsidiaries taken as a whole.
(h) Parent and its subsidiaries do not have any material obligation or
liability (contingent or otherwise) to provide post-retirement life insurance or
health benefits coverage for current or former officers, directors, or employees
of Parent or any of its subsidiaries except (i) as may be required under Part 6
of Title I of ERISA (or similar state or local law) at the sole expense of the
participant or the participant's beneficiary, (ii) a medical expense
reimbursement account plan pursuant to Section 125 of the Code, or (iii) through
the last day of the calendar month in which the participant terminates
employment with Parent or any subsidiary of Parent.
(i) Except as set forth in Section 4.13(i) of the Parent Disclosure
Schedule, none of the assets of any Parent Benefit Plan is stock of Parent or
any of its affiliates, or property leased to or jointly owned by Parent or any
of its affiliates.
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(j) Except as disclosed in Section 4.13(j) of the Parent Disclosure
Schedule or in connection with equity compensation, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due to any employee (current,
former, or retired) of Parent or any of its subsidiaries, (ii) increase any
benefits under any Parent Benefit Plan or Parent Employee Arrangement
(determined without regard to the "materiality" limits set forth in the
definitions of such terms), or (iii) result in the acceleration of the time of
payment of, vesting of, or other rights in respect of any such benefits.
(k) Except as set forth in Section 4.13(k) of the Parent Disclosure
Schedule, Parent has no employees outside of the United States.
(l) The aggregate number of shares of Parent Common Stock purchasable
under all outstanding purchase rights under each Parent Option Plan does not
exceed the maximum number of shares remaining available for issuance under such
plan.
(m) Neither Parent, nor, to the best knowledge of Parent, any other plan
"fiduciary" or "party in interest" (as such terms are defined in Sections 3(21)
and 3(14) of ERISA) of any Parent Benefit Plans has engaged in any transaction
in violation of Sections 404 or 406 of ERISA or any "prohibited transaction," as
such term is defined in Section 4975 of the Code, for which no exemption exists
under Section 408 of ERISA, Section 4975 of the Code, or has engaged in any
transaction that may result in the imposition of any excise Tax under Sections
4971 through 4980E of the Code, or otherwise incurred a liability for any excise
Tax, other than excise Taxes that have been paid or have otherwise been
disclosed in Section 4.13(m) of the Parent Disclosure Schedule.
(n) Except as required by Law or as otherwise disclosed in Section
4.13(n) of the Parent Disclosure Schedule, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) result in any payment (including, without limitation, severance,
unemployment compensation, bonus or otherwise) becoming due to any current or
former director, officer or employee of Parent or its any of its subsidiaries
under any Parent Benefit Plan, Parent Employee Arrangement or otherwise, (ii)
materially increase any benefits otherwise payable under any Parent Benefit Plan
or Parent Employee Arrangement, (iii) result in the acceleration of the time of
payment or vesting of any such benefits, or (iv) create a right to receive
payments upon a subsequent termination of employment. There are no contracts or
arrangements providing for payments that could subject any person to liability
for tax under Section 4999 of the Code. No Parent Benefit plan or Parent
Employee Arrangement, or other contract or arrangement, provides for the payment
by Parent or its subsidiaries of any amount, either alone or in combination with
any other amounts, for which the deduction by Parent would be disallowed under
Section 162(m) or 280G of the Code or otherwise.
(o) Each Parent Benefit Plan or Parent Employee Arrangement that is a
"group health plan," as defined in Section 607(1) of ERISA, has been operated in
material compliance with the health care continuation provisions of Part 6 of
Title I of ERISA and Section 4980B of the Code at all times.
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SECTION 4.14 LABOR MATTERS.
(a) Parent and its subsidiaries are not parties to any labor or
collective bargaining agreement, and no employees of Parent or any of its
subsidiaries are represented by any labor organization. There are no
representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to Parent's knowledge, threatened in
writing to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority. Within the last twelve months, to
Parent's knowledge, there have been no organizing activities involving Parent or
any of its subsidiaries in respect of any group of employees of Parent or any of
its subsidiaries.
(b) There are no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor disputes pending or,
to Parent's knowledge, threatened in writing, against or involving Parent or any
of its subsidiaries. There are no unfair labor practice charges, grievances or
complaints pending or, to Parent's knowledge, threatened in writing, by or on
behalf of any employee or group of employees of Parent or any of its
subsidiaries which, if individually or collectively resolved against Parent or
any of its subsidiaries, would reasonably be expected to have a Material Adverse
Effect on Parent and its subsidiaries taken as a whole.
(c) There are no complaints, charges or claims against Parent or any of
its subsidiaries pending or, to Parent's knowledge, threatened to be brought or
filed with any Governmental Entity or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment of any individual by Parent or any of its subsidiaries which, if
individually or collectively resolved against Parent or any of its subsidiaries,
would reasonably be expected to have a Material Adverse Effect on Parent and its
subsidiaries taken as a whole, and, to the knowledge of Parent, there are no
facts or circumstances which could form a reasonable basis for any of the
foregoing.
(d) There has been no "mass layoff" or "plant closing" as defined by
WARN in respect of Parent or any of its subsidiaries within the six months prior
to the Effective Time.
(e) All employees of Parent and its subsidiaries possess all applicable
passports, visas, permits and other authorizations required by all applicable
immigration or similar Laws to be employed by and to perform services for and on
behalf of Parent and its subsidiaries, except where the failure to possess such
passports, visas, permits or other authorizations would not, individually or in
the aggregate, reasonably be expected to materially affect the conduct of
business by Parent or its subsidiaries. Parent and its subsidiaries, and their
employees, have complied in all material respects with all applicable
immigration and similar Laws.
SECTION 4.15 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.15
of the Parent Disclosure Schedule: (i) Parent and each of its subsidiaries have
obtained and are in compliance with all Parent Permits issuable and issued
pursuant to any Environmental Law; (ii) as of the date hereof, there are no
administrative, civil or criminal actions, suits, demands, notices,
investigations, writs, injunctions, decrees, orders or judgments outstanding or,
to the knowledge of Parent, threatened against Parent or any of its subsidiaries
based upon or arising
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out of any Environmental Law; (iii) neither Parent nor any of its subsidiaries
has caused, has received notice of, or has knowledge of any Release or
threatened Release of a Hazardous Material on or from the assets owned or
operated by Parent or any of its subsidiaries; (iv) neither Parent nor any of
its subsidiaries has any current liability in connection with any Release of a
Hazardous Material; and (v) none of the operations of Parent or any of its
subsidiaries involves the treatment, storage, or disposal of a Hazardous
Material on any property owned, leased or operated by Parent or any of its
subsidiaries.
SECTION 4.16 TAX MATTERS.
(a) Except as set forth in Section 4.16(a) of the Parent Disclosure
Schedule, each of Parent and its subsidiaries has timely filed (or has had
timely filed) all material Tax Returns required to be filed by it (or on its
behalf). All such Tax Returns are complete and correct in all material respects.
Parent and its subsidiaries have paid all material Taxes due for the periods
covered by such Tax Returns. The most recent Parent SEC Reports reflect an
adequate reserve for all Taxes payable by Parent and its subsidiaries for all
Taxable periods and portions thereof through the date of such Parent SEC
Reports. Parent has previously delivered (or, in the case of foreign Tax Returns
and audit reports, will deliver) to the Company copies of (i) all federal,
state, foreign and other material income and franchise Tax Returns filed by
Parent and its subsidiaries relating to any taxable periods of Parent or any of
its subsidiaries that remains subject to audit under applicable statutes of
limitations; and (ii) any audit report issued within the last three years (or
otherwise in respect of any audit or investigation in progress) relating to
Taxes due from or in respect of Parent or its subsidiaries.
(b) Except as set forth in Section 4.16(b) of the Parent Disclosure
Schedule, no material deficiencies for any Taxes have been proposed, asserted,
or assessed against Parent or its subsidiaries that have not been fully paid or
adequately provided for in the appropriate financial statements of Parent, no
requests for waivers of the time to assess any Taxes are pending, and no power
of attorney still in effect in respect of any Taxes has been executed or filed
with any taxing authority. No material issues relating to Taxes have been raised
by the relevant taxing authority during any presently pending audit or
examination.
(c) No material Liens for Taxes exist in respect of any assets or
properties of Parent or its subsidiaries, except for statutory Liens for Taxes
not yet due.
(d) Neither Parent nor any of its subsidiaries is a party to or is bound
by any Tax sharing agreement, Tax indemnity obligation, or similar agreement,
arrangement, or practice in respect of Taxes (whether or not written) (including
any advance pricing agreement, closing agreement, or other agreement relating to
Taxes with any taxing authority).
(e) Neither Parent nor any of its subsidiaries (i) has ever been a
member of an affiliated group within the meaning of Section 1504(a) of the Code
(or any similar or analogous group defined under a similar or analogous state,
local or foreign Law) other than an affiliated group the common parent of which
is Parent, or (ii) has any liability under Treasury Regulation Section 1.1502-6
(or any predecessor or successor thereof or analogous or similar provision under
state,
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local or foreign Law), as a transferee or successor, by contract or otherwise
for Taxes of any affiliated group of which Parent is not the common parent.
(f) Neither Parent nor any of its subsidiaries has taken or agreed to
take any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
(g) Except as set forth in Section 4.16(g) of the Parent Disclosure
Schedule, there are no employment, severance, or termination agreements or other
compensation arrangements currently in effect which provide for the payment of
any amount (whether in cash or property or the vesting of property) as a result
of any of the transactions contemplated by this Agreement that individually or
collectively (either alone or upon the occurrence of any additional or
subsequent event), could give rise to a payment which is nondeductible by reason
of Section 280G of the Code.
(h) Parent and its subsidiaries have complied in all material respects
with all Laws applicable to the payment and withholding of Taxes and have duly
and timely withheld from employee salaries, wages and other compensation and
have paid over to the appropriate taxing authority all material amounts required
to be so withheld and paid over for all periods under all applicable Laws.
(i) No federal, state, local, or foreign audits or other administrative
proceedings or court proceedings are presently pending in respect of any Taxes
or Tax Returns of Parent or its subsidiaries and neither Parent nor its
subsidiaries have received a written notice of any pending audit or proceeding
in respect of any Taxes or Tax Returns.
(j) Except as set forth in Section 4.16(j) of the Parent Disclosure
Schedule, neither Parent nor any of its subsidiaries has agreed to or is
required to make any adjustment under Section 481(a) of the Code or any similar
provision of state, local or foreign Law by reason of a change in accounting
method initiated by Parent or its subsidiaries or has any knowledge that a
taxing authority has proposed any such adjustment or change in Tax accounting
method, or has any application pending with any taxing authority requesting
permission for any changes in Tax accounting methods that relate to the business
or operations of Parent or its subsidiaries.
(k) Neither Parent nor any of its subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (i) in the two years prior to
the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
SECTION 4.17 ABSENCE OF QUESTIONABLE PAYMENTS. To Parent's knowledge,
neither Parent nor any of its subsidiaries nor any director, officer, agent,
employee or other person acting on behalf of Parent or any of its subsidiaries,
has used any corporate or other funds for unlawful contributions, payments,
gifts or entertainment, or made any unlawful expenditures relating to political
activity to government officials or others or established or maintained any
unlawful or
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unrecorded funds in violation of the Foreign Corrupt Practices Act of 1977, as
amended, or any other domestic or foreign Law. To Parent's knowledge, neither
Parent nor any of its subsidiaries nor any director, officer, agent, employee or
other person acting on behalf of Parent or any of its subsidiaries has accepted
or received any unlawful contributions, payments, gifts or expenditures.
SECTION 4.18 MATERIAL CONTRACTS.
(a) Set forth in Section 4.18(a) of the Parent Disclosure Schedule is a
list of the following contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which Parent or
any of its subsidiaries is a party affecting the obligations of any party
thereunder) to which Parent or any of its subsidiaries is a party or by which
any of its assets or properties is bound that are material to the business,
assets or properties of Parent and its subsidiaries taken as a whole: (i)
executory employment, executory severance, material product design or
development, executory personal services, material consulting, executory
non-competition or material indemnification contracts (including any material
contract to which Parent or any of its subsidiaries is a party involving
employees of Parent or any of its subsidiaries), but excluding normal
indemnification provisions under license or sale contracts; (ii) licensing,
merchandising or distribution agreements involving the payment of more than
$100,000 per year; (iii) contracts granting a right of first refusal or first
negotiation involving in excess of $100,000; (iv) partnership or joint venture
agreements; (v) any agreements for the acquisition, sale or lease of material
assets or properties of Parent (by merger, purchase or sale of assets or stock
or otherwise) entered into since September 30, 2001 involving a payment in
excess of $100,000; (vi) contracts or agreements with any Governmental Entity
involving the payment of more than $50,000 per year; (vii) loan or credit
agreements, mortgages, indentures or other agreements or instruments evidencing
indebtedness for borrowed money by Parent or any of its subsidiaries or any such
agreement pursuant to which indebtedness for borrowed money may be incurred, in
each case involving in excess of $100,000; (viii) agreements that purport to
limit, curtail or restrict the ability of Parent or any of its subsidiaries to
compete in any geographic area or line of business; (ix) assembly (packaging),
testing, or supply agreements, in each case, involving in excess of $100,000 per
year; (x) agreements, written or oral, with any officers, directors,
stockholders of Parent or any member of the immediate family of any officer,
director, or stockholder of Parent; and (xi) commitments and agreements to enter
into any of the foregoing (collectively, together with any such contracts
entered into in accordance with Section 5.2, the "PARENT MATERIAL CONTRACTS").
Section 4.18(a) of the Parent Disclosure Schedule sets forth a list of all
Parent Material Contracts and Parent has heretofore made available to the
Company true, correct, and complete copies of all such Parent Material
Contracts.
(b) To Parent's knowledge, each of the Parent Material Contracts
constitutes the valid and legally binding obligation of Parent or its
subsidiaries, enforceable in accordance with its terms, and is in full force and
effect. There is no material default under any Parent Material Contract either
by Parent (or its subsidiaries) or, to Parent's knowledge, by any other party
thereto, and no event has occurred that with the giving of notice, the lapse of
time, or both would constitute a material default thereunder by Parent (or its
subsidiaries) or, to Parent's knowledge, any other party. As of the date hereof,
to Parent's knowledge, no party has notified Parent in
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writing that it intends to terminate or fail to extend any contract between such
person and Parent within one year of the date of this Agreement, except for any
such termination or failure as would not have a Material Adverse Effect on
Parent and its subsidiaries taken as a whole.
(c) To Parent's knowledge, no party to any such Parent Material Contract
has given notice to Parent of or made a claim against Parent in respect of any
material breach or default thereunder by Parent or a subsidiary.
(d) Except as set forth in Section 4.18(d) of the Parent Disclosure
Schedule, no consent of any third party is required under any Parent Material
Contract as a result of or in connection with, and the enforceability of any
Parent Material Contract will not be affected in any manner by, the execution,
delivery, and performance of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 4.19 SUBSIDIES. Section 4.19 of the Parent Disclosure Schedule
sets forth a list of all material grants, material subsidies and similar
material arrangements directly or indirectly between or among Parent or any of
its subsidiaries, on the one hand, and any Governmental Entity or any other
person, on the other hand. Except as set forth on Section 4.19 of the Parent
Disclosure Schedule, neither Parent nor any of its subsidiaries has requested,
sought, applied for or entered into any material grant, material subsidy or
similar material arrangement directly or indirectly from or with any
Governmental Entity or any other person.
SECTION 4.20 INTELLECTUAL PROPERTY.
(a) To Parent's knowledge, and except as are not reasonably expected to
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole:
(i) each item of Intellectual Property owned or controlled by Parent and its
subsidiaries (collectively, the "PARENT INTELLECTUAL PROPERTY") comprised of
registered copyrights, copyright applications, patents, patent applications,
registered trademarks, and trademark applications are in compliance with
applicable legal requirements relating to the registration or maintenance of
such item (including payment of filing, examination and maintenance fees and
proofs of working or use, as applicable) other than any requirement that, if not
satisfied, would not result in a revocation of or otherwise materially affect
the enforceability of the item of Parent Intellectual Property in question, and
Parent has taken reasonable steps to protect such Parent Intellectual Property;
(ii) Parent and its subsidiaries own or have the right to use, free and clear of
all Liens, all Parent Intellectual Property necessary for the operation of the
businesses of Parent and its subsidiaries as presently conducted and as
presently proposed to be conducted; (iii) each material item of Parent
Intellectual Property owned or used by Parent and its subsidiaries immediately
prior to the Effective Time will be owned or available for use by Parent or its
relevant subsidiary immediately subsequent to the Effective Time; (iv) Parent
and its subsidiaries have taken all action deemed by Parent or its relevant
subsidiary to be necessary or reasonable, but in no event less than all
commercially reasonable action, to protect and preserve the confidentiality of
all Parent Intellectual Property consisting of trade secrets; (v) Parent has had
and continues to have a requirement that all employees, agents and contractors
of Parent and its subsidiaries must execute a non-disclosure agreement which
includes an agreement to assign to Parent or its subsidiaries all rights to
Parent Intellectual Property originated or invented by such employee
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relating to the business of Parent or its relevant subsidiary; and (vi) no trade
secret or confidential know-how material to the business of Parent or any of its
subsidiaries as currently operated has been disclosed or authorized to be
disclosed to any third party, other than pursuant to a non-disclosure agreement
that protects Parent's or such subsidiary's proprietary interests in and to such
trade secrets and confidential know-how.
(b) Except as set forth in Section 4.20(b) of the Parent Disclosure
Schedule, to Parent's knowledge, neither Parent nor any of its subsidiaries has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property rights of third parties, and neither Parent nor
any of its subsidiaries has received any charge, complaint, claim or notice
alleging any such interference, infringement, misappropriation or violation that
remains unresolved and, if decided adversely to Parent, would be reasonably
likely to have a Material Adverse Effect on Parent and subsidiaries taken as a
whole. No third party has, to Parent's knowledge, interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Intellectual
Property rights of Parent or its subsidiaries, except where such actions are not
reasonably expected to have a Material Adverse Effect on Parent and its
subsidiaries taken as a whole.
(c) Section 4.20(c) of the Parent Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that Parent
or any of its subsidiaries uses pursuant to license, sublicense, agreement or
permission (other than software generally available on commercially reasonable
terms) that either (i) if such license, sublicense, agreement or permission were
denied, would reasonably be expected to have a Material Adverse Effect on Parent
or its subsidiaries taken as a whole, or (ii) includes any unsatisfied
obligation to pay any royalty or other amount or any obligation to pay a royalty
or other amount, whether fixed or determined based on usage, following the
Effective Time in excess of $25,000. To Parent's knowledge, in respect of each
such item of used Intellectual Property:
(i) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable and in full
force and effect;
(ii) the licenses, sublicenses, agreements or
permissions will in all material respects continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms
following the Effective Time;
(iii) no party to the license, sublicense, agreement or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder such as would have
a Material Adverse Effect on Parent and its subsidiaries taken as a
whole; and
(iv) no party to the license, sublicense, agreement or
permission has repudiated any provision thereof.
(d) Except as set forth in Section 4.20(d) of the Parent Disclosure
Schedule, neither Parent nor any of its subsidiaries has granted to any third
party (i) any licenses (other than
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implied patent licenses pursuant to sales of products or services in the
ordinary course of business) in any patents owned by Parent or any of its
subsidiaries or (ii) any exclusive licenses in any other Parent Intellectual
Property.
(e) Except as may have been given in connection with licenses set forth
in Section 4.20(d) of the Parent Disclosure Schedule or given in the ordinary
course of business, neither Parent nor any of its subsidiaries has entered into
any material agreement to indemnify any other person against any charge of
infringement or misappropriation of any Parent Intellectual Property.
(f) The execution, delivery and performance by Parent of this Agreement,
and the consummation of the transactions contemplated hereby, will not (i)
result in the loss or impairment of, or give rise to any right of any third
party to terminate or alter, any of Parent's or any of its subsidiaries' rights
to own any Parent Intellectual Property except as are not reasonably expected to
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole,
nor (ii) require the consent of any Governmental Entity or other third party in
respect of any such Parent Intellectual Property that, if not obtained, is
reasonably expected to have a Material Adverse Effect on Parent and its
subsidiaries taken as a whole.
SECTION 4.21 OPINION OF PARENT FINANCIAL ADVISOR. L.H. Friend, Weinress,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLC (the "PARENT FINANCIAL ADVISOR") has delivered to the
Parent Board its opinion, dated the date of this Agreement, to the effect that,
as of such date, the Stock Exchange Ratio is fair to the stockholders of Parent
from a financial point of view, and as of the date of the Closing, such opinion
has not been withdrawn or modified.
SECTION 4.22 NO PRIOR ACTIVITIES. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, Merger
Sub has neither incurred any obligation or liability nor engaged in any business
or activity of any type or kind whatsoever or entered into any agreement or
arrangement with any person.
SECTION 4.23 BROKERS. No broker, finder, investment banker or other
person (other than the Parent Financial Advisor, a true and correct copy of
whose engagement letter has been provided to the Company) is entitled to any
brokerage, finder's or other fee or commission or expense reimbursement in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent, Merger Sub or any of their
affiliates.
SECTION 4.24 DGCL SECTION 203. Parent has taken all action required so
that the restrictions contained in Section 203 of the DGCL applicable to a
"business combination" (as defined in DGCL Section 203) will not apply to the
execution, delivery or performance of this Agreement, the applicable Voting
Agreement, or the consummation of the Merger. No other antitakeover Laws of any
state are applicable to this Agreement, such Voting Agreement or the
transactions contemplated hereby or thereby.
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ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as consented to
by Parent, as disclosed in Section 5.1 of the Company Disclosure Schedule, or as
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, neither the Company nor any of its subsidiaries will:
(a) amend its charter, articles or certificate of incorporation or
bylaws (or other similar organizational or governing instruments);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities convertible into or exchangeable for any
stock or any equity equivalents (including, any stock options or stock
appreciation rights), except for (i) the issuance of Shares upon the exercise of
outstanding Company Stock Options, Company Warrants and Convertible Notes and
(ii) the grant to newly hired officers, employees or agents (in the ordinary and
usual course of business consistent with past practice) of additional Company
Stock Options after the date hereof to purchase up to 50,000 additional Shares
and the issuance of Shares on the exercise thereof;
(c) (i) split, combine or reclassify any shares of its capital stock;
(ii) declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock (other than any dividends or distributions payable to the Company or its
subsidiaries); (iii) make any other actual, constructive or deemed distribution
in respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such (other than any distributions or payments
to the Company or its subsidiaries); or (iv) redeem, repurchase or otherwise
acquire any of its securities or any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any subsidiary of
the Company;
(f) (i) incur or assume any indebtedness for borrowed money other than
under existing credit facilities (or any renewals, replacements or extensions
that do not increase the aggregate commitments thereunder) except (A) in the
ordinary and usual course of business consistent with past practice or (B) in
connection with any acquisition or capital expenditure permitted by this Section
5.1; (ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary and usual course of business consistent with past
practice, and except for obligations of the wholly owned subsidiaries of the
Company; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than (A) any acquisition permitted by
this Section 5.1, (B) loans, advances or capital contributions to or investments
in
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wholly owned subsidiaries of the Company, (C) loans or advances to employees of
the Company or any of its subsidiaries in the ordinary and usual course of
business consistent with past practice or (D) extensions of credit to customers
in the ordinary and usual course of business consistent with past practice);
(iv) pledge or otherwise encumber shares of capital stock of the Company or its
subsidiaries; or (v) create or assume any Lien on any material assets of the
Company or any of its subsidiaries other than in the ordinary and usual course
of business consistent with past practice;
(g) (i) increase in any manner the compensation or fringe benefits of
any director, officer or employee except in the ordinary and usual course of
business consistent with past practice or pay any benefit not required by any
Company Benefit Plan or Company Employee Arrangement as in effect as of the date
hereof or grant any completion bonuses or change of control payments in respect
of the Merger; (ii) except in the ordinary and usual course of business
consistent with past practice, promote or change the classification or status in
respect of or hire any employee or individual; or (iii) make any contributions
or other deposits to any trust that is not qualified under Section 501(a) of the
Code;
(h) acquire, sell, lease or dispose of any material assets outside the
ordinary and usual course of business consistent with past practice or any
assets which in the aggregate are material to the Company and its subsidiaries
taken as a whole, other than extensions or renewals in the ordinary and usual
course of business consistent with past practice;
(i) except as may be required as a result of a change in Law or in GAAP,
make any material change in any of the accounting principles or practices used
by it;
(j) revalue in any material respect any of its assets, including,
writing down the value of inventory or writing-off notes or accounts receivable
other than in the ordinary and usual course of business consistent with past
practice or as required by GAAP;
(k) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) other than in the ordinary and
usual course of business consistent with past practice, enter into any material
contract or agreement or amend in any material respect any of the Company
Material Contracts or the agreements referred to in Section 3.18; (iii)
authorize any new capital expenditure or expenditures which are not provided for
in the Company's current capital expenditure plan and which, individually, is in
excess of $25,000 or, in the aggregate, are in excess of $50,000; or (iv) enter
into or amend any contract, agreement, commitment or arrangement providing for
the taking of any action that would be prohibited hereunder;
(l) make or revoke any material Tax election, or settle or compromise
any material Tax liability, or change (or make a request to any taxing authority
to change) any aspect of its method of accounting for Tax purposes;
(m) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
and usual course of business consistent with past practice or in
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accordance with their terms of liabilities reflected, or reserved against in,
the consolidated financial statements, including notes thereto, of the Company
and its subsidiaries or incurred since the date of such financial statements or
waive the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement related to a business combination involving the
Company to which the Company or any of its subsidiaries is a party;
(n) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby;
(o) enter into any agreement or arrangement that limits or otherwise
restricts the Company or any of its subsidiaries or any successor thereto or
that could, after the Effective Time, limit or restrict the Surviving
Corporation and its affiliates (including Parent) or any successor thereto, from
engaging or competing in any line of business or in any geographic area;
(p) fail to comply in any material respect with any Law applicable to
the Company, its subsidiaries, or their respective assets;
(q) enter into any direct or indirect arrangements for financial
subsidies from a Governmental Entity;
(r) adopt, enter into, amend, alter or terminate (partially or
completely) any Company Benefit Plan or Company Employee Arrangement except as
contemplated by this Agreement or to the extent required by applicable Law;
(s) enter into any contract with an officer, director, employee, agent
or other similar representative of the Company or any of its subsidiaries that
is not terminable, without penalty or other liability, upon not more than sixty
(60) calendar days' notice;
(t) except as permitted by Sections 6.6, 8.3 and 8.5 hereof, take,
propose to take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through 5.1(s) or any action which would cause the
condition set forth in Section 7.2(a) not to be satisfied; or
(u) except as permitted by Sections 6.6, 8.3 and 8.5 hereof, take any
action that would or would reasonably be expected to prevent, impair or
materially delay the ability of the Company or Parent to consummate the
transactions contemplated by this Agreement.
SECTION 5.2 CONDUCT OF BUSINESS OF PARENT. Except as consented to by the
Company, as set forth in Section 5.2 of the Parent Disclosure Schedule, or as
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, neither Parent nor any of its subsidiaries will:
(a) amend its charter, articles or certificate of incorporation or
bylaws (or other similar organizational or governing instruments);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments,
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subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities convertible into or exchangeable for any stock or any equity
equivalents (including, any stock options or stock appreciation rights), except
for (i) the issuance of shares of Parent Common Stock upon the exercise of
outstanding Parent Stock Options and Parent Warrants, and (ii) the grant to
newly hired officers, employees or agents (in the ordinary course of business
consistent with past practice) of additional Company Stock Options after the
date hereof to purchase up to 50,000 additional shares of Parent Stock and the
issuance of shares on the exercise thereof;
(c) (i) split, combine or reclassify any shares of its capital stock;
(ii) declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock (other than any dividends or distributions payable to Parent or its
subsidiaries); (iii) make any other actual, constructive or deemed distribution
in respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such (other than any distributions or payments
to Parent or its subsidiaries); or (iv) redeem, repurchase or otherwise acquire
any of its securities or any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any subsidiary of
Parent;
(f) (i) incur or assume any indebtedness for borrowed money other than
under existing credit facilities (or any renewals, replacements or extensions
that do not increase the aggregate commitments thereunder) except (A) in the
ordinary and usual course of business consistent with past practice or (B) in
connection with any acquisition or capital expenditure permitted by this Section
5.2; (ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary and usual course of business consistent with past
practice, and except for obligations of the wholly owned subsidiaries of Parent;
(iii) make any loans, advances or capital contributions to, or investments in,
any other person (other than (A) any acquisition permitted by this Section 5.2,
(B) loans, advances or capital contributions to or investments in wholly owned
subsidiaries of Parent, (C) loans or advances to employees of Parent or any of
its subsidiaries in the ordinary and usual course of business consistent with
past practice or (D) extensions of credit to customers in the ordinary and usual
course of business consistent with past practice); (iv) pledge or otherwise
encumber shares of capital stock of Parent or its subsidiaries; or (v) create or
assume any Lien on any material assets of Parent or any of its subsidiaries
other than in the ordinary and usual course of business consistent with past
practice;
(g) (i) increase in any manner the compensation or fringe benefits of
any director, officer or employee except in the ordinary and usual course of
business consistent with past practice or pay any benefit not required by any
Parent Benefit Plan or Parent Employee Arrangement as in effect as of the date
hereof or grant any completion bonuses or change of control payments in respect
of the Merger; (ii) except in the ordinary and usual course of business
consistent with past practice, promote or change the classification or status in
respect of
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or hire any employee or individual; or (iii) make any contributions or other
deposits to any trust that is not qualified under Section 501(a) of the Code;
(h) acquire, sell, lease or dispose of any material assets outside the
ordinary and usual course of business consistent with past practice or any
assets which in the aggregate are material to Parent and its subsidiaries taken
as a whole, other than extensions or renewals in the ordinary and usual course
of business consistent with past practice;
(i) except as may be required as a result of a change in Law or in GAAP,
make any material change in any of the accounting principles or practices used
by it;
(j) revalue in any material respect any of its assets, including,
writing down the value of inventory or writing-off notes or accounts receivable
other than in the ordinary and usual course of business consistent with past
practice or as required by GAAP;
(k) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) other than in the ordinary and
usual course of business consistent with past practice, enter into any material
contract or agreement or amend in any material respect any of the Parent
Material Contracts or the agreements referred to in Section 4.18; (iii)
authorize any new capital expenditure or expenditures which are not provided for
in Parent's current capital expenditure plan and which, individually, is in
excess of $25,000 or, in the aggregate, are in excess of $50,000; or (iv) enter
into or amend any contract, agreement, commitment or arrangement providing for
the taking of any action that would be prohibited hereunder;
(l) make or revoke any material Tax election, or settle or compromise
any material Tax liability, or change (or make a request to any taxing authority
to change) any material aspect of its method of accounting for Tax purposes;
(m) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
and usual course of business consistent with past practice or in accordance with
their terms of liabilities reflected, or reserved against in, the consolidated
financial statements, including notes thereto, of Parent and its subsidiaries or
incurred since the date of such financial statements or waive the benefits of,
or agree to modify in any manner, any confidentiality, standstill or similar
agreement related to a business combination involving Parent to which Parent or
any of its subsidiaries is a party;
(n) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby;
(o) enter into any agreement or arrangement that limits or otherwise
restricts Parent or any of its subsidiaries or any successor thereto or that
could, after the Effective Time, limit or restrict the Surviving Corporation and
its affiliates (including Parent) or any successor thereto, from engaging or
competing in any line of business or in any geographic area;
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(p) fail to comply in any material respect with any Law applicable to
Parent, its subsidiaries, or their respective assets;
(q) enter into any direct or indirect arrangements for financial
subsidies from a Governmental Entity;
(r) adopt, enter into, amend, alter or terminate (partially or
completely) any Parent Benefit Plan or Parent Employee Arrangement except as
contemplated by this Agreement or to the extent required by applicable Law;
(s) enter into any contract with an officer, director, employee, agent
or other similar representative of Parent or any of its subsidiaries that is not
terminable, without penalty or other liability, upon not more than sixty (60)
calendar days' notice; or
(t) except as permitted by Sections 6.6, 8.4 and 8.5 hereof, take,
propose to take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.2(a) through 5.2(s) or any action which would cause the
condition set forth in Section 7.3(a) not to be satisfied; or
(u) except as permitted by Sections 6.6, 8.4 and 8.5 hereof, take any
action that would or would reasonably be expected to prevent, impair or
materially delay the ability of the Company or Parent to consummate the
transactions contemplated by this Agreement.
SECTION 5.3 ACCESS TO INFORMATION.
(a) Between the date hereof and the Effective Time and subject to
applicable Law, the Company will give Parent and Merger Sub and their authorized
representatives (including counsel, financial advisors, accountants, consultants
and auditors) reasonable access to all employees, plants, offices, warehouses
and other facilities and to all books and records of the Company and its
subsidiaries, will permit Parent and Merger Sub to make such inspections as
Parent and Merger Sub may reasonably require, and will cause the Company's
officers and those of its subsidiaries to furnish Parent and Merger Sub with
such financial and operating data and other information in respect of the
business, properties and personnel of the Company and its subsidiaries as Parent
or Merger Sub may from time to time reasonably request, provided that no
investigation pursuant to this Section 5.3(a) shall affect or be deemed to
modify any of the representations or warranties made by the Company; provided,
however, that nothing contained in this Section 5.3 shall be interpreted to
require the Company or any of its subsidiaries to disclose any source code or
any information which it is prohibited from disclosing pursuant to the terms of
a confidentiality undertaking to a third party.
(b) Between the date hereof and the Effective Time and subject to
applicable Law, Parent and Merger Sub will give the Company and its authorized
representatives (including counsel, financial advisors, accountants, consultants
and auditors) reasonable access to all employees, plants, offices, warehouses
and other facilities and to all books and records of Parent and its
subsidiaries, will permit the Company to make such inspections as the Company
may reasonably require, and will cause Parent's officers and those of its
subsidiaries to furnish the
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Company with such financial and operating data and other information in respect
of the business, properties and personnel of Parent and its subsidiaries as the
Company may from time to time reasonably request, provided that no investigation
pursuant to this Section 5.3(b) shall affect or be deemed to modify any of the
representations or warranties made by Parent; provided, however, that nothing
contained in this Section 5.3 shall be interpreted to require Parent or any of
its subsidiaries to disclose any source code or any information which it is
prohibited from disclosing pursuant to the terms of a confidentiality
undertaking to a third party.
(c) Each of Parent, Merger Sub and the Company will hold and will cause
its authorized representatives to hold in confidence all documents and
information furnished to the other in connection with the transactions
contemplated by this Agreement pursuant to the terms of that certain
Non-Disclosure Agreement entered into between the Company and Parent dated May
6, 2002 (the "NON-DISCLOSURE AGREEMENT"), which shall survive any termination of
this Agreement in all respects in accordance with its terms.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 PREPARATION OF S-4 AND THE JOINT PROXY STATEMENT. Parent and
the Company will, as promptly as practicable, jointly prepare and (i) Parent and
the Company will file with the SEC the Joint Proxy Statement in connection with
(a) the vote of the stockholders of Parent in respect of (A) the Merger and the
other Proposals and (B) the election of Director Nominees, and (b) the vote of
the stockholders of the Company in respect of the Merger, and (ii) Parent will
file with the SEC the S-4 in connection with the registration under the
Securities Act of the shares of Parent Common Stock, the Contingent Warrant
Shares and the Contingent Warrants and the other transactions contemplated
hereby. Parent and the Company will, and will cause their accountants and
lawyers to, use their commercially reasonable efforts to have or cause the S-4
to be declared effective as promptly as practicable after filing with the SEC
and to maintain the effectiveness of the S-4 through the Effective Time,
including causing their accountants to deliver necessary or required instruments
such as opinions, consents and certificates, and will take any other action
required or necessary to be taken under federal or state securities Laws or
otherwise in connection with the registration process (other than qualifying to
do business in any jurisdiction which it is not now so qualified or filing a
general consent to service of process in any jurisdiction). The Company and
Parent shall, as promptly as practicable after the receipt thereof, provide to
the other party copies of any written comments and advise the other party of any
oral comments in respect of the Joint Proxy Statement or the S-4 received from
the staff of the SEC. Parent and the Company will provide each other with a
reasonable opportunity to review and comment on any amendment or supplement to
the Joint Proxy Statement prior to filing with the SEC and will provide each
other with a copy of all such filings with the SEC. Parent will provide the
Company with a reasonable opportunity to review and comment on any amendment or
supplement on the S-4 prior to filing with SEC and will provide the Company with
a copy of all such filings with the SEC. Parent will advise the Company,
promptly after it receives notice thereof, of the time when the S-4 has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the
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S-4 or comments thereon and responses thereto or requests by the SEC for
additional information. Each of the Company and Parent will use its commercially
reasonable efforts to cause the Joint Proxy Statement to be mailed to its
respective stockholders at the earliest practicable date.
SECTION 6.2 LETTER OF ACCOUNTANTS.
(a) The Company shall use all commercially reasonable efforts to cause
to be delivered to Parent a letter of ▇▇▇▇▇▇ + Co., the Company's independent
auditors, dated as of the date on which the S-4 shall become effective and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4.
(b) Parent shall use all commercially reasonable efforts to cause to be
delivered to the Company a letter of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, Parent's independent
auditors, dated as of the date on which the S-4 shall become effective and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4.
SECTION 6.3 PARENT STOCKHOLDER MEETING. Parent shall take all lawful
action to (i) cause a special meeting of its stockholders (the "PARENT
STOCKHOLDER MEETING") to be duly called and held as soon as practicable after
the effective date of the S-4 for the purpose of voting on (A) the approval and
adoption of this Agreement and approval of the Merger and the other Proposals
and related matters, and (B) election of the Director Nominees; and (ii) subject
to applicable Law, solicit proxies from its stockholders to obtain the Parent
Requisite Vote with respect to the foregoing matters. Subject to the provisions
of Section 6.6(b), the Parent Board shall recommend approval and adoption of
this Agreement and approval of the Merger by Parent's stockholders and the
Parent Board shall not withdraw, amend or modify in a manner adverse to Company
such recommendation (or announce publicly its intention to do so).
SECTION 6.4 COMPANY STOCKHOLDER MEETING. Company shall take all lawful
action to (i) cause a special meeting of its stockholders (the "COMPANY
STOCKHOLDER MEETING") to be duly called and held as soon as practicable after
the effective date of the S-4 for the purpose of voting on the approval and
adoption of this Agreement and approval of the Merger and related matters and
(ii) subject to applicable Law, solicit proxies from its stockholders to obtain
the Company Requisite Vote for the approval and adoption of this Agreement and
approval of the Merger. Subject to the provisions of Section 6.6(b), the Company
Board shall recommend approval and adoption of this Agreement and approval of
the Merger by the Company's stockholders and the Company Board shall not
withdraw, amend or modify in a manner adverse to Parent such recommendation (or
announce publicly its intention to do so).
SECTION 6.5 COMMERCIALLY REASONABLE EFFORTS.
(a) Subject to the terms and conditions of this Agreement and applicable
Law, each party will use its commercially reasonable efforts to take, or cause
to be taken, all actions and to
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do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate the Merger and the other transactions contemplated
by this Agreement. In furtherance and not in limitation of the foregoing, each
party hereto shall make appropriate filings required under any applicable
Antitrust Law (as hereinafter defined) in respect of the transactions
contemplated hereby as promptly as practicable and to supply as promptly as
practicable any additional information and documentary material that may be
requested by the applicable Governmental Entities administering such Laws and
use its commercially reasonable efforts to take, or cause to be taken, all other
action consistent with this Section 6.5 necessary to secure the applicable
clearances or approvals under such Laws as soon as practicable. For purposes of
this Agreement, "ANTITRUST LAW" means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇
Act, as amended, the Federal Trade Commission Act, as amended, and all other
Laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition, including applicable
foreign Laws.
(b) Each of Parent and the Company shall, in connection with the efforts
referenced in Section 6.5(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under any
Antitrust Law, use its commercially reasonable efforts subject to applicable Law
to (i) cooperate in all respects with each other in connection with any filing
or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party; (ii) keep the other party
informed in all material respects of any material communication received by such
party from, or given by such party to, any Governmental Entity and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby; and (iii) permit the other party to review any material communication
given by it to, and consult with each other in advance of any meeting or
conference with, any Governmental Entity in connection herewith or, in
connection with any proceeding by a private party, with any other person, and to
the extent permitted by such applicable Governmental Entity or other person,
give the other party the opportunity to attend and participate in such meetings
and conferences.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 6.5(a) and (b), each of Parent and the Company shall,
subject to applicable Law, use its commercially reasonable efforts to resolve
such objections if any, as may be asserted by a Governmental Entity or other
person in respect of the transactions contemplated hereby under any Antitrust
Law. In connection with the foregoing, if any administrative or judicial action
or proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any Antitrust Law, each of Parent and the Company
shall cooperate in all respects with each other and use its respective
commercially reasonable efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this Section
6.5 shall (i) limit a party's right to terminate this Agreement pursuant to
Section 8.2 so
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long as such party has up to then complied in all material respects with its
obligations under this Section 6.5, (ii) require Parent to dispose or hold
separate any part of its business or operations or agree not to compete in any
geographic area or line of business or (iii) require Parent to dispose or hold
separate any part of the Company's business or operations or agree to cause the
Company not to compete in any geographic area or line of business which would in
any such case impair in any material respect any of the benefits intended to be
derived by Parent after the Effective Time as a result of the Merger.
(d) The Company agrees that in connection with any litigation which may
be brought against the Company or its directors relating to the transactions
contemplated hereby, the Company will keep Parent, and any counsel which Parent
may retain at its own expense, informed of the course of such litigation, to the
extent Parent is not otherwise a party thereto. The Company agrees that it will
consult with Parent prior to entering into any settlement or compromise of any
such litigation, and that no such settlement or compromise will be entered into
without Parent's prior written consent, which consent shall not be unreasonably
withheld.
(e) Parent agrees that in connection with any litigation which may be
brought against Parent or its directors relating to the transactions
contemplated hereby, Parent will keep the Company, and any counsel which the
Company may retain at its own expense, informed of the course of such
litigation, to the extent the Company is not otherwise a party thereto. Parent
agrees that it will consult with the Company prior to entering into any
settlement or compromise of any such litigation, and that no such settlement or
compromise will be entered into without the Company's prior written consent,
which consent shall not be unreasonably withheld.
SECTION 6.6 ACQUISITION PROPOSALS.
(a) From the date of this Agreement until the Effective Time, or, if
earlier, the termination of this Agreement in accordance with its terms, Parent
and the Company will not, nor will either party permit any of its subsidiaries
to, nor will either party authorize or permit any officer, director or employee
of or any investment banker, attorney, accountant or other advisor or
representative of, Parent or the Company, as appropriate, or any of its
subsidiaries to, directly or indirectly, (i) solicit, initiate or knowingly
encourage the submission of any Acquisition Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information in respect of, or knowingly take any other
action to facilitate, any Acquisition Proposal or any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, provided, however, that nothing contained in this Section
6.6(a) shall prohibit the Parent Board or the Company Board, as appropriate,
from furnishing any information to, or entering into discussions or negotiations
with, any person that makes an unsolicited bona fide Acquisition Proposal if,
and only to the extent that (A) the Parent Stockholder Meeting or the Company
Stockholder Meeting, as appropriate, shall not have occurred, (B) the Parent
Board or the Company Board, as appropriate, after consultation with outside
legal counsel, determines in good faith that the failure to take such action
would be inconsistent with its fiduciary duties to the stockholders of Parent or
the Company, as appropriate, under applicable Law, as such duties would exist in
the absence of any limitation in this Agreement, (C) the Parent Board or the
Company Board, as appropriate, determines in good faith that such Acquisition
Proposal is reasonably likely to lead
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to a transaction that, if accepted, is reasonably likely to be consummated
taking into account all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, and believes in good faith, after
consultation with its financial advisor, based on the information available to
such board at the time, that such Acquisition Proposal would, if consummated,
result in a transaction more favorable to the stockholders of Parent or the
Company, as appropriate, than the Merger (any such more favorable Acquisition
Proposal being referred to herein as a "SUPERIOR PROPOSAL"), and (D) prior to
furnishing any information to, or entering into discussions or negotiations with
any person that makes an unsolicited bona fide Acquisition Proposal, Parent or
the Company, as appropriate, (x) provides reasonable notice to the other party
to the effect that it is taking such action and (y) receives from the person
submitting such Acquisition Proposal an executed confidentiality/standstill
agreement in reasonably customary form and in any event containing terms at
least as stringent as those contained in the Non-Disclosure Agreement. Parent
and the Company, as appropriate, shall notify the other party of any Acquisition
Proposal (including the material terms and conditions thereof and the identity
of the person making it) as promptly as practicable (but in no case later than
24 hours) after its receipt thereof, and shall thereafter inform the other party
on a prompt basis of the status of any discussions or negotiations with such
third party, and any material changes to the terms and conditions of such
Acquisition Proposal, and shall promptly give the other party a copy of any
information delivered to such person which has not previously been reviewed by
such other party. Each of Parent and the Company has ceased and terminated, and
has caused its subsidiaries and affiliates, and their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents and representatives to cease and terminate, any existing activities,
discussions or negotiations with any parties conducted heretofore in respect of
any possible Acquisition Proposal. Each of Parent and the Company, as
appropriate, shall take all necessary steps to promptly inform the individuals
or entities referred to in the first sentence of this Section 6.6 of the
obligations undertaken in this Section 6.6. "ACQUISITION PROPOSAL" means, with
respect to Parent or the Company, as the case may be, any inquiry, offer or
proposal regarding any of the following (other than the transactions
contemplated by this Agreement) involving such party or any of its subsidiaries:
(w) any merger, consolidation, share exchange, recapitalization, business
combination, asset sale or other similar transaction; (x) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of such party and its subsidiaries, taken as a
whole, in a single transaction or series of related transactions; (y) any tender
offer or exchange offer for 20% or more of the outstanding capital stock of such
party, or the filing of a registration statement under the Securities Act in
connection therewith; or (z) 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.
(b) Neither the Parent Board nor the Company Board will withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the other
party, its approval or recommendation of the Merger unless such board, after
consultation with outside legal counsel, determines in good faith that the
failure to take such action would be inconsistent with its fiduciary duties to
the stockholders of Parent or the Company, as appropriate, under applicable Law;
provided, however, that neither the Parent Board nor the Company Board, as
appropriate, may approve or recommend an Acquisition Proposal (and in connection
therewith, withdraw or modify its approval or recommendation of the Merger)
unless such an Acquisition Proposal is a
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Superior Proposal (and Parent or the Company, as appropriate, shall have first
complied with its obligations set forth in Section 8.3(a) or 8.4(a), as
appropriate, and the time referred to in the last sentence of Section 8.3(a) or
8.4(a), as appropriate, has expired) and unless it shall have first consulted
with outside legal counsel, and have determined that the failure to take such
action would be inconsistent with its fiduciary duties to the stockholders of
Parent or the Company, as appropriate. Nothing contained in this Section 6.6(b)
shall prohibit Parent or the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated
under the Exchange Act. Nothing contained in this Section 6.6(b) shall prohibit
Parent or the Company from making any disclosure to its stockholders which, in
the good faith reasonable judgment of the Parent Board or the Company Board, as
appropriate, after consultation with outside legal counsel, is required under
applicable Law; provided, however, that except as otherwise permitted in this
Section 6.6(b), Parent or the Company, as appropriate, does not withdraw or
modify, or propose to withdraw or modify, its position in respect of the Merger
or approve or recommend, or propose to approve or recommend, an Acquisition
Proposal. Notwithstanding anything contained in this Agreement to the contrary,
no action by the Parent Board or the Company Board, as appropriate, permitted
by, and taken in accordance with, this Section 6.6(b) shall constitute a breach
of this Agreement by Parent or the Company, as appropriate. Nothing in this
Section 6.6(b) shall (i) permit either Parent or the Company to terminate this
Agreement (except as provided in Article VIII hereof) or (ii) affect any of its
other obligations under this Agreement.
SECTION 6.7 PUBLIC ANNOUNCEMENTS. Prior to the termination of this
Agreement pursuant to Article VIII, none of Parent, Merger Sub or the Company
will issue any press release or otherwise make any public statements in respect
of this Agreement, the transactions contemplated by this Agreement, including
the Merger, or any other aspect of their dealings in connection with any of the
foregoing, without first obtaining the prior approval of the other parties
hereto (any such approval not to be unreasonably withheld or delayed), subject
to each party's obligations under applicable Law or stock market or bulletin
board listing requirements or rules; provided, however, that the party so
obligated to make any such public disclosure shall nevertheless provide each of
the other parties hereto with a prior reasonable opportunity to review and
comment on the contents of such disclosure.
SECTION 6.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, and pursuant to the terms and
conditions of this Section 6.8, the Surviving Corporation shall, and Parent
shall cause the Surviving Corporation to the fullest extent permitted by
applicable Law to, indemnify, defend, and hold harmless each person who is now,
or has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer or employee of the Company or any subsidiary
thereof, (each an "INDEMNIFIED PARTY" and, collectively, the "INDEMNIFIED
PARTIES") against all losses, expenses (including, reasonable attorneys' fees
and expenses), claims, damages, costs or liabilities or amounts paid in
settlement, in connection with any claim, action, suit, proceeding or
investigation, whether civil, administrative or investigative, arising out of
actions or omissions occurring at or prior to the Effective Time and whether
asserted, instituted or claimed prior to, at or after the Effective Time that
are in whole or in part based on, or arising out of the fact that such person is
or was a director, officer, or employee of the Company, in the
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same manner and on the same terms and conditions as the Parent is currently
obligated to indemnify, defend and hold harmless each of Parent's directors,
officers or employees against all losses, expenses (including, reasonable
attorneys' fees and expenses), claims, damages, costs or liabilities or amounts
paid in settlement, in connection with any claim, action, suit, proceeding or
investigation, whether civil, administrative or investigative, that are in whole
or in part based on, or arising out of the fact that such person is or was a
director, officer, or employee of the Parent.
(b) From and for a period of three years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect such policies of
directors' and officers' liability insurance coverage, for the benefit of those
Indemnified Parties, that are the same as, or substantially similar to, the
policies of directors' and officers' liability insurance coverage maintained by
Parent for the benefit of Parent's directors and officers.
(c) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity or such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, or otherwise dissolves or liquidates, then and in either such
case, proper provision shall be made so that the successors and assigns of the
Surviving Corporation (or Parent, in the case of a dissolution or liquidation)
shall assume the obligations set forth in this Section 6.8.
(d) The provisions of this Section 6.8 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs, and his or her representatives.
SECTION 6.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time so as to cause the conditions set
forth in Article VII hereof to fail to be satisfied, or (ii) any material
failure of the Company, Parent or Merger Sub, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder so as to cause the conditions set forth in Article VII hereof to
fail to be satisfied; provided, however, that the delivery of any notice
pursuant to this Section 6.9 shall not cure such breach or non-compliance or
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 6.10 TAX-FREE REORGANIZATION TREATMENT. The parties hereto
intend that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code. Each of the parties hereto shall, and shall cause
its respective subsidiaries to, use its commercially reasonable efforts to cause
the Merger to so qualify. The parties will use their commercially reasonable
efforts to cause the opinions of counsel contemplated by Sections 7.2(d) and
7.3(d) to be timely delivered, including providing all supporting
representations reasonably requested by such counsel and substantially in the
form of EXHIBITS C and D hereto.
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SECTION 6.11 EMPLOYEE MATTERS.
(a) Parent shall assume the Company Stock Options at the Effective Time.
(b) At the Effective Time, employees of the Company and its domestic
subsidiaries immediately prior to the Effective Time (the "COMPANY EMPLOYEES")
will become employees of the Surviving Corporation. At the Effective Time,
employees of the Company's foreign subsidiaries immediately prior to the
Effective Time (the "SUBSIDIARY EMPLOYEES") will remain employees of such
subsidiaries.
(c) The Company Employees and Subsidiary Employees will be eligible to
participate in Parent's applicable employee benefit plans, as such plans may be
in effect from time to time, as soon as administratively convenient (as
determined in Parent's sole discretion) after the Effective Time (the "Benefits
Integration Date"). Until the Benefits Integration Date and except as
contemplated by this Agreement, Parent will and will cause the Surviving
Corporation to honor the obligations of the Company or any of its subsidiaries
under the provisions of each Company Benefit Plan and Company Employee
Arrangement; provided that prior to the Effective Time and subject to Section
5.1, the Company shall have the right at any time to amend or terminate any such
Company Benefit Plan or Company Employee Arrangement in accordance with its
terms. Following the Benefits Integration Date, with respect to each plan
maintained by Parent in which any Company Employee or Subsidiary Employee
participates (each, a "Parent Plan") that is an "employee benefit plan" as
defined in Section 3(3) of ERISA, for purposes of eligibility to participate,
vesting and, solely with respect to severance and vacation, level of benefit
entitlement (including for purposes of benefits accrual during the last actual
twelve months), service with the Company and its affiliates (or predecessor
employers to the extent the Company and its affiliates provided past service
credit) shall be treated as service with Parent to the same extent such service
was counted under the corresponding Company Benefit Plan, if any; provided,
however, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits. Such service also shall
apply for purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition limitations. Each
Parent Plan shall waive preexisting condition limitations to the same extent
waived under the corresponding Company Benefit Plan. Company Employees and
Subsidiary Employees shall be given credit under the applicable Parent Plan for
amounts paid under a corresponding Company Benefit Plan during the same period
as though such amounts had been paid in accordance with the terms and conditions
of the Parent Plan.
(d) Effective as of the Effective Time, Parent shall enter into and/or
assume employment agreements with the executive officers and employees of
Company and its subsidiaries identified in Section 6.11(d) of the Company
Disclosure Schedule, upon the terms and conditions agreed between the parties.
(e) Upon the request of Parent, the Company Board shall adopt a
resolution terminating the Company's 401(k) plan and 100% vesting of
participants' accounts in the plan as of the Benefits Integration Date. In
addition, upon the request of Parent, the Company shall take
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appropriate action to terminate its 401(k) plan and shall seek a determination
of termination from the IRS regarding the qualified status of such 401(k) plan,
all as of the Benefits Integration Date.
SECTION 6.12 FEES AND EXPENSES. Whether or not the Merger is
consummated, all Expenses (as defined below) incurred in connection with this
Agreement and the transactions contemplated hereby and thereby shall be paid by
the party incurring such Expenses, except (a) Expenses incurred in connection
with the filing, printing and mailing of the Joint Proxy Statement and the S--4,
which shall be shared equally by the Company and Parent, and (b) if applicable,
as provided in Section 8.5(b). As used in this Agreement, "EXPENSES" includes
all out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with, or
related to, the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, filing, printing and mailing of the Joint Proxy
Statement and the S--4 and the solicitation of stockholder approvals and all
other matters related to the transactions contemplated hereby.
SECTION 6.13 OBLIGATIONS OF MERGER SUB. Parent will take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
SECTION 6.14 PARENT BOARD SEATS. At the Effective Time, Parent shall
have taken all action necessary as allowed under applicable Law, its certificate
of incorporation and bylaws to (i) increase the size of the Parent Board to
seven (7) members and (ii) amend its bylaws to allow the Parent Board to
increase the number of directors on the Parent Board to nine (9) members without
additional stockholder approval. In the Joint Proxy Statement, the Parent Board
shall nominate as directors of Parent the following individuals for election by
Parent's stockholders at the Parent Stockholder Meeting: ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively, the "DIRECTOR NOMINEES").
SECTION 6.15 REGISTRATION OF OPTIONS. As soon as reasonably practicable
following the Effective Time, Parent shall register all shares of Parent Common
Stock underlying each Assumed Stock Option with the SEC on form S-8, and with
all states required by applicable state "blue sky" laws.
SECTION 6.16 RESTATED CERTIFICATE. Prior to the Effective Time, Parent's
stockholders shall have approved the amended and restated certificate of
incorporation of Parent, in a form mutually agreed upon by Parent and Company
(the "RESTATED CERTIFICATE"), pursuant to which Parent, among other things,
shall (i) effectuate a reverse stock split of the Parent Common Stock on a 1 for
4 basis, the result of which will be to reduce to 25,000,000 or fewer the number
of shares of Parent Common Stock that will be issued and outstanding immediately
prior to the Effective Time and the consummation of the transactions
contemplated by this Agreement (the "REVERSE SPLIT"), (ii) increase the
authorized shares of Parent Common Stock to 125,000,000, and (iii) authorize
10,000,000 shares of preferred stock, which is the number of preferred stock
authorized under the Certificate of Incorporation of Parent as of the date
hereof.
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SECTION 6.17 LOCK-UP AGREEMENTS. Prior to the Closing Date, the Company
shall deliver to Parent a Lock-Up Agreement, substantially in the form attached
as EXHIBIT B (a "LOCK-UP AGREEMENT"), executed by each officer and director of
the Company and each beneficial owner of Company Common Stock who will either
serve as an executive officer or director of Parent or the Surviving
Corporation, or who will own beneficially at least 10% of the issued and
outstanding Parent Common Stock (calculated on a post-closing basis) following
the Merger (each, a "COMPANY INSIDER"). Prior to the Closing Date, Parent shall
have received a Lock-Up Agreement executed by each officer and director of
Parent, and each beneficial owner of Parent Common Stock, who will either serve
as an executive officer or director of Parent or the Surviving Corporation, or
who will own beneficially at least 10% of the issued and outstanding Parent
Common Stock (calculated on a post-closing basis), following the Merger (each, a
"PARENT INSIDER").
SECTION 6.18 DIRECTOR AND OFFICER INSURANCE. On or before the Closing
Date, Parent shall have obtained customary director and officer insurance, which
shall provide claims coverage of a minimum of $2,000,000 per claim.
SECTION 6.19 WAIVER OF CHANGE OF CONTROL PROVISIONS. On or before the
Closing Date, except for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and
▇▇▇▇▇▇ ▇▇▇▇▇▇, the Company shall have obtained all consents and waivers
necessary, and taken such other actions as may be reasonably determined by
Parent to be necessary (including the adoption by the Company Board of
appropriate resolutions), to ensure that, with respect to each holder of Company
Stock Options or Company Warrants, in each case entitling such holder to
purchase 15,000 or more shares of Company Common Stock, no rights to acquire
shares of Company Common Stock pursuant to such Company Stock Options or Company
Warrants shall become fully vested and exercisable, and no rights to receive any
payments under or pursuant to Company Employment Agreements shall accrue, as a
result of the consummation of the transactions contemplated by this Agreement.
SECTION 6.20 AMENDMENT TO 2000 INCENTIVE PLAN. Prior to the Closing
Date, Parent's stockholders shall have approved an amendment to the 2000
Incentive Plan whereby the aggregate share limit under the 2000 Incentive Plan
is increased by an additional 3,500,000 shares, for a proposed new aggregate
share limit under the 2000 Incentive Plan of 5,500,000 shares (the "2000
INCENTIVE PLAN AMENDMENT").
SECTION 6.21 TERMINATION OF THE STOCKHOLDER RIGHTS AGREEMENTS; WAIVER OF
CHANGE IN CONTROL PROVISIONS. Prior to the Closing Date, (i) Parent and all
other parties thereto shall have terminated all stockholder rights agreements
with its stockholders including, but not limited to, that certain Investor
Rights Agreement, by and among Parent, East-West Capital Associates, Inc. and
the other parties thereto dated as of June 12, 2002 (collectively, the
"STOCKHOLDER RIGHTS AGREEMENTS"), pursuant to the terms of such Stockholder
Rights Agreements or by such other appropriate means as are not reasonably
expected to have a Material Adverse Effect on Parent and its subsidiaries taken
as a whole, (ii) Parent shall have obtained all consents and waivers necessary,
and taken such other actions as may be reasonably determined by the Company to
be necessary (including the adoption by the Parent Board of appropriate
resolutions), to ensure that, with respect to each holder of Parent Stock
Options or
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Parent Warrants, in each case entitling such holder to purchase 15,000 or more
shares of Parent Common Stock, no rights to acquire shares of Parent Common
Stock pursuant to such Parent Stock Options or Parent Warrants shall become
fully vested and exercisable, and no rights to receive any payments under or
pursuant to Parent Employment Agreements shall accrue, as a result of the
consummation of the transactions contemplated by this Agreement, and (iii)
Parent shall have obtained all consents and waivers necessary, and taken such
other actions as may be reasonably determined by the Company to be necessary, to
ensure that (A) no rights to receive any payments under that certain
Subordinated Promissory Note by Parent in favor of Radical Communication, Inc.,
dated September 12, 2001, for the principal amount of One Million Dollars
($1,000,000) shall accrue or otherwise accelerate, as a result of the
consummation of the transactions contemplated by this Agreement, and (B) no
rights to anti-dilution protection under that certain Warrant to Purchase Shares
of Common Stock of Parent, dated September 30, 1999, issued to @Onex LLC, shall
be triggered as a result of the consummation of the transactions contemplated by
this Agreement.
SECTION 6.22 ANTITAKEOVER LAWS . Neither the Company, Parent nor Merger
Sub shall take any action that would cause the Merger or the other transactions
contemplated by this Agreement to be subject to the requirements of the
antitakeover Laws of any state. If the antitakeover Laws of any state shall
become applicable to the Merger or the other transactions contemplated by this
Agreement, each of the Company, Parent and Merger Sub and their respective
Boards of Directors shall grant such approvals and take such actions as are
necessary so that the Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement, and otherwise act to eliminate or minimize the
effects of such antitakeover Laws on the Merger and the other transactions
contemplated by this Agreement.
SECTION 6.23 VOTING AGREEMENTS. Prior to the initial filing with the SEC
of the documents referred to in Section 6.1, the Company shall deliver to Parent
a Voting Agreement, substantially in the form attached as EXHIBIT A1, executed
by ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, collectively who own in excess of 50% of the issued and
outstanding Company Common Stock as of the date hereof. Prior to the filing with
the SEC of the documents referred to in Section 6.1, Parent shall have received
a Voting Agreement, substantially in the form attached as EXHIBIT A2, executed
by beneficial owners of Parent Common Stock collectively owning beneficially at
least 50% of the issued and outstanding Parent Common Stock as of the date
hereof.
SECTION 6.24 DELIVERY OF DISCLOSURE SCHEDULES. The parties acknowledge
that the Company has delivered to Parent an initial draft, dated June 18, 2002,
of the Company Disclosure Schedule (the "DISCLOSURE DRAFT"). Prior to the
initial filing with the SEC of the documents referred to in Section 6.1, the
Company shall deliver to Parent the Company Disclosure Schedule in final form
and all contracts, agreements, and documents referred to therein not previously
delivered to Parent, in form and substance reasonably satisfactory to Parent.
Any provision in this Agreement indicating that such materials and information
have previously been provided to Parent or Merger Sub, or will be provided to
such parties hereafter, shall be deemed to require delivery of such materials
and information prior to the initial filing with SEC of the documents referred
to in Section 6.1.
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SECTION 6.25 MASTER CONTINGENT WARRANT AGREEMENT. Prior to the filing
with the SEC of the documents referred to in Section 6.1, the Company and Parent
shall have finalized the form of Master Contingent Warrant Agreement, a true and
complete copy of which shall be attached hereto as EXHIBIT E.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following conditions, any or all of which may be
waived in whole or in part by the party being benefited thereby, to the extent
permitted by applicable Law:
(a) The Merger shall have been approved and adopted by the Parent
Requisite Vote and the Company Requisite Vote.
(b) There shall not be in effect any Law of any Governmental Entity of
competent jurisdiction restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by this Agreement and no
Governmental Entity shall have instituted any proceeding which continues to be
pending seeking any such Law.
(c) There shall be an absence of any pending or threatened litigation
regarding this Agreement or the transactions contemplated hereby.
(d) The S-4 shall have been declared effective by the SEC and shall be
effective at the Effective Time, and no stop order suspending effectiveness
shall have been issued and no action, suit, proceeding or investigation by the
SEC or any state securities administrator to suspend the effectiveness thereof
shall have been threatened, initiated and be continuing.
SECTION 7.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
respective obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Closing Date of each of the following additional conditions, any or all of which
may be waived in whole or in part by Parent and Merger Sub, as the case may be,
to the extent permitted by applicable Law:
(a) The representations and warranties of the Company contained herein
shall have been true in all respects when made and on and as of the Closing Date
as though made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which shall speak only as of the
specified date), except where the failure to be true, individually or in the
aggregate, has not had or is not reasonably expected to have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole.
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(b) The Company shall have performed or complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the time of the Closing.
(c) The Company shall have delivered to Parent a certificate, dated the
Closing Date, signed by the President or any Vice President of the Company
certifying as to the fulfillment of the conditions specified in Sections 7.2(a)
and 7.2(b).
(d) Parent shall have received an opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP,
dated the Closing Date, to the effect that (i) the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code; and (ii) each
of Parent, Merger Sub and the Company will be a party to the reorganization
within the meaning of Section 368(b) of the Code. The issuance of such opinion
shall be conditioned on the receipt by such counsel of representation letters
from each of Parent, Merger Sub and the Company, substantially in the forms
attached hereto as EXHIBITS C and D in each case, in form and substance
reasonably satisfactory to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP. Each such representation
letter shall be dated on or before the date of such opinion and shall not have
been withdrawn or modified in any material respect.
(e) All authorizations, consents or approvals of any Governmental Entity
(other than those specified in Section 7.1(b)) required in connection with the
execution and delivery of this Agreement and the performance of the obligations
hereunder shall have been obtained, without any limitation, restriction or
condition that is reasonably expected to have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole (or, were such effect applied to
the Surviving Corporation and its subsidiaries, is reasonably expected to have a
Material Adverse Effect on Parent and its subsidiaries taken as a whole), except
for such authorizations, consents or approvals, the failure of which to have
been obtained is not reasonably expected to have a Material Adverse Effect on
the Company and its subsidiaries taken as a whole (or, were such effect applied
to the Surviving Corporation and its subsidiaries, is not reasonably expected to
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole).
(f) All authorizations, consents or approvals of any third parties
(other than those specified in Section 7.2(e)) identified in the Company
Disclosure Schedule required for the Company to consummate the Merger and the
other transactions contemplated hereby shall have been obtained, except for such
authorizations, consents or approvals, the failure of which to have been made or
obtained is not reasonably expected to have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole (or, were such effect applied to
the Surviving Corporation and its subsidiaries, is not reasonably expected to
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole).
(g) Parent shall have received a Lock-Up Agreement executed by each
Company Insider and Parent Insider.
(h) Stockholders of the Company holding no more than five percent (5%)
of the Company Common Stock shall have elected any appraisal rights or
associated payments under Sections 92A-420 and 92A-440 of the NGCL.
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(i) Parent shall have received an opinion, dated the Closing Date, from
▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel to the Company, in the form reasonably
acceptable to Parent and its legal counsel regarding the due authorization of
the Company entering and performing this Agreement and the Merger,
enforceability of this Agreement and the Merger, and no conflicts with the
articles of incorporation or bylaws of the Company.
(j) All consents, waivers and other actions referred to in Section 6.19
shall have been obtained and/or taken as provided therein.
SECTION 7.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Closing Date of each
of the following conditions, any or all of which may be waived in whole or in
part by the Company to the extent permitted by applicable Law:
(a) The representations and warranties of Parent and Merger Sub
contained herein shall have been true in all respects when made and on and as of
the Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which shall speak
only as of the specified date), except where the failure to be true,
individually or in the aggregate, has not had or is not reasonably expected to
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole.
(b) Parent shall have performed or complied in all material respects
with all agreements and conditions contained herein required to be performed or
complied with by it prior to or at the time of the Closing.
(c) Parent shall have delivered to the Company a certificate, dated the
Closing Date, signed by the President or Chief Financial Officer of Parent
certifying as to the fulfillment of the conditions specified in Sections 7.3(a)
and 7.3(b).
(d) The Company shall have received an opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇,
L.L.P., dated the Closing Date, to the effect that (i) the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code; and (ii)
each of Parent, Merger Sub and the Company will be a party to the reorganization
within the meaning of Section 368(b) of the Code. The issuance of such opinion
shall be conditioned on the receipt by such counsel of representation letters
from each of Parent, Merger Sub and the Company, substantially in the forms
attached hereto as EXHIBITS C and D in each case, in form and substance
reasonably satisfactory to ▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. Each such representation
letter shall be dated on or before the date of such opinion and shall not have
been withdrawn or modified in any material respect.
(e) All authorizations, consents or approvals of any Governmental Entity
(other than those specified in Section 7.1(b)) required in connection with the
execution and delivery of this Agreement and the performance of the obligations
hereunder shall have been obtained, without any limitation, restriction or
condition that is reasonably expected to have a Material Adverse Effect on
Parent and its subsidiaries taken as a whole (or, were such effect applied to
Parent and its subsidiaries giving effect to the Merger, is reasonably expected
to have a Material Adverse Effect on Parent and its subsidiaries (including the
Surviving Corporation) taken as a whole),
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except for such authorizations, consents or approvals, the failure of which to
have been obtained is not reasonably expected to have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole (or, were such effect
applied to Parent and its subsidiaries giving effect to the Merger, is not
reasonably expected to have a Material Adverse Effect on Parent and its
subsidiaries (including the Surviving Corporation) taken as a whole).
(f) All authorizations, consents or approvals of any third parties
(other than those specified in Section 7.3(e)) identified in the Parent
Disclosure Schedule required for Parent to consummate the Merger and the other
transactions contemplated hereby shall have been obtained, except for such
authorizations, consents or approvals, the failure of which to have been made or
obtained is not reasonably expected to have a Material Adverse Effect on Parent
and its subsidiaries taken as a whole (or, were such effect applied to Parent
and its subsidiaries giving effect to the Merger, is not reasonably expected to
have a Material Adverse Effect on Parent and its subsidiaries (including the
Surviving Corporation) taken as a whole).
(g) The Company shall have received an opinion, dated the Closing Date,
from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, counsel to Parent, in the form reasonably
acceptable to the Company and its legal counsel regarding the due authorization
of Parent and Merger Sub entering and performing this Agreement and the Merger,
enforceability of this Agreement and the Merger, and no conflicts with the
certificate of incorporation or bylaws of Parent or Merger Sub.
(h) Parent will have a minimum of one million five hundred thousand
dollars ($1,500,000) in cash on hand.
(i) Parent will have executed and/or assumed employment agreements with
those executive officers and employees of the Company and its subsidiaries
identified in Section 6.11(d) of the Company Disclosure Schedule, as provided in
Section 6.11(d) of this Agreement.
(j) Parent shall have received a Lock-Up Agreement executed by each
Company Insider and Parent Insider.
(k) Parent's stockholders shall have elected the Director Nominees and
approved each of the Proposals.
(l) All consents or agreements of holders of the Convertible Notes shall
have been obtained by the Company to give effect to the terms and conditions of
Section 2.3.
(m) All consents, waivers, terminations and other actions referred to in
Section 6.21 shall have been obtained and/or taken as provided therein.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval of the Merger by the Parent Requisite
Vote and Company Requisite
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Vote referred to in Section 7.1(a), by mutual written consent of the Company and
Parent by action of their respective boards of directors.
SECTION 8.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of the board of directors of either Parent or the
Company if:
(a) the Merger shall not have been consummated by September 30, 2002,
whether such date is before or after the later of the date of approval of the
Merger by the Parent Requisite Vote and the Company Requisite Vote (the
"TERMINATION DATE"); provided, however, that if either Parent or the Company
reasonably determines in good faith that additional time is necessary in
connection with obtaining any consent, registration, approval, permit or
authorization required to be obtained from any Governmental Entity, the
Termination Date may be extended by Parent or the Company from time to time by
written notice to the other party to a date not beyond October 30, 2002;
(b) the Parent Requisite Vote shall not have been obtained at the Parent
Stockholder Meeting or at any adjournment or postponement thereof;
(c) the Company Requisite Vote shall not have been obtained at the
Company Stockholder Meeting or at any adjournment or postponement thereof;
(d) any Law permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable (whether before
or after the approval of the Merger by both the Parent Requisite Vote and the
Company Requisite Vote);
(e) any Governmental Entity shall have failed to issue an order, decree
or ruling or to take any other action which is necessary to fulfill the
conditions set forth in Sections 7.1(b), 7.2(e) and 7.3(e), as applicable, and
such denial of a request to issue such order, decree or ruling or take such
other action shall have been final and nonappealable; or
(f) if the Company Disclosure Schedule is not delivered to Parent, and
accepted by Parent, as provided in Section 6.24, and/or the Company Disclosure
Schedule as so delivered contains any material adverse information not
previously disclosed in the Disclosure Draft.
provided, however, that the right to terminate this Agreement pursuant
to this Section 8.2 shall not be available to any party that has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure of the Merger to
be consummated.
SECTION 8.3 TERMINATION BY THE COMPANY. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time by
action of the Company Board:
(a) if (i) the Company Stockholder Meeting shall not have been held and
completed, (ii) the Company Board authorizes the Company, subject to complying
with the terms of this
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Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and the Company notifies Parent in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement to such notice, and (iii) during the three business
day period after the Company's notice, (A) the Company shall have negotiated
with, and shall have caused its respective financial and legal advisors to
negotiate with, Parent to attempt to make such adjustments in the terms and
conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated hereby and (B) the Company Board shall have concluded,
after considering the results of such negotiations, that any Superior Proposal
giving rise to the Company's notice continues to be a Superior Proposal. The
Company may not effect such termination unless contemporaneously therewith the
Company pays to Parent in immediately available funds the fees required to be
paid pursuant to Section 8.5(d). The Company agrees (x) that it will not enter
into a binding agreement referred to in clause (ii) above until at least the day
following the third business day after it has provided the notice to Parent
required thereby and (y) to notify Parent promptly if its intention to enter
into a written agreement referred to in its notification shall change at any
time after giving such notification;
(b) if either (i) Parent enters into a binding agreement for a Superior
Proposal, or (ii) the Parent Board shall have withdrawn or adversely modified
its approval or recommendation of the Merger;
(c) if Parent's representations and warranties set forth in Section 4.2
are not correct in any material respect; or
(d) if there is a breach by Parent or Merger Sub of any other
representation, warranty, covenant or agreement contained in this Agreement that
cannot be cured and would cause a condition set forth in Section 7.3(a) or
7.3(b) to be incapable of being satisfied as of the Termination Date.
SECTION 8.4 TERMINATION BY PARENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by Parent:
(a) if (i) the Parent Stockholder Meeting shall not have been held and
completed, (ii) the Parent Board authorizes Parent, subject to complying with
the terms of this Agreement, to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal and Parent
notifies the Company in writing that it intends to enter into such an agreement,
attaching the most current version of such agreement to such notice, and (iii)
during the three business day period after Parent's notice, (A) Parent shall
have negotiated with, and shall have caused its respective financial and legal
advisors to negotiate with, the Company to attempt to make such adjustments in
the terms and conditions of this Agreement as would enable Parent to proceed
with the transactions contemplated hereby and (B) the Parent Board shall have
concluded, after considering the results of such negotiations, that any Superior
Proposal giving rise to Parent's notice continues to be a Superior Proposal.
Parent may not effect such termination unless contemporaneously therewith Parent
pays to the Company in immediately available funds the fees required to be paid
pursuant to Section 8.5(b). Parent agrees (x) that it will not enter into a
binding agreement referred to in clause (ii) above until at least the day
following the third business day after it has provided the notice to the Company
required thereby
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and (y) to notify the Company promptly if its intention to enter into a written
agreement referred to in its notification shall change at any time after giving
such notification;
(b) if either (i) the Company enters into a binding agreement for a
Superior Proposal, or (ii) the Company Board shall have withdrawn or adversely
modified its approval or recommendation of the Merger;
(c) if the Company's representations and warranties set forth in Section
3.2 are not correct in any material respect; or
(d) there is a breach by the Company of any other representation,
warranty, covenant or agreement contained in this Agreement that cannot be cured
and would cause a condition set forth in Section 7.2(a) or 7.2(b) to be
incapable of being satisfied as of the Termination Date.
SECTION 8.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VIII, this Agreement (other than Sections
5.3(c), 6.12 and 8.5, and Article IX) shall become void and of no effect with no
liability on the part of any party hereto (or of any of its directors, officers,
employees, agents, legal and financial advisors, or other representatives);
provided, however, that except as otherwise provided herein, no such termination
shall relieve any party hereto of any liability or damages resulting from any
willful breach of this Agreement.
(b) In the event that (i) a bona fide Acquisition Proposal shall have
been made or any person shall have publicly announced an intention (whether or
not conditional) to make a bona fide Acquisition Proposal in respect of Parent
or any of its subsidiaries and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 8.2(b) or 8.2(c) or by the Company
pursuant to Section 8.3(d) as a result of a material breach by Parent of any of
the covenants set forth in Section 6.6 hereof (provided that within 9 months of
the termination of this Agreement any Acquisition Proposal by a third party is
entered into, agreed to, or consummated by Parent) or (ii) this Agreement is
terminated by Parent pursuant to Section 8.4(a), or (iii) this Agreement is
terminated by the Company pursuant to Section 8.3(b)(i), or (iv) this Agreement
is terminated by the Company pursuant to Section 8.3(b)(ii) and, within 9 months
of such termination, any Acquisition Proposal by any third party is entered
into, agreed to or consummated by Parent, then Parent shall pay the Company a
termination fee equal to the sum of (A) $100,000, and (B) all reasonable and
documented fees and expenses incurred by Company in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, in same-day funds, on the date
of such termination, in the case of clause (ii) or (iii), or on the earlier of
the date an agreement is entered into in respect of an Acquisition Proposal or
an Acquisition Proposal is consummated in the case of clause (i) or (iv).
(c) Parent acknowledges that the agreements contained in Section 8.5(b)
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the Company would not have entered into this
Agreement; accordingly, if Parent
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fails to promptly pay the amount due pursuant to Section 8.5(b), and, in order
to obtain such payment, the Company commences a suit which results in a judgment
against Parent for the fee set forth in this Section 8.5, Parent shall pay to
the Company its costs and expenses (including, attorneys' fees) in connection
with such suit, together with interest from the date of termination of this
Agreement on the amounts owed at the prime rate of Bank of America, N.A., in
effect from time to time during such period.
(d) In the event that (i) a bona fide Acquisition Proposal shall have
been made or any person shall have publicly announced an intention (whether or
not conditional) to make a bona fide Acquisition Proposal in respect of the
Company or any of its subsidiaries and thereafter this Agreement is terminated
by either Parent or the Company pursuant to Section 8.2(b) or 8.2(c) or by
Parent pursuant to Section 8.4(d) as a result of a material breach by the
Company of any of the covenants set forth in Section 6.6 hereof (provided that
within 9 months of the termination of this Agreement any Acquisition Proposal by
a third party is entered into, agreed to, or consummated by the Company) or (ii)
this Agreement is terminated by the Company pursuant to Section 8.3(a), or (iii)
this Agreement is terminated by Parent pursuant to Section 8.4(b)(i), or (iv)
this Agreement is terminated by Parent pursuant to Section 8.4(b)(ii) and,
within 9 months of such termination, any Acquisition Proposal by any third party
is entered into, agreed to or consummated by the Company, then the Company shall
pay Parent a termination fee equal to the sum of (A) $100,000, and (B) all
reasonable and documented fees and expenses incurred by Parent in connection
with the negotiation, preparation, execution and delivery of this Agreement and
the other agreements to be executed in connection herewith, in same-day funds,
on the date of such termination, in the case of clause (ii) or (iii), or on the
earlier of the date an agreement is entered into in respect of an Acquisition
Proposal or an Acquisition Proposal is consummated in the case of clause (i) or
(iv).
(e) The Company acknowledges that the agreements contained in Section
8.5(d) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent would not have entered into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to Section 8.5(d), and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the Company for the fee set
forth in this Section 8.5, the Company shall pay to Parent its costs and
expenses (including, attorneys' fees) in connection with such suit, together
with interest from the date of termination of this Agreement on the amounts owed
at the prime rate of Bank of America, N.A., in effect from time to time during
such period.
(f) Without limiting the terms of this Section 8.5, the parties agree
that no termination fee shall be due pursuant to this Section as a result of the
termination of this Agreement by either Parent or the Company solely as a result
of the failure of a closing condition set forth in Article VII herein.
SECTION 8.6 AMENDMENT. This Agreement may be amended by action taken by
the Company, Parent and Merger Sub at any time before or after approval of the
Merger by both the Parent Requisite Vote and the Company Requisite Vote but,
after any such approval, no amendment shall be made which requires the approval
of such stockholders under applicable
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Law without such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
SECTION 8.7 EXTENSION; WAIVER. At any time prior to the Effective Time,
each party hereto (for these purposes, Parent and Merger Sub shall together be
deemed one party and the Company shall be deemed the other party) may (i) extend
the time for the performance of any of the obligations or other acts of the
other party, (ii) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document, certificate or writing
delivered pursuant hereto, or (iii) waive compliance by the other party with any
of the agreements or conditions contained herein. Any agreement on the part of
either party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 ENTIRE AGREEMENT; ASSIGNMENT.
(a) This Agreement (including exhibits, schedules (including the Company
Disclosure Schedule and the Parent Disclosure Schedule), documents and
instruments referred to herein) constitutes the entire agreement between the
parties hereto in respect of the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, between the parties
in respect of the subject matter hereof, other than the Non-Disclosure Agreement
(which shall remain in effect).
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of Law (including by merger
or consolidation) or otherwise without the prior written consent of the other
parties. Any assignment in violation of the preceding sentence shall be null and
void. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by the parties and their respective
successors and permitted assigns.
SECTION 9.2 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section 9.2 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time or after termination of this Agreement.
SECTION 9.3 NOTICES. All notices, requests, instructions or other
documents to be given under this Agreement shall be in writing and shall be
deemed given (i) five business days following sending by registered or certified
mail, postage prepaid, (ii) when sent if sent by facsimile; provided, however,
that the facsimile is promptly confirmed by telephone confirmation thereof with
the person indicated below to whose attention the same is to be delivered, (iii)
when delivered, if delivered personally to the intended recipient, and (iv) one
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business day following sending by overnight delivery via a national courier
service, and in each case, addressed to a party at the following address for
such party:
if to Merger Sub or to
Parent, to: MindArrow Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company, to: Category 5 Technologies, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
15 West South Temple, Suite ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or facsimile number as the person to whom
notice is given may have previously furnished to the other in writing in
the manner set forth above.
SECTION 9.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of California, without giving
effect to the choice of Law principles thereof.
SECTION 9.5 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
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SECTION 9.6 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Section 6.8, nothing in this
Agreement, 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 Agreement, and no other person is entitled to rely on any of the
representations, warranties and agreements of the parties contained in this
Agreement.
SECTION 9.7 SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
SECTION 9.8 SPECIFIC PERFORMANCE. 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 in any court of the
United States located in Los Angeles County or Orange County in the State of
California or in Salt Lake County in the State of Utah or in any California
state court located in Los Angeles County or Orange County or in any Utah state
court located in Salt Lake County, this being in addition to any other remedy to
which they are entitled at Law 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 Los Angeles County or Orange County in the State of
California or in Salt Lake County in the State of Utah in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby, (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 hereby in any court other than a federal or state court sitting in
Los Angeles County or Orange County in the State of California or in Salt Lake
County in the State of Utah.
SECTION 9.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts by manual or facsimile signature, all of which shall be considered
one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
parties.
SECTION 9.10 INTERPRETATION.
(a) The words "hereof," "herein," "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
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references are to the articles, sections, paragraphs, exhibits, and schedules of
this Agreement unless otherwise specified. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation," the word "or" shall mean
"and/or." All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, qualified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
(b) The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to July 12, 2002. The phrase "made available" in this Agreement shall
mean that the information referred to has been actually delivered to the party
to whom such information is to be made available.
(c) 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 provisions of this
Agreement.
SECTION 9.11 DEFINITIONS. As used herein,
(a) "BENEFICIAL OWNERSHIP" or "BENEFICIALLY OWN" has the meaning
provided in Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
(b) "BUSINESS DAY" shall mean any day other than Saturday, Sunday or any
day on which banks in Los Angeles, California are required or authorized by Law
to be closed for business.
(c) "KNOW" or "KNOWLEDGE" means, in respect of any party, the actual
knowledge of the officers and employees of such party actively participating in
the negotiation of this Agreement and related due diligence activities, without
any requirement to undertake an independent investigation, provided that, (i) in
the case of the Company, such officers and employees shall be limited to those
persons named in Section 9.11(c) of the Company Disclosure Schedule and (ii) in
the case of Parent, such officers and employees shall be limited to those
persons named in Section 9.11(c) of the Parent Disclosure Schedule.
(d) "MATERIAL ADVERSE EFFECT" means in respect of any entity, any
material adverse effect on (i) the assets, properties, financial condition or
results of operations of such entity and its subsidiaries taken as a whole,
other than any change, circumstance, effect or development (A)
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relating to the Internet-based software and services industry or economy in
general (it being understood that this clause (A) shall not exclude, in the case
of any Material Adverse Effect with respect to either party, any change,
circumstance, effect or development relating to the Internet-based software and
services industry or economy in general in any location in which such party
operates or owns assets that materially and disproportionately impacts such
party), (B) arising out of or resulting from actions contemplated by the parties
in connection with, or which is attributable to, the announcement of this
Agreement and the transactions contemplated hereby (including loss of customers,
suppliers or employees or the delay or cancellation of orders for products), or
(C) any stockholder litigation or litigation by any Governmental Entity, in each
case brought or threatened against such entity or any member of its board of
directors in respect of this Agreement or the transactions contemplated hereby;
provided that any change in the market price or trading volume of the Company
Common Stock or Parent Common Stock shall not, in and of itself, constitute a
Material Adverse Effect, or (ii) the ability of such party to consummate the
transactions contemplated by this Agreement.
(e) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(f) "SUBSIDIARY" means, in respect of any party, any corporation,
partnership or other entity or organization, whether incorporated or
unincorporated, of which (i) such other party or any other subsidiary of such
party is a general partner (excluding such partnerships where such party or any
subsidiary of such party does not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions in respect of such corporation
or other organization is directly or indirectly owned or controlled by such
party or by any one or more of its subsidiaries, or by such party and one or
more of its subsidiaries.
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the date first above written.
CATEGORY 5 TECHNOLOGIES, INC.
By:
---------------------------------
Name:
Title:
MINDARROW SYSTEMS, INC.
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
MINDARROW ACQUISITION CORP.
By:
---------------------------------
Name:
Title:
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EXHIBIT A1
VOTING AGREEMENT
MindArrow Systems, Inc., a Delaware corporation ("Parent"), MindArrow
Acquisition Corp., a Delaware corporation ("Merger Sub"), and Category 5
Technologies, Inc., a Nevada corporation (the "Company"), have entered into that
certain Agreement and Plan of Merger, dated as of July 12, 2002 (the "Merger
Agreement"), pursuant to which the Company, upon the terms and subject to the
conditions thereof, will merge with and into Merger Sub (the "Merger"), and each
outstanding share of Company Common Stock will be converted into the right to
receive the Merger Consideration in accordance with the terms of the Merger
Agreement. In consideration of the foregoing, each of the undersigned holders
(each, a "Stockholder") of shares of Company Common Stock agrees with each of
Parent, Merger Sub and the Company as follows:
1. During the period (the "Agreement Period") beginning on the date
hereof and ending on the earlier of (i) the Effective Time, or (ii) the date of
termination of the Merger Agreement in accordance with its terms, each
Stockholder hereby agrees to vote the shares of Company Common Stock set forth
opposite its name in SCHEDULE A hereto (the "Schedule A Securities") to approve
and adopt the Merger Agreement and the Merger (provided that the Stockholder
shall not be required to vote in favor of the Merger Agreement or the Merger if
the Merger Agreement has, without the consent of the Stockholder, been amended
in any manner that is material and adverse to such Stockholder) and any actions
directly and reasonably related thereto at any meeting or meetings of the
stockholders of the Company, and at any adjournment thereof or pursuant to
action by written consent, at or by which such Merger Agreement, or such other
actions, are submitted for the consideration and vote of the stockholders of the
Company so long as such meeting is held (including any adjournment thereof) or
written consent is adopted prior to the termination of the Agreement Period.
2. During the Agreement Period, each Stockholder hereby agrees that such
Stockholder shall not enter into any voting agreement or grant a proxy or power
of attorney with respect to the Schedule A Securities in any manner inconsistent
with the obligations of such Stockholder under this Agreement.
3. Each Stockholder hereby represents and warrants to Parent and Merger
Sub that as of the date hereof:
(a) Such Stockholder (i) owns beneficially all of the shares of
Company Common Stock set forth opposite the Stockholder's name in
SCHEDULE A hereto, (ii) has the full and unrestricted legal power,
authority and right to enter into, execute and deliver this Voting
Agreement without the consent or approval of any other person, and (iii)
has not entered into any voting agreement or other similar agreement
with or granted any person any proxy (revocable or irrevocable) in
respect of such shares (other than this Voting Agreement).
A1-1
(b) This Voting Agreement is the valid and binding agreement of
such Stockholder.
(c) No investment banker, broker or finder is entitled to a
commission or fee from such Stockholder or the Company in respect of
this Voting Agreement based upon any arrangement or agreement made by or
on behalf of the Stockholder.
4. If any provision of this Voting Agreement shall be invalid or
unenforceable under applicable law, such provision shall be ineffective to the
extent of such invalidity or unenforceability only, without in any way affecting
the remaining provisions of this Voting Agreement.
5. This Voting Agreement may be executed in two or more counterparts
each of which shall be an original with the same effect as if the signatures
hereto and thereto were upon the same instrument.
6. The parties hereto agree that if, for any reason, any party hereto
shall have failed to perform its obligations under this Voting Agreement, then
the party seeking to enforce this Voting Agreement against such non-performing
party shall be entitled to specific performance and injunctive and other
equitable relief, and the parties hereto further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such injunctive relief. This provision is without prejudice to any other rights
or remedies, whether at law or in equity, that any party hereto may have against
any other party hereto for any failure to perform its obligations under this
Voting Agreement.
7. This Voting Agreement shall be governed by and construed in
accordance with the laws of the State of California.
8. Each Stockholder will, upon request, execute and deliver any
additional documents deemed by the Company to be reasonably necessary or
desirable to complete and effectuate the covenants contained herein.
9. This Agreement shall terminate upon the termination of the Agreement
Period.
10. No Stockholder shall sell, assign, encumber or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding in
respect of the direct or indirect sale, assignment, transfer, encumbrance or
other disposition of, any Schedule A Securities during the term of this
Agreement unless such Stockholder first provides written notice thereof to
Parent and obtains a written agreement of the proposed transferee to be bound by
the terms of this Agreement.
11. Parent, Merger Sub and the Company understand and agree that this
Agreement pertains only to each Stockholder and not to any of its affiliates, if
any, or advisers.
A1-2
12. Parent, Merger Sub and the Company severally, but not jointly,
represent and warrant to each Stockholder that there is no agreement,
understanding or commitment, written or oral, to pay any consideration directly
or indirectly in connection with the Merger or otherwise to or for the benefit
of any holder of Company Common Stock or options thereon other than as set forth
in the Merger Agreement (except, in the case of directors, employees, agents,
customers, suppliers or contractors of the Company who are also holders, such
consideration as is payable by the Company in the ordinary course of business,
and except for amounts payable to officers, directors or employees in connection
with or pursuant to any options or option, stock purchase, stock ownership or
other employee benefit plans or agreements).
13. Neither Parent, Merger Sub nor the Company will enter into any
agreement with any other stockholder of the Company having a purpose or effect
substantially similar to that of this Voting Agreement on financial terms (in
respect of such other stockholder) more favorable than the terms of this Voting
Agreement.
14. Any Stockholder who is also a director or officer of the Company
will not, by execution of this Agreement, be precluded from exercising his
fiduciary duties under applicable Law in his capacity as a director or officer
with respect to the Company and nothing herein will limit or affect, or give
rise to any liability to a Stockholder by virtue of any actions taken by such
Stockholder in his or her capacity as a director or officer of the Company.
15. Nothing contained in this Voting Agreement shall be deemed to vest
in Parent, Merger Sub or the Company any direct or indirect ownership or
incidence of ownership of or with respect to any Schedule A Securities. All
rights, ownership and economic benefits of and relating to the Schedule A
Securities shall remain and belong to the applicable Stockholder and neither
Parent, Merger Sub nor the Company shall have any power or authority to direct
any Stockholder in the voting of any Schedule A Securities or the performance by
any Stockholder of its duties or responsibilities as a stockholder of the
Company, except as otherwise provided herein.
16. All capitalized terms, not otherwise defined herein, shall have the
meanings set forth in the Merger Agreement.
A1-3
IN WITNESS WHEREOF, the parties hereto have executed this Voting
Agreement as of July , 2002.
MINDARROW SYSTEMS, INC., a Delaware
corporation
By:
---------------------------------
Name:
Title:
MINDARROW ACQUISITION CORP., a
Delaware corporation
By:
---------------------------------
Name:
Title:
CATEGORY 5 TECHNOLOGIES, INC., a
Nevada corporation
By:
---------------------------------
Name:
Title:
A1-4
STOCKHOLDERS:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
A1-5
SCHEDULE A
TO
VOTING AGREEMENT
------------------------------- ----------------------------- ----------------------------
Stockholder Class Number of Shares
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
A1-6
EXHIBIT A2
VOTING AGREEMENT
MindArrow Systems, Inc., a Delaware corporation ("Parent"), MindArrow
Acquisition Corp., a Delaware corporation ("Merger Sub"), and Category 5
Technologies, Inc., a Nevada corporation (the "Company"), have entered into that
certain Agreement and Plan of Merger, dated as of July 12, 2002 (the "Merger
Agreement"), pursuant to which the Company, upon the terms and subject to the
conditions thereof, will merge with and into Merger Sub (the "Merger"), and each
outstanding share of Company Common Stock will be converted into the right to
receive the Merger Consideration in accordance with the terms of the Merger
Agreement. In consideration of the foregoing, each of the undersigned holders
(each, a "Stockholder") of shares of Parent Common Stock agrees with each of
Parent, Merger Sub and the Company as follows:
1. During the period (the "Agreement Period") beginning on the date
hereof and ending on the earlier of (i) the Effective Time, or (ii) the date of
termination of the Merger Agreement in accordance with its terms, each
Stockholder hereby agrees to vote the shares of Parent Common Stock set forth
opposite its name in SCHEDULE A hereto (the "Schedule A Securities") to approve
and adopt the Merger Agreement and the Merger (provided that the Stockholder
shall not be required to vote in favor of the Merger Agreement or the Merger if
the Merger Agreement has, without the consent of the Stockholder, been amended
in any manner that is material and adverse to such Stockholder) and any actions
directly and reasonably related thereto at any meeting or meetings of the
stockholders of Parent, and at any adjournment thereof or pursuant to action by
written consent, at or by which such Merger Agreement, or such other actions,
are submitted for the consideration and vote of the stockholders of Parent so
long as such meeting is held (including any adjournment thereof) or written
consent adopted prior to the termination of the Agreement Period.
2. During the Agreement Period, each Stockholder hereby further agrees
to vote the Schedule A Securities to (i) elect each of the Director Nominees,
(ii) approve the Reverse Split, (iii) approve the 2000 Incentive Plan Amendment,
and (iv) approve the Restated Certificate and any actions directly and
reasonably related thereto at any meeting or meetings of the stockholders of
Parent, and at any adjournment thereof or pursuant to action by written consent,
at or by which such Director Nominees and Proposals, as appropriate, are
submitted for the consideration and vote of the stockholders of Parent so long
as such meeting is held (including any adjournment thereof) or written consent
is adopted prior to the termination of the Agreement Period.
3. During the Agreement Period, each Stockholder hereby agrees that such
Stockholder shall not enter into any voting agreement or grant a proxy or power
of attorney with respect to the Schedule A Securities in any manner inconsistent
with the obligations of such Stockholder under this Agreement.
A2-1
4. Each Stockholder hereby represents and warrants to the Company that
as of the date hereof:
(a) Such Stockholder (i) owns beneficially all of the shares of
Parent Common Stock set forth opposite the Stockholder's name in
SCHEDULE A hereto, (ii) has the full and unrestricted legal power,
authority and right to enter into, execute and deliver this Voting
Agreement without the consent or approval of any other person, and (iii)
has not entered into any voting agreement or other similar agreement
with or granted any person any proxy (revocable or irrevocable) in
respect of such shares (other than this Voting Agreement).
(b) This Voting Agreement is the valid and binding agreement of
such Stockholder.
(c) No investment banker, broker or finder is entitled to a
commission or fee from such Stockholder, Parent or Merger Sub in respect
of this Voting Agreement based upon any arrangement or agreement made by
or on behalf of the Stockholder.
5. If any provision of this Voting Agreement shall be invalid or
unenforceable under applicable law, such provision shall be ineffective to the
extent of such invalidity or unenforceability only, without in any way affecting
the remaining provisions of this Voting Agreement.
6. This Voting Agreement may be executed in two or more counterparts
each of which shall be an original with the same effect as if the signatures
hereto and thereto were upon the same instrument.
7. The parties hereto agree that if, for any reason, any party hereto
shall have failed to perform its obligations under this Voting Agreement, then
the party seeking to enforce this Voting Agreement against such non-performing
party shall be entitled to specific performance and injunctive and other
equitable relief, and the parties hereto further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such injunctive relief. This provision is without prejudice to any other rights
or remedies, whether at law or in equity, that any party hereto may have against
any other party hereto for any failure to perform its obligations under this
Voting Agreement.
8. This Voting Agreement shall be governed by and construed in
accordance with the laws of the State of California.
9. Each Stockholder will, upon request, execute and deliver any
additional documents deemed by Parent to be reasonably necessary or desirable to
complete and effectuate the covenants contained herein.
10. This Agreement shall terminate upon the termination of the Agreement
Period.
A2-2
11. No Stockholder shall sell, assign, encumber or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding in
respect of the direct or indirect sale, assignment, transfer, encumbrance or
other disposition of, any Schedule A Securities during the term of this
Agreement unless such Stockholder first provides written notice thereof to the
Company and obtains a written agreement of the proposed transferee to be bound
by the terms of this Agreement.
12. Parent, Merger Sub and the Company understand and agree that this
Agreement pertains only to each Stockholder and not to any of its affiliates, if
any, or advisers.
13. Parent, Merger Sub and the Company severally, but not jointly,
represent and warrant to each Stockholder that there is no agreement,
understanding or commitment, written or oral, to pay any consideration directly
or indirectly in connection with the Merger or otherwise to or for the benefit
of any holder of Company Common Stock or options thereon other than as set forth
in the Merger Agreement (except, in the case of directors, employees, agents,
customers, suppliers or contractors of the Company who are also holders, such
consideration as is payable by the Company in the ordinary course of business,
and except for amounts payable to officers, directors or employees in connection
with or pursuant to any options or option, stock purchase, stock ownership or
other employee benefit plans or agreements).
14. Neither Parent, Merger Sub nor the Company will enter into any
agreement with any other stockholder of Parent having a purpose or effect
substantially similar to that of this Voting Agreement on financial terms (in
respect of such other stockholder) more favorable than the terms of this Voting
Agreement.
15. Any Stockholder who is also a director or officer of Parent will
not, by execution of this Agreement, be precluded from exercising his fiduciary
duties under applicable Law in his capacity as a director or officer with
respect to Parent and nothing herein will limit or affect, or give rise to any
liability to a Stockholder by virtue of any actions taken by such Stockholder in
his or her capacity as a director or officer of Parent.
16. Nothing contained in this Voting Agreement shall be deemed to vest
in Parent, Merger Sub or the Company any direct or indirect ownership or
incidence of ownership of or with respect to any Schedule A Securities. All
rights, ownership and economic benefits of and relating to the Schedule A
Securities shall remain and belong to the applicable Stockholder and neither
Parent, Merger Sub nor the Company shall have any power or authority to direct
any Stockholder in the voting of any Schedule A Securities or the performance by
any Stockholder of its duties or responsibilities as a stockholder of Parent,
except as otherwise provided herein.
17. All capitalized terms, not otherwise defined herein, shall have the
meanings set forth in the Merger Agreement.
A2-3
IN WITNESS WHEREOF, the parties hereto have executed this Voting
Agreement as of July , 2002.
MINDARROW SYSTEMS, INC., a Delaware
corporation
By:
---------------------------------
Name:
Title:
MINDARROW ACQUISITION CORP., a
Delaware corporation
By:
---------------------------------
Name:
Title:
CATEGORY 5 TECHNOLOGIES, INC., a
Nevada corporation
By:
---------------------------------
Name:
Title:
A2-4
STOCKHOLDERS:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
A2-5
SCHEDULE A
TO
VOTING AGREEMENT
------------------------------- ----------------------------- ----------------------------
Stockholder Class Number of Shares
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
------------------------------- ----------------------------- ----------------------------
A2-6
EXHIBIT B
[FORM OF LOCK-UP AGREEMENT TO PARENT]
LOCK-UP AGREEMENT
MindArrow Systems, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Dear Sir or Madam:
1. In consideration of MindArrow Systems, Inc., a Delaware corporation
(the "Parent") entering into the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of July 12, 2002, among Category 5 Technologies, Inc., a
Nevada corporation (the "Company"), Parent, and MindArrow Acquisition Corp., a
Nevada corporation and a direct wholly owned subsidiary of Parent ("Merger
Sub"), pursuant to which the Company will be merged with and into Merger Sub,
with Merger Sub continuing as the surviving corporation (the "Merger"), and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the undersigned agrees that the undersigned will not, for a period
of 12 months subsequent to the Effective Time of the Merger, offer, sell,
contract to sell or otherwise dispose of any of (1) any options or warrants to
purchase shares of Common Stock of Parent or (2) any shares of Common Stock of
Parent, whether or not any of such options, warrants or shares are currently
issued or outstanding, without prior written consent of Parent.
2. Notwithstanding the foregoing, the undersigned may transfer any or
all of such securities by bona fide gift, will or intestacy; provided that it
shall be a condition to any such permitted transfer by bona fide gift, will, or
intestacy that the transferee execute an agreement obliging such person to hold
the transferred securities subject to the provisions of this Lock-Up Agreement.
3. The undersigned hereby acknowledges that this Lock-Up Agreement is
valid and binding notwithstanding any prior agreements relating to this matter
and further agrees and consents to the entry of stop-transfer of shares of
Common Stock of Parent held by the undersigned except in compliance with this
Lock-Up Agreement. The undersigned also understands that Parent will proceed in
executing the Merger Agreement in reliance on this Lock-Up Agreement.
4. This Lock-Up Agreement shall be binding on the undersigned and the
successors, heirs, personal representatives and permitted assigns of the
undersigned.
B-1
5. This Lock-Up Agreement shall lapse and become null and void upon the
earlier of (i) the expiration of twelve (12) months following the Effective Time
or (ii) the date on which the undersigned no longer qualifies as a [Company
Insider] [Parent Insider], pursuant to any condition included in the definition
thereof, as set forth in the Merger Agreement.
6. All capitalized terms, not otherwise defined herein, shall have the
meanings set forth in the Merger Agreement.
Signature:
----------------------------------
Print Name:
---------------------------------
Date:
---------------------------------------
B-2
EXHIBIT C
COMPANY CERTIFICATE
In connection with the merger (the "MERGER") of Category 5
Technologies, Inc., a Nevada corporation (the "COMPANY"), with and into
MindArrow Acquisition Corp. ("MERGER SUB"), a Delaware corporation and a direct
wholly owned subsidiary of MindArrow Systems, Inc., a Delaware corporation
("PARENT"), pursuant to the Agreement and Plan of Merger dated as of July 12,
2002 (the "MERGER AGREEMENT"), among the Company, Parent and Merger Sub, the
Company hereby certifies the following (any capitalized terms used but not
defined herein having the meaning given to such term in the Merger Agreement):
(a)The facts relating to the merger of the Company with and into Merger Sub
pursuant to the Merger Agreement (the "MERGER"), as described in the Joint Proxy
Statement, are, insofar as such facts pertain to the Company, true, correct and
complete in all respects at the date hereof. The Merger will be carried out
strictly in accordance with the Merger Agreement, and none of the material terms
and conditions thereof have been or will be waived or modified.
(b) The consideration to be received in the Merger by the stockholders
of the Company was the result of arm's length bargaining between the managements
of Parent and the Company. The fair market value of the common stock of Parent
("PARENT COMMON STOCK"), warrants to acquire shares of Parent Common Stock and
any cash received in lieu of fractional shares to be received by each
stockholder of the Company will be approximately equal to the fair market value
of the common stock of Company ("COMPANY COMMON STOCK") surrendered in the
Merger.
(c) In the Merger, the holders of Company Common Stock will receive, in
exchange for their Company Common Stock, the Merger Consideration. Except for
the consideration described herein, no cash or other property originating with
Parent or its affiliates has been or will be paid to the holders of Company
Common Stock in exchange for Company Common Stock. As of the Effective Time, the
Parent Common Stock issued in the Merger will have a value that is not less than
50% of the aggregate value of the Merger Consideration as of such time.
(d) The payment of cash in lieu of fractional shares of Parent Common
Stock in the Merger is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares, if any, and does not
represent separately bargained-for consideration. The total cash consideration
that will be paid in the Merger to holders of Company Common Stock instead of
issuing fractions of Parent Common Stock will not exceed one percent (1%) of the
total
C-1
consideration that will be issued in the Merger to holders of Company Common
Stock in exchange for their Company Common Stock.
(e) Prior to and in connection with the Merger, no shares of Company
Common Stock have been or will be (i) redeemed by the Company, (ii) acquired by
a person related to the Company (within the meaning of Treasury Regulation
Section 1.368-1(e)(3) determined without regard to Treasury Regulation Section
1.368-1(e)(3)(i)(A)) for consideration other than Parent Common Stock or Company
Common Stock, or (iii) the subject of any extraordinary distribution by the
Company.
(f) There is no plan or intention on the part of any stockholder of the
Company who owns five percent or more of the Company Common Stock, and to the
best knowledge of the Company there is no plan or intention on the part of any
of the remaining stockholders of the Company, to sell, exchange or otherwise
dispose of any Parent Common Stock to be received in the Merger by such holder
directly or indirectly to Parent or to a person related to Parent (within the
meaning of Treasury Regulation Section 1.368-1(e)(3)) for consideration other
than Parent Common Stock.
(g) The Surviving Corporation will pay the Company's dissenting
stockholders, if any, the value of their shares of Company Common Stock out of
the Surviving Corporation's own funds. No funds will be supplied for that
purpose, directly or indirectly, by Parent nor will Parent directly or
indirectly reimburse the Surviving Corporation for any payments to dissenters.
(h) The Company has no outstanding equity interests other than as
described in Section 3.2 of the Merger Agreement. At the Effective Time, and
following the Merger, the Company will not have outstanding any warrants,
options, convertible securities, or any other type of right pursuant to which
any person could acquire stock in the Company.
(i) The Company has no plan or intention to issue additional shares of
its stock.
(j) Except as set forth in Section 6.12 of the Merger Agreement, the
Company and its stockholders will pay their respective expenses, if any,
incurred in connection with the Merger. The Company has not agreed to assume,
nor will it directly or indirectly assume, any expense or other liability,
whether fixed or contingent, of any holder of Company Common Stock.
(k) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"CODE").
(l) The Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(m) There is no inter-corporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired or
will be settled at a discount.
(n) None of the compensation to be received by any stockholder-employee
of the Company in the Merger will be separate consideration for, or allocable
to, any of such person's
C-2
shares of Company Common Stock; none of the Parent Common Stock to be received
by any stockholder-employee of the Company will be separate consideration for,
or allocable to, any past or future services, and the compensation to be paid to
any stockholder-employee after the Merger will be for services actually rendered
and will be commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
(o) In connection with the Merger, the Company has not sold, transferred
or otherwise disposed of any of its assets as would prevent Parent from either
continuing the historic business of the Company or using a significant portion
of the Company's historic business assets in a business following the Merger,
both within the meaning of Treasury Regulation Section 1.368-1(d).
(p) On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
(q) In the Merger, Merger Sub will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by the Company immediately prior to the Merger. For purposes
of this representation, amounts paid by the Company to dissenters, amounts paid
by the Company to stockholders who receive cash or other property in the Merger,
amounts used by the Company to pay its reorganization expenses and those of its
stockholders, and all redemptions and distributions (except for regular, normal
dividends) made by the Company will be included as assets of the Company
immediately prior to the Merger.
(r) All options, warrants or rights to acquire shares of Company Common
Stock were issued with an exercise price no less than fair market value at the
time of issue.
(s) The Merger is being affected for bona fide business reasons, as
described in the Joint Proxy Statement.
(t) None of the Company's preferred stock is issued or outstanding.
(u) The liabilities of the Company assumed by Merger Sub and the
liabilities to which the transferred assets of the Company are subject were
incurred by the Company in the ordinary course of business.
(v) The Company will not take any position on any federal, state, or
local income or franchise tax return, or take any tax reporting position, that
is inconsistent with the treatment of the Merger as a reorganization for federal
income tax purposes, unless otherwise required by a "determination" (as defined
by Section 1313(a)(1) of the Code) or by a change in law after the date hereof.
(w) The Merger Agreement (including all exhibits and attachments
thereto) represents the full and complete agreement between Parent, Merger Sub
and the Company regarding the Merger, and there are no other written or oral
agreements regarding the Merger.
C-3
(x) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP may rely, without
further inquiry, on this Certificate in rendering their opinions as to certain
United States federal income tax consequences of the Merger. We will promptly
and timely inform ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP if, after
signing this Certificate and before the Effective Time, we have reason to
believe that any of the above certifications ceases to be true, correct and
complete in any respect.
IN WITNESS WHEREOF, the Company has executed this Certificate on this
_____ day of ___________, 2002.
CATEGORY 5 TECHNOLOGIES, INC.
By:
--------------------------
Name:
Title:
C-4
EXHIBIT D
PARENT CERTIFICATE
In connection with the merger (the "MERGER") of Category 5
Technologies, Inc., a Nevada corporation (the "COMPANY"), with and into
MindArrow Acquisition Corp. ("MERGER Sub"), a Delaware corporation and a direct
wholly owned subsidiary of MindArrow Systems, Inc., a Delaware corporation
("PARENT"), pursuant to the Agreement and Plan of Merger dated as of July 12,
2002 (the "MERGER AGREEMENT"), among Company, Parent and Merger Sub, Parent
hereby certifies, on behalf of Parent and Merger Sub, the following (any
capitalized terms used but not defined herein having the meaning given to such
term in the Merger Agreement):
(a) The facts relating to the merger of the Company with and into Merger
Sub pursuant to the Merger Agreement (the "MERGER"), as described in the Joint
Proxy Statement, are, insofar as such facts pertain to the Company, true,
correct and complete in all respects at the date hereof. The Merger will be
carried out strictly in accordance with the Merger Agreement, and none of the
material terms and conditions thereof have been or will be waived or modified.
(b) The consideration to be issued in the Merger to the stockholders of
the Company was the result of arm's length negotiation between the managements
of Parent and the Company. The fair market value of the common stock of Parent
("PARENT COMMON STOCK"), warrants to acquire shares of Parent Common Stock and
any cash in lieu of fractional shares to be received by each stockholder of the
Company will be approximately equal to the fair market value of the common stock
of Company ("COMPANY COMMON STOCK") surrendered in the Merger.
(c) In the Merger, the holders of Company Common Stock will receive, in
exchange for their Company Common Stock, the Merger Consideration. Except for
the consideration described herein, no cash or other property originating with
Parent or its affiliates has been or will be paid to the holders of Company
Common Stock in exchange for Company Common Stock. As of the Effective Time, the
Parent Common Stock issued in the Merger will have a value that is not less than
50% of the aggregate value of the Merger Consideration as of such time.
(d) The payment of cash in lieu of fractional shares of Parent Common
Stock in the Merger is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares, if any, and does not
represent separately bargained-for consideration.
D-1
(e) The Surviving Corporation will pay the Company's dissenting
stockholders, if any, the value of their shares of Company Common Stock out of
the Surviving Corporation's own funds. No funds will be supplied for that
purpose, directly or indirectly, by Parent nor will Parent directly or
indirectly reimburse the Surviving Corporation for any payments to dissenters.
(f) In the Merger, Merger Sub will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by the Company immediately prior to the Merger. For purposes
of this representation, amounts paid by the Company to dissenters, amounts paid
by the Company to stockholders who receive cash or other property in the Merger,
amounts used by the Company to pay its reorganization expenses and those of its
stockholders, and all redemptions and distributions (except for regular, normal
dividends) made by the Company will be included as assets of the Company
immediately prior to the Merger.
(g) Following the Merger, Parent will either continue the historic
business of the Company or use a significant portion of the Company's historic
business assets in a business, both within the meaning of Treasury Regulation
Section 1.368-1(d).
(h) Parent has no plan or intention to: (a) liquidate Merger Sub; (b)
merge Merger Sub with or into another corporation; (c) sell, exchange, transfer
or otherwise dispose of any stock of Merger Sub except for transfers described
in Revenue Ruling 2001-24, 2001-22 I.R.B. 1290; or (d) cause Merger Sub to sell,
exchange, transfer or otherwise dispose of any of the assets of the Company
acquired in the Merger, except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C) of the Internal Revenue
Code of 1986, as amended (the "CODE") or Treasury Regulations Section
1.368-2(k)(1).
(i) In connection with the Merger, neither Parent nor any person related
to Parent (within the meaning of Treasury Regulation Section 1.368-1(e)(3)) will
purchase, exchange, redeem or otherwise acquire (directly or indirectly) any
Parent Common Stock issued to holders of Company Common Stock in the Merger for
consideration other than Parent Common Stock, except for (i) cash paid in lieu
of fractional shares of Parent Common Stock pursuant to the Merger and (ii) open
market purchases pursuant to Parent's stock repurchase program, if any,
consistent with Revenue Ruling 99-58, 1999-2 C.B. 701.
(j) Except as set forth in Section 6.12 of the Merger Agreement, Parent
and Merger Sub will pay their respective expenses, if any, incurred in
connection with the Merger, and will not pay any of the expenses of the Company
or of the stockholders of the Company incurred in connection with the Merger.
Neither Parent nor Merger Sub has agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or contingent,
of any holder of Company Common Stock.
(k) Neither Parent nor any person related to Parent (within the meaning
of Treasury Regulation Section 1.368-1(e)(3)) has owned during the past five (5)
years any shares of stock of the Company.
D-2
(l) Neither Parent nor Merger Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(m) Before the Merger, Parent will own one hundred percent (100%) of
Merger Sub. Merger Sub was formed solely for the purpose of effecting the
Merger, and Merger Sub has not conducted business or other activities except in
connection with the Merger. No stock or securities of Merger Sub will be issued
in the Merger.
(n) Parent has no plan or intention to cause Merger Sub to issue
additional shares of stock of Merger Sub that would result in Parent losing
control of Merger Sub within the meaning of Section 368(c) of the Code. Prior to
and immediately following the Merger, Merger Sub will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in Merger Sub that, if exercised or
converted, would affect Parent's ownership or retention of control of Merger Sub
within the meaning of Section 368(c) of the Code.
(o) There is no inter-corporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired or
will be settled at a discount.
(p) None of the compensation to be received by any stockholder-employee
of the Company in the Merger will be separate consideration for, or allocable
to, any of such person's shares of Company Common Stock; none of the shares of
Parent Common Stock to be received by any stockholder-employee of the Company
will be separate consideration for, or allocable to, any past or future
services; and the compensation to be paid to any stockholder-employee after the
Merger will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services.
(q) The Merger is being affected for bona fide business reasons, as
described in the Joint Proxy Statement.
(r) Neither Parent nor Merger Sub will take any position on any federal,
state, or local income or franchise tax return, or take any tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization for federal income tax purposes, unless otherwise required by a
"determination" (as defined by Section 1313(a)(1) of the Code) or by a change in
law after the date hereof.
(s) The Merger Agreement (including all exhibits and attachments
thereto) represents the full and complete agreement between Parent, Merger Sub
and the Company regarding the Merger, and there are no other written or oral
agreements regarding the Merger.
(t) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP may rely, without
further inquiry, on this Certificate in rendering their opinions as to certain
United States federal income tax consequences of the Merger. We will promptly
and timely inform ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP if, after
signing this Certificate and before the Effective Time, we have reason to
believe that any of the above certifications ceases to be true, correct and
complete in any respect.
D-3
IN WITNESS WHEREOF, Parent has executed this Certificate on this ____
day of ____________________, 2002.
MINDARROW SYSTEMS, INC.
By:
---------------------------------
Name:
Title:
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EXHIBIT E
FORM OF MASTER CONTINGENT WARRANT AGREEMENT
[A copy of the Master Contingent Warrant Agreement shall be attached upon its
approval by the Company and Parent pursuant to Section 6.24 of this Agreement.]
E-1