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EXHIBIT 10.10
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
By and Among
ADVANTIX, INC.
ADVANTIX ACQUISITION CORP.,
▇▇▇▇▇▇▇.▇▇▇, INC.
and
CERTAIN OF ITS STOCKHOLDERS
Dated as of January 26, 1999
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TABLE OF CONTENTS
ARTICLE I THE MERGER.........................................................................2
1.1 The Merger....................................................................2
1.2 Closing.......................................................................2
1.3 Effective Time................................................................2
1.4 Effects of the Merger.........................................................2
1.5 Certificate of Incorporation; Bylaws..........................................2
1.6 Directors and Officers........................................................3
1.7 Merger Consideration; Conversion and Cancellation of Company Capital Stock....3
1.8 Dissenters' Rights............................................................4
1.9 Options and Warrants to Purchase Company Common Stock.........................5
1.10 Tax Consequences..............................................................6
1.11 Exemption from Registration...................................................6
1.12 Taking of Necessary Action; Further Action....................................6
ARTICLE II EXCHANGE OF SHARES................................................................6
2.1 Exchange Agent................................................................6
2.2 Exchange Fund.................................................................6
2.3 Escrow Fund...................................................................7
2.4 Exchange of Shares............................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY STOCKHOLDERS.......9
3.1 Corporate Organization.......................................................10
3.2 Capitalization...............................................................10
3.3 Authority; No Violation......................................................11
3.4 Consents and Approvals.......................................................12
3.5 Financial Statements.........................................................13
3.6 Absence of Undisclosed Liabilities...........................................13
3.7 Absence of Certain Changes...................................................13
3.8 Legal Proceedings............................................................14
3.9 Restrictions on Business Activities..........................................15
3.10 Governmental Authorization; Compliance with Laws.............................15
3.11 Title and Condition of Personal Property.....................................15
3.12 Real and Leased Property.....................................................16
3.13 Intellectual Property........................................................17
3.14 Taxes........................................................................19
3.15 Environmental Matters........................................................19
3.16 Major Suppliers..............................................................20
3.17 List of Accounts.............................................................20
3.18 Employment Agreements........................................................20
3.19 Employee Benefit Plans.......................................................21
3.20 Labor Matters................................................................21
3.21 Contracts and Commitments....................................................22
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3.22 Absence of Breaches or Defaults..............................................24
3.23 Insurance....................................................................24
3.24 Reorganization...............................................................24
3.25 Section 203 of the DGCL Not Applicable.......................................25
3.26 Brokers......................................................................25
3.27 Minute Books.................................................................25
3.28 Vote Required................................................................25
3.29 Employee Nondisclosure and Assignment of Inventions Agreements...............25
3.30 Year 2000 Compliance.........................................................25
3.31 Representations Complete.....................................................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..........................26
4.1 Corporate Organization.......................................................26
4.2 Authority; No Violation......................................................26
4.3 Capitalization of Parent and Merger Sub......................................27
4.4 Subsidiaries.................................................................28
4.5 Consents and Approvals.......................................................28
4.6 Parent Financial Statements..................................................28
4.7 Absence of Undisclosed Liabilities...........................................29
4.8 Absence of Certain Changes...................................................29
4.9 Additional Representations and Warranties....................................30
4.10 Brokers......................................................................30
4.11 Vote Required................................................................30
4.12 Representations Complete. ..................................................30
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS.........................................30
5.1 Covenants of the Company.....................................................30
5.2 Covenants of Parent..........................................................32
ARTICLE VI ADDITIONAL AGREEMENTS............................................................33
6.1 Preparation of Information Statement.........................................33
6.2 Stockholders' Meetings.......................................................35
6.3 Access to Information........................................................35
6.4 Public Disclosure............................................................36
6.5 Intentionally Deleted........................................................36
6.6 Legal Requirements...........................................................36
6.7 Blue Sky Laws................................................................37
6.8 Company Stock Option Plan....................................................37
6.9 Board Representation; Appointment of Certain Officers........................38
6.10 Loan to the Company. .......................................................38
6.11 Reorganization...............................................................38
6.12 Control of Operations........................................................38
6.13 Change of Corporate Names....................................................38
6.14 Best Efforts and Further Assurances..........................................40
6.15 Amendments to Certificates of Designation....................................40
6.16 Stockholder Voting Agreements; Irrevocable Proxies...........................40
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6.17 Stockholders Agreement.......................................................40
6.18 Investor Rights Agreement....................................................41
6.19 Company Stock Option Plan....................................................41
ARTICLE VII CONDITIONS PRECEDENT............................................................41
7.1 Conditions to Each Party's Obligation to Effect the Merger...................41
7.2 Conditions to Obligations of Parent and Merger Sub...........................42
7.3 Conditions to the Obligations of Company and Company Stockholders............44
ARTICLE VIII TERMINATION AND AMENDMENT......................................................45
8.1 Termination..................................................................45
8.2 Effect of Termination........................................................46
8.3 Amendment....................................................................46
8.4 Extension; Waiver............................................................46
ARTICLE IX INDEMNIFICATION AND ESCROW FUND..................................................47
9.1 Indemnity; Escrow Fund.......................................................47
9.2 Claims.......................................................................47
9.3 Objections to Claims.........................................................48
9.4 Attempt to Resolve Conflicts; Arbitration....................................48
9.5 Actions of the Stockholders' Agent...........................................51
9.6 Third-Party Claims...........................................................51
9.7 Limitations..................................................................51
9.8 No Limitation................................................................52
ARTICLE X GENERAL PROVISIONS................................................................52
10.1 Nonsurvival of Representations, Warranties and Agreements....................52
10.2 Expenses.....................................................................53
10.3 Notices......................................................................53
10.4 Governing Law................................................................54
10.5 Severability.................................................................55
10.6 Assignment; Binding Effect; Benefit..........................................55
10.7 Headings.....................................................................55
10.8 Entire Agreement.............................................................55
10.9 Counterparts.................................................................56
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EXHIBITS AND SCHEDULES
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Promissory Note
Exhibit C Form of Stockholder Voting Agreement
Exhibit D Form of Irrevocable Proxy
Exhibit E Form of Amended Stockholders Agreement
Exhibit F Form of Second Amended Investor Rights Agreement
Exhibit G Form of Opinion of Company's counsel
Exhibit H Form of Stockholder Representation Agreement
Exhibit I Form of Opinion of Parent's counsel
Exhibit J Arbitration Procedures
Schedule I Company Stockholders
Schedule II Stockholders Executing Stockholders Representation Agreement
Schedule III Company Officers Constituting "Knowledge"
Schedule IV Parent Officers Constituting "Knowledge"
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement"), is made and entered into as of January 26, 1999, by and among
ADVANTIX, INC., a Delaware corporation ("Parent"), ADVANTIX ACQUISITION CORP., a
Delaware corporation and wholly-owned subsidiary of Parent ("Merger Sub"),
▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware corporation (the "Company"), and the individual
stockholders of the Company listed on Schedule I hereto (individually, a
"Company Stockholder" and collectively, the "Company Stockholders"). Merger Sub
and the Company are sometimes collectively referred to herein as the
"Constituent Corporations."
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company have each determined that it is in the best interest of their respective
companies and in the best interest of their respective stockholders to
consummate the business combination transaction provided for herein in which
Merger Sub will, subject to the terms and conditions set forth herein, merge
with and into the Company (the "Merger"); and
WHEREAS, pursuant to the Merger, among other things, (i) all of
the outstanding shares of Common Stock, par value $.0001 per share, of the
Company ("Company Common Stock") shall be converted into shares of Common Stock,
par value $.0001 per share, of Parent ("Parent Common Stock"), (ii) all of the
outstanding shares of Series A Preferred Stock, par value $.0001 per share, of
the Company ("Company Series A Preferred") shall be converted into shares of
Series A1 Preferred Stock of Parent ("Parent Series A1 Preferred"), and (iii)
all of the outstanding shares of Series C Preferred Stock, par value $.0001 per
share, of the Company ("Company Series C Preferred") shall be converted into
shares of Series C Preferred Stock, par value $.0001 per share, of Parent
("Parent Series C Preferred"), in each case at the rate set forth herein. As
used herein, the Company Common Stock, Company Series A Preferred and Company
Series C Preferred are collectively referred to as the "Company Capital Stock"
and the Parent Common Stock, Series A Preferred Stock, par value $.0001 per
share, of Parent ("Parent Series A Preferred"), Parent Series A1 Preferred,
Series B Preferred Stock, par value $.0001 per share, of Parent ("Parent Series
B Preferred") and Parent Series C Preferred are collectively referred to as the
"Parent Capital Stock."
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a tax-free reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time (as
defined in Section 1.3 hereof), Merger Sub shall merge with and into the
Company. The Company shall be the surviving company (hereinafter sometimes
called the "Surviving Corporation") in the Merger, and shall continue its
corporate existence under the laws of the State of Delaware. Upon consummation
of the Merger, the separate corporate existence of Merger Sub shall terminate,
and the Company shall be a wholly-owned subsidiary of Parent.
1.2 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place as soon as practicable after the satisfaction
or waiver of each of the conditions set forth in Article VII hereof or at such
other time as the parties hereto agree (the "Closing Date"), provided, however,
that the parties shall use reasonable commercial efforts to effect the Closing
on or prior to April 10, 1999. The Closing shall take place at the offices of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ or at
such other location as the parties hereto agree.
1.3 Effective Time. The Merger shall become effective upon the
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware in such form as is required by, and executed in accordance with the
relevant provisions of, the DGCL on the Closing Date (the "Certificate of
Merger"). The term "Effective Time" shall be the date and time of the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
or such later time as is specified in the Certificate of Merger.
1.4 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in this Agreement, the Certificate of
Merger and the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of 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.
1.5 Certificate of Incorporation; Bylaws. At the Effective Time, the
Certificate of Incorporation of Merger Sub as in effect at the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.6 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
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1.7 Merger Consideration; Conversion and Cancellation of Company
Capital Stock. By virtue of the Merger without any action on the part of Parent,
Merger Sub, the Company or the holders of any Company Capital Stock or capital
stock of Merger Sub:
(a) Conversion of Company Capital Stock. Subject to the
terms and conditions of this Agreement, at the Effective Time, each share of
Company Capital Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares (as hereinafter defined)) and all rights in
respect thereof shall be converted and exchanged for such number and class or
series of shares of Parent Capital Stock as set forth below:
(i) each share of Company Common Stock shall be
converted and exchanged for that number of shares of Parent Common Stock equal
to the quotient of (A) 20,691,212 divided by (B) the sum of (1) the number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time, (2) the number of shares of Company Common Stock into which the
Company Series A Preferred and Company Series C Preferred issued and outstanding
immediately prior to the Effective Time are convertible, and (3) the number of
shares of Company Common Stock issuable upon conversion or exercise of all other
securities convertible into Company Common Stock and all stock options, warrants
and other rights (if any) to purchase Company Common Stock issued and
outstanding immediately prior to the Effective Time (the "Exchange Ratio");
(ii) each share of Company Series A Preferred shall
be converted and exchanged for that number of shares of Parent Series A1
Preferred equal to the Exchange Ratio; and
(iii) each share of Company Series C Preferred shall
be converted and exchanged for that number of shares of Parent Series C
Preferred equal to the Exchange Ratio.
At the Effective Time, all shares of Company Capital Stock converted into the
right to receive shares of Parent Capital Stock at the Exchange Ratio (the
"Merger Consideration") pursuant to this Article I shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate (each a "Certificate") previously representing any such shares
of Company Capital Stock shall thereafter only represent the right to receive
the shares of Parent Capital Stock into which the shares represented by such
Certificate have been converted pursuant to this Section 1.7(a). Certificates
previously representing shares of Company Capital Stock shall be exchanged for
shares of Parent Capital Stock upon surrender of such Certificates in accordance
with Section 2.4 hereof, without any interest.
(b) Cancellation of Company Capital Stock Owned by Parent or
Company. At the Effective Time, all shares of Company Capital Stock that are
owned by the Company as treasury stock, each share of Company Capital Stock
owned by Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Company Stock Option Plan. At the Effective Time, the
Company's 1998 Stock Plan (the "Company Stock Option Plan") and all options to
purchase Company
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Common Stock then outstanding under the Company Stock Option Plan shall be
assumed by Parent in accordance with Sections 1.9 and 6.8 of this Agreement.
(d) Certain Adjustments to Exchange Ratio. The Exchange
Ratio shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into the applicable class or series of Company Capital Stock or
Parent Capital Stock), reorganization, recapitalization or other like change
with respect to the applicable class or series of Company Capital Stock or
Parent Capital Stock, any termination or cancellation of any previously granted
stock options or any issuances of stock options permitted by the terms hereof,
occurring after the date hereof and prior to the Effective Time.
(e) Conversion of Merger Sub Capital Stock. Each share of
Common Stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one newly and validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation.
(f) Fractional Shares. No fraction of a share of Parent
Capital Stock will be issued, but in lieu thereof each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Parent Capital Stock (after aggregating all fractional shares of the
applicable class or series of Parent Capital Stock to be received by such
holder) shall receive from Parent an amount of cash (rounded to the nearest
whole cent) equal to the product of (i) such fraction, multiplied by (ii) $2.10.
1.8 Dissenters' Rights.
(a) Notwithstanding any provision of the Agreement to the
contrary, each share of Company Capital Stock that is issued and outstanding
immediately prior to the Effective Time and is held by stockholders who have not
voted such shares in favor of the approval and adoption of this Agreement and
who shall have properly demanded appraisal of such shares in accordance with
Section 262 of the DGCL ("Dissenting Shares") shall not be converted into the
right to receive the relevant Merger Consideration at the Effective Time, unless
and until the holder of such Dissenting Shares shall have failed to perfect or
shall have effectively withdrawn or lost such right to appraisal and payment
under the DGCL. If a holder of Dissenting Shares (a "Dissenting Stockholder")
shall have so failed to perfect or shall have effectively withdrawn or lost such
right to appraisal and payment, then, as of the Effective Time or the occurrence
of such event, whichever last occurs, such Dissenting Shares shall be converted
into and represent solely the right to receive the relevant Merger
Consideration, without any interest thereon, as provided in Section 1.7.
(b) The Company shall give Parent (i) prompt notice of any
written demands for appraisal, withdrawal of demands for appraisal and any other
instruments served pursuant to Section 262 of the DGCL and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under Section 262 of the DGCL. The Company agrees that prior to the Effective
Time, it will not, without the prior written consent of Parent, voluntarily make
or agree to make any payment with respect to, or settle or offer to settle, any
such demands.
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(c) Each holder of Dissenting Shares who becomes entitled,
pursuant to the provisions of Section 262 of the DGCL, to payment of his or her
Dissenting Shares shall receive payment therefor after the Effective Time from
the Surviving Corporation (but only after the amount thereof shall have been
agreed upon or finally determined pursuant to such provisions) and such shares
shall be canceled.
(d) Parent hereby assumes responsibility for the preparation
and delivery of any and all notices, documents, information or instruments
required by law to be delivered to stockholders of the Company in connection
with the provisions of Section 262 of the DGCL and for compliance of such
materials with any disclosure obligations imposed by applicable law.
1.9 Options and Warrants to Purchase Company Common Stock. At the
Effective Time, each option or warrant granted by the Company to purchase shares
of Company Common Stock (each, a "Company Stock Option") which is outstanding
and unexercised immediately prior to the Effective Time shall be assumed by
Parent and converted into an option or warrant to purchase shares of Parent
Common Stock in such number and at such exercise price as provided below and
otherwise having the same terms and conditions as in effect immediately prior to
the Effective Time (except to the extent that such terms, conditions and
restrictions may be altered in accordance with their terms as a result of the
Merger):
(a) the number of shares of Parent Common Stock to be
subject to the new option or warrant shall be equal to the product of (i) the
number of shares of Company Common Stock subject to the original option or
warrant and (ii) the Exchange Ratio;
(b) the exercise price per share of Parent Common Stock
under the new option or warrant shall be equal to the quotient of (i) the
exercise price per share of Company Common Stock under the original option or
warrant divided by (ii) the Exchange Ratio; and
(c) upon each exercise of options or warrants by a holder
thereof, the aggregate number of shares of Parent Common Stock deliverable upon
such exercise shall be rounded down, if necessary, to the nearest whole share
and the aggregate exercise price shall be rounded up, if necessary, to the
nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code.
1.11 Exemption from Registration. Assuming the accuracy of the
representations contained in the Stockholder Representation Agreements delivered
to Parent by those holders of Company Capital Stock set forth on Schedule II
hereto pursuant to Section 7.2 hereof and the Stockholder Voting Agreements
delivered to Parent by the Company Stockholders, the shares of Parent Capital
Stock to be issued in connection with the Merger will be issued in a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of Section 4(2) thereof.
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1.12 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
power and franchises of the Company, the officers and directors of the Company,
Parent and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
ARTICLE II
EXCHANGE OF SHARES
2.1 Exchange Agent. The Company and Parent shall mutually select an
agent to serve as exchange agent (the "Exchange Agent") in the Merger.
2.2 Exchange Fund. At or prior to the Effective Time, Parent shall
deposit, or shall cause to be deposited, with the Exchange Agent for the benefit
of the holders of Certificates, for exchange in accordance with this Article II
(i) certificates evidencing a number of shares of Parent Capital Stock for the
conversion of Company Capital Stock in accordance with the provisions of Section
1.7(a), less such numbers of shares of Parent Capital Stock as shall be
deposited into the Escrow Fund (as defined in Section 2.3 below) and (ii) cash
in an amount sufficient to provide for the payments to be made in lieu of
issuing any fractional shares of Parent Capital Stock as provided in Section
1.7(f) of this Agreement (such certificates and cash being hereinafter referred
to as the "Exchange Fund").
2.3 Escrow Fund.
(a) Deposit of Shares. At or prior to the Effective Time,
Parent shall cause to be issued in the name of each holder of a Certificate, a
certificate representing ten percent (10%) of the number of shares of the
applicable class or series of Parent Capital Stock to be received by such holder
in the Merger (the "Escrow Shares") and shall deposit the Escrow Shares on
behalf of such holders with the Escrow Agent to be held (together with any
monies exchanged for Escrowed Shares pursuant to paragraph (b) of this Section
2.3 and any shares of Parent Capital Stock distributed with respect to the
Escrowed Shares in a stock split or reverse stock split) in a fund (the "Escrow
Fund"), pursuant to the Escrow Agreement attached hereto as Exhibit A (the
"Escrow Agreement"), to be held in escrow in accordance with the terms and
conditions of such Escrow Agreement.
(b) Withdrawal of Shares During Escrow Period. At any time
during the twelve (12) month period following the Closing Date (the "Escrow
Period") each Holder may withdraw such Holder's shares of Parent Capital Stock
from the Escrow Fund by (i) delivering to each of the Escrow Agent and Parent a
notice (a "Withdrawal Notice") setting forth the number and class or series of
shares of Parent Capital Stock to be withdrawn, and (ii) by delivering to the
Escrow Agent a certified or bank cashier's check in an amount equal to the
product of (a) $2.10 and (b) the number of shares of Parent Capital Stock set
forth in the Withdrawal Notice. Promptly following receipt of such certified or
bank cashier's check, the Escrow Agent shall deliver to the Holder a certificate
or certificates representing the number of shares of Parent Capital Stock
withdrawn pursuant to the Withdrawal Notice.
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2.4 Exchange of Shares.
(a) Exchange Procedures. As soon as practicable after the
Effective Time, and in no event more than three (3) business days thereafter,
the Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for shares of
Parent Capital Stock and cash in lieu of any fractional shares, into which the
shares of Company Capital Stock shall have been converted pursuant to this
Agreement. The Company shall have the right to approve both the letter of
transmittal and the instructions prior to the Effective Time, which approval
shall not be unreasonably withheld. Upon surrender of a Certificate for exchange
and cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing ninety percent (90%) of
that number of whole shares of the applicable class or series of Parent Capital
Stock which such holder has the right to receive pursuant to the provisions of
Section 1.7(a) and cash in the amount such holder has the right to receive
pursuant to the provisions of Section 1.7(f), and the Certificates so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash payable to holders of Certificates.
(b) Transfers of Ownership. If any payment for shares of
Company Capital Stock is to be made in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the payment of the relevant Merger Consideration to a person other
than the registered holder of the Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(c) Distribution With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Capital Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Capital Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the Certificates representing whole shares of
Parent Capital Stock issued in exchange thereof, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time payable with respect to such whole shares of
Parent Capital Stock.
(d) No Liability. Notwithstanding anything to the contrary
in this Section 2.4, none of the Parent, Company, Exchange Agent, the Escrow
Agent, the Surviving Corporation or any other party hereto shall be liable to a
holder of shares of Parent Capital Stock or Company Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
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(e) No Further Ownership Rights in Company Capital Stock.
The Merger Consideration paid upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid in lieu of fractional shares), shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital Stock
and there shall be no further registration of transfers on the records of
Company of shares of Company Capital Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in Section 2.4.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Capital Stock and cash for
fractional shares, if any, as may be required pursuant to Section 2.4(a);
provided, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to indemnify Parent against any loss or cost incurred by or claim
that may be made against Parent, the Surviving Corporation, or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
(g) Transfer Restrictions; Legends. The shares of Parent
Capital Stock issued in the Merger shall not be transferable in the absence of
an effective registration statement under the Securities Act or an exemption
therefrom. In the absence of an effective registration statement under the
Securities Act, neither such shares of Parent Capital Stock nor any interest
therein shall be sold, transferred, assigned or otherwise disposed of, unless
Parent shall have previously received an opinion of counsel knowledgeable in
Federal securities law, in form and substance reasonably satisfactory to Parent,
to the effect that registration under the Securities Act is not required in
connection with such disposition. Parent shall be entitled to give stop transfer
instructions to its transfer agent with respect to such shares of Parent Capital
Stock in order to enforce the foregoing restrictions.
The certificate or certificates representing the shares of Parent
Capital Stock issued in the Merger shall bear the following legend restricting
the transfer thereof, in addition to any other legend required by applicable
law:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE COMPANY STOCKHOLDERS
For purposes of this Agreement, the phrases "knowledge of the Company,"
or "to the Company's knowledge", or references to the absence of "notice to the
Company" or the like shall refer to the actual knowledge after due inquiry of
those persons set forth on Schedule III attached hereto. Except as disclosed in
the disclosure schedule attached hereto (the "Company Disclosure Schedule"), the
Company and each of the Company Stockholders jointly and severally, except as
otherwise noted below, represent and warrant to Parent and Merger Sub as
follows:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted,
and is qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such qualification necessary, except where
the failure to be so licensed or qualified (i) is related solely to the fact
that the Company is deemed to conduct commerce over the Internet or using
interstate telephone lines or through the use of an "800" number in a particular
jurisdiction, (ii) would not individually or in the aggregate have a Material
Adverse Effect (as defined below) or (iii) would not adversely affect the
ability of the Company to consummate the transactions contemplated hereby. To
the knowledge of the Company, the Company has not received notice from any
governmental authority that its business activities constitute the conduct of
business in any jurisdiction where the Company is not qualified to transact
business. The copies of the Certificate of Incorporation and Bylaws of the
Company which have previously been made available to Parent are true and correct
copies of such documents as in effect as of the date of this Agreement. For
purposes of this Agreement, an action, event or occurrence has a "Material
Adverse Effect" if it has, or could reasonably be expected to have, a material
adverse effect on the assets, liabilities, business, financial condition or
results of operations of the Company or Parent, as the case may be.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Company Common Stock, and 25,000,000 shares of preferred
stock, par value $0.0001 per share, of which 3,250,000 shares have been
designated as Company Series A Preferred and 7,150,438 shares have been
designated as Company Series C Preferred. As of the date hereof, there are (i)
9,485,540 shares of Company Common Stock issued and outstanding and no shares of
Company Common Stock held by the Company as treasury stock, (ii) 3,000,000
shares of Company Series A Preferred, no shares of Series B Preferred Stock and
6,400,438 shares of Company Series C Preferred issued and outstanding, (iii)
5,456,658 shares of Company Common Stock reserved for issuance upon exercise of
outstanding stock options and (iv) an aggregate of 9,400,438 shares of Company
Common Stock reserved for issuance upon conversion of the Company Series A and
Series C Preferred Stock. All of the issued and outstanding shares of Company
Capital Stock were duly authorized and validly issued and are fully paid and
nonassessable and are free of any liens or encumbrances created by or resulting
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from the actions of the Company, and, except as set forth in Section 3.2(a) of
the Company Disclosure Schedule, are not subject to preemptive rights or rights
of first refusal created by statute, the Certificate of Incorporation or Bylaws
of the Company or any agreement to which the Company is a party or by which it
is bound. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule, to the knowledge of the Company, none of the outstanding shares of
Company Capital Stock were issued in violation of any applicable federal or
state securities law. Section 3.2(a) of the Company Disclosure Schedule sets
forth all outstanding subscriptions, options (including a schedule of exercise
prices, vesting and/or acceleration provisions), warrants, convertible
securities, calls, commitments, agreements or obligations of any character
calling for the purchase, redemption or issuance of any shares of Company
Capital Stock or any other equity security of the Company or any securities
representing the right to purchase or otherwise receive any shares of Company
Capital Stock or any other equity security of the Company (collectively,
"Capital Stock Purchase Rights"). Except as reflected in Section 3.2(a) of the
Company Disclosure Schedule, the Company does not have, and is not bound by, any
outstanding Capital Stock Purchase Rights. The terms of the Company Stock Option
Plan permit the assumption or substitution of options to purchase Parent Common
Stock as provided in this Agreement, without the consent or approval of the
holders of such securities, the Company Stockholders, or otherwise and without
any acceleration of the exercise schedule or vesting provisions in effect for
those options, except as set forth in Section 3.2(a) of the Company Disclosure
Schedule. True and complete copies of all forms of agreements and instruments
relating to or issued under the Company Stock Option Plan have been made
available to Parent and such agreements and instruments have not been amended,
modified or supplemented, and except as set forth in Section 3.2(a) of the
Company Disclosure Schedule, there are no agreements to amend, modify or
supplement such agreements or instruments in any case from the form made
available to Parent.
(b) The Company does not presently own or control, directly
or indirectly, and has no stock or other interest as owner or principal in, any
other corporation, partnership, limited liability company, joint venture,
business, trust, association or other business venture or entity.
3.3 Authority; No Violation.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The Board of
Directors of the Company has (i) unanimously approved this Agreement and the
Merger and all transactions contemplated hereby, (ii) determined that the Merger
is in the best interests of the stockholders of the Company and is on terms that
are fair to such stockholders and (iii) determined that this Agreement is
advisable and recommended that the stockholders of the Company approve this
Agreement and consummation of the Merger. Except for the adoption of this
Agreement by the requisite votes of the Company's stockholders, no other
corporate proceedings on the part of the Company are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all other agreements and documents to be entered into in connection herewith
have been duly and validly executed and delivered by the Company and (assuming
due authorization, execution and delivery by Parent and Merger Sub) constitute
valid and binding obligations of the Company, enforceable against the Company,
except as enforcement may be
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limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally. Each of the Company Stockholders
severally (and not jointly) represents that this Agreement and all other
agreements and documents to be entered into in connection herewith have been
duly and validly executed and delivered by each of the Company Stockholders and
(assuming due authorization, execution and delivery by Parent and Merger Sub)
constitute valid and binding obligations of each of the Company Stockholders,
enforceable against each of the Company Stockholders, except as enforcement may
be limited by general principles of equity whether applied in a court of law or
a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Except as set forth in Section 3.3(b) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the terms or provisions
hereof, will (i) violate any provision of the Certificate of Incorporation or
Bylaws of the Company, (ii) assuming that the consents and approvals referred to
in Section 3.4 hereof are duly obtained, violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to the
Company or any of its properties or assets or (iii) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of the Company under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
the Company is a party, or by which the Company or any of its properties or
assets may be bound or affected.
(c) Each of the Company Stockholders severally (and not
jointly) represents that, except as set forth in Section 3.3(c) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by
each of the Company Stockholders, nor the consummation by each of the Company
Stockholders of the transactions contemplated hereby, nor compliance by each of
the Company Stockholders with any of the terms or provisions hereof, will (i)
assuming that the consents and approvals referred to in Section 3.4 hereof are
duly obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the Company Stockholders or any
of their respective properties or assets or (ii) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of any of the Company
Stockholders under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which any of the Company Stockholders is a party, or
by which any of the Company Stockholders or any of their respective properties
or assets may be bound or affected.
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3.4 Consents and Approvals. Except for (a) the approval of this
Agreement by the requisite vote of the stockholders of the Company, (b) the
filing of Certificate of Merger with the Secretary of State of the State of
Delaware pursuant to Section 251(c) of the DGCL, and (c) such filings,
authorizations or approvals as may be set forth in Section 3.4 of the Company
Disclosure Schedule, no consents, approvals, orders or authorizations of or
filings or registrations with any court, administrative agency or commission or
other governmental authority or instrumentality (each a "Governmental Entity")
or with any third party are necessary with respect to the Company or any of the
Company Stockholders in connection with (1) the execution and delivery of this
Agreement and (2) the consummation of the Merger and the other transactions
contemplated hereby, except for those which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company or a Material Adverse Effect on the ability of the parties to consummate
the transactions contemplated hereby.
3.5 Financial Statements. Set forth in Section 3.5 of the Company
Disclosure Schedule are true and correct copies of (a) an unaudited balance
sheet of the Company at December 31, 1997, together with related unaudited
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, and (b) the Company's unaudited balance sheet and statement of
operations as of and for the year ended December 31, 1998 (the "Reference
Balance Sheet Date") (collectively, the "Financial Statements"). Such Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except that the unaudited Financial Statements do not
contain all footnotes required by GAAP and are subject to normal year-end audit
adjustments that in the aggregate, with the exception of certain adjustments
related to compensation expense in connection with stock options, will not be
material) applied on a basis consistent throughout the periods indicated and
with each other. The Financial Statements (a) are complete and correct in all
material respects, (b) are in accordance with the Company's books and records,
and (c) fairly present the financial condition and operating results of the
Company as of the dates, and for the periods indicated therein, subject to
normal year-end audit adjustments. Except as disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation. The books and records of the Company have
been, and are being, maintained in accordance with GAAP and any other applicable
legal and accounting requirements.
3.6 Absence of Undisclosed Liabilities. Except as set forth on
Section 3.6 of the Company Disclosure Schedule, the Company has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those disclosed or reserved against in its unaudited
balance sheet as of December 31, 1998 (the "Reference Balance Sheet"), (ii)
those incurred in the ordinary course of business and not required to be set
forth in the Reference Balance Sheet under GAAP, (iii) those incurred in the
ordinary course of business since the Reference Balance Sheet Date and
consistent with past practice, and (iv) those incurred in connection with the
execution of this Agreement.
3.7 Absence of Certain Changes. Except as disclosed in Section 3.7
of the Company Disclosure Schedule, since the Reference Balance Sheet Date, the
Company has conducted its business in the ordinary course consistent with past
practice, and except for transactions contemplated or authorized hereby, there
has not occurred (i) any purchase or other acquisition of, sale, lease,
disposition, or other transfer of, or mortgage, pledge or subjection to
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any material encumbrance or lien on, any material asset, tangible or intangible,
of the Company, other than in the ordinary course of business; (ii) any change
in accounting methods or practices (including any change in depreciation or
amortization policies or rates) by the Company or any revaluation by the Company
of any of its assets; (iii) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Company Capital
Stock, or any split-up or other recapitalization in respect of Company Capital
Stock, or any direct or indirect redemption, purchase or other acquisition by
the Company of any shares of Company Capital Stock; (iv) any material contract
entered into by the Company, other than in the ordinary course of business and
as provided to Parent, or any amendment or termination of, or default under, any
material contract to which the Company is a party or by which it is bound; (v)
any amendment or change to the Certificate of Incorporation or Bylaws of the
Company; (vi) any increase in or modification of the compensation or benefits
payable or to become payable by the Company to any of its directors or
employees; (vii) any issuance, transfer, sale or pledge by the Company of any
shares of Company Capital Stock or other securities or of any commitment,
option, right or privilege under which the Company is or may become obligated to
issue any shares of Company Capital Stock or other securities; (viii) any
indebtedness for borrowed money incurred by the Company, except such as may have
been incurred or entered into in the ordinary course of business not exceeding
$25,000; (ix) any loan made or agreed to be made by the Company, nor has the
Company become liable or agreed to become liable as a guarantor with respect to
any loan; (x) any waiver or compromise by the Company of any right or rights or
any payment, direct or indirect, of any material debt, liability or other
obligation, other than in the ordinary course of business; (xi) any sale,
assignment, or transfer of any patents, trademarks, copyrights, domain names,
URLs, trade secrets or other intangible assets, including, without limitation,
the telephone number (▇▇▇) ▇▇▇-▇▇▇▇ ("800 TICKETS"), (▇▇▇) ▇▇▇-▇▇▇▇ ("888
TICKETS"), "▇▇▇▇▇▇▇.▇▇▇" and "▇▇▇▇▇▇▇▇.▇▇▇," other than in the ordinary course
of business; (xii) any actual or, to the knowledge of the Company, threatened
termination or loss of (a) any material contract, lease, license or other
agreement to which the Company was or is a party; (b) any certificate, license
or other authorization required for the continued operation by the Company of
any portion of any of its business; or (c) termination or loss of any customer
or other revenue source, which termination or loss could reasonably be expected
to result in loss of revenues to the Company in excess of $50,000 per year, and
the Company has no knowledge of any event (including, without limitation, the
transactions contemplated hereby) which could reasonably be expected to result
in any such termination or loss; (xiii) any resignation of employment of any key
officer or employee of the Company, or to the knowledge of the Company, any
impending resignation of employment of any such officer or employee; (xiv) any
negotiation or agreement by the Company to do any of the things described in the
preceding clauses (i) through (xiii) (other than negotiations with Parent and
its representatives regarding the transactions contemplated by this Agreement);
or (xv) to the Company's knowledge, any other event or circumstance that will
have or could reasonably be expected to have a Material Adverse Effect on the
Company.
3.8 Legal Proceedings. Except as set forth in Section 3.8 of the
Company Disclosure Schedule, there are no legal actions, suits, arbitrations or
other legal, administrative or governmental proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company or
its properties, assets or business in which an unfavorable outcome, ruling or
finding would have a Material Adverse Effect, and neither the Company nor any of
the Company Stockholders is aware of any facts which might result in or form the
basis for any such action, suit or other proceeding or which would challenge the
validity or propriety
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of the transactions contemplated by this Agreement. The Company is not in
default with respect to any judgment, order or decree of any court or any
governmental agency or instrumentality which would have a Material Adverse
Effect. The foregoing includes, without limiting the generality thereof, actions
pending, or to the Company's knowledge, threatened or involving the prior
employment of any of the Company's employees or their use in connection with the
Company's business of any information or techniques allegedly proprietary to a
former employee.
3.9 Restrictions on Business Activities. To the Company's knowledge,
there is no agreement, judgment, injunction, order or decree binding upon the
Company which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
the Company, any acquisition of property by the Company, the ability of the
Company to compete with any other person or the conduct of business by the
Company as currently conducted or as proposed to be conducted by the Company.
3.10 Governmental Authorization; Compliance with Laws. Except as set
forth in Section 3.10 of the Company Disclosure Schedule, the Company has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which the Company currently operates or holds any interest in any of
its properties or (ii) that is required for the operation of the Company's
business or the holding of any such interest ((i) and (ii) herein collectively
called the "Company Authorizations"), and all of such Company Authorizations are
in full force and effect, except where the failure to obtain or have any such
Company Authorizations could not reasonably be expected to have a Material
Adverse Effect on the Company. To the Company's knowledge, except as set forth
in Section 3.10 of the Company Disclosure Schedule, the Company is in material
compliance with all applicable laws, statutes, orders, rules and regulations of
any Governmental Entity relating to the Company except where the failure to do
so would not have a Material Adverse Effect, and the Company has not received
notice of any violations of any of the above.
3.11 Title and Condition of Personal Property. The Company has
marketable title to all of its personal property reflected in the Reference
Balance Sheet or acquired after the Reference Balance Sheet Date (other than
property sold or otherwise disposed of since the Reference Balance Sheet Date in
the ordinary course of business), free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character or claims thereto,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and would not reasonably
be expected to have a Material Adverse Effect on the Company and (iii) liens
securing debt which is reflected on the Reference Balance Sheet. The plants,
property and equipment of the Company that are used in the operations of its
business are in all material respects in good operating condition and repair.
All properties used in the operations of the Company are reflected in the
Reference Balance Sheet to the extent GAAP requires the same to be reflected.
3.12 Real and Leased Property.
(a) The Company does not own any fee simple interest in real
property. The Company does not lease or sublease any real property other than as
set forth on Section 3.12
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of the Company Disclosure Schedule. Section 3.12 of the Company Disclosure
Schedule sets forth the street address of each parcel of real property leased or
subleased by the Company (the "Leased Property"). The Company has previously
delivered to Parent a true and complete copy of all of the lease and sublease
agreements, as amended to date (the "Leases") relating to the Leased Property.
The Leases are valid, binding and in full force and effect, all rent and other
sums and charges payable thereunder are current, no notice of default or
termination under any of the Leases is outstanding, no termination event or
condition or uncured default on the part of the Company or, on the part of the
landlord or sublandlord, as the case may be, thereunder, exists under the
Leases, and no event has occurred and no condition exists which, with the giving
of notice or the lapse of time or both, would constitute such a default or
termination event or condition. There are no subleases, licenses or other
agreements granting to any person other than the Company any right to the
possession, use, occupancy or enjoyment of the premises demised by the Leases.
All of the premises are used in the conduct of the Company's business.
(b) The heating, ventilation, air conditioning, plumbing and
electrical systems at the Leased Property are in such working order and repair
as is necessary to permit the Company's computer and information systems to
function properly without material disruption on the date hereof and will be in
such working order and repair on the Closing Date. The Company has not
experienced any material interruption in material services provided to any of
the Leased Property within the last six (6) months. To the knowledge of the
Company, no landlord under the Leases has any plans to make any material
alterations to any of the Leased Property, the construction of which would
materially and adversely interfere with the Company's use of the Leased
Property. To the knowledge of the Company, no landlord under the Leases has any
plans to make any material alterations to any of the buildings in which Leased
Property is located, the costs of which alterations would be borne in any part
by a tenant under the applicable Lease.
(c) Section 3.12 of the Company Disclosure Schedule sets
forth all material permits, licenses, franchises, approvals and authorizations
(collectively, the "Real Property Permits") required to be obtained by the
Company from all Governmental Entities having jurisdiction over each Leased
Property and from all insurance companies and fire rating and other similar
boards and organizations (collectively, the "Insurance Organizations"). All such
Real Property Permits required to be obtained by the Company to enable each
Leased Property to be lawfully occupied and used for all of the purposes for
which they are currently occupied and have been lawfully issued to the Company
and are, as of the date hereof, in full force and effect. The Company has not
received or been informed by a third party of the receipt by it of any notice
from any Governmental Entity having jurisdiction over any Leased Property or
from any Insurance Organization threatening a suspension, revocation,
modification or cancellation of any Real Property Permit or of any insurance
policies and, to the best knowledge and belief of the Company there is no basis
for the issuance of any such notice or the taking of any such action. No action
is required in order for all Real Property Permits and liability and casualty
insurance policies required under any of the Leases to remain Real Property
Permits and insurance policies of the Surviving Corporation.
(d) The Company has not received any notice, nor has it any
knowledge, of any pending, threatened or contemplated condemnation proceeding
affecting any Leased Property or any part thereof.
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(e) There are no liabilities (other than rent and other sums
and charges regularly payable) associated with any of the Leases including,
without limitation, any liability under any Environmental and Safety Laws (as
defined in Section 3.15), which is or which may become payable by the Surviving
Corporation.
3.13 Intellectual Property.
(a) Section 3.13(a) of the Company Disclosure Schedule sets
forth an accurate and complete description of (i) all foreign and domestic
patents, patent applications, inventions not the subject of any issued patent or
patent application, trademarks, trademark applications, service marks, trade
names, product names or other marks in which the Company has common law
trademark rights, copyrights, domain names and URLs of the Company which are
registered or issued or for which registration or issuance is pending with any
Governmental Entity specifying as to each such item, as applicable, the
jurisdiction(s) by or in which such patent, trademark, service ▇▇▇▇, trade name
or copyright has been issued or registered or in which an application for such
issuance or registration has been filed or proposed, including the registration
or application number; (ii) all foreign and domestic franchises, licenses,
sublicenses, contracts and agreements, pursuant to which any person other than
the Company is authorized to use any foreign and domestic patents, inventions
not the subject of any issued patent or patent application, trademarks, trade
names, service marks, product names or other marks in which the Company has
common law trademark rights, copyrights, domain names, URLs, and any
applications therefor, net lists, schematics, technology, know-how (except for
shared know-how), trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
("Intellectual Property") owned by the Company; and (iii) all foreign and
domestic franchises, licenses, sublicenses, contracts and agreements, other than
shrink-wrap software licenses, pursuant to which the Company is authorized to
use any such Intellectual Property not owned by the Company (except for shared
know-how) ("Third Party Intellectual Property Rights")[ including, with respect
to (ii) or (iii), the identity of all parties thereto, a description of the
nature and subject matter thereof, the royalty provided and the term thereof.]
(b) Except as set forth in Section 3.13(b) of the Company
Disclosure Schedule, the Company owns or has the right to use, pursuant to
franchise, license, sublicense, contract, agreement or permission, all of the
Intellectual Property necessary for the conduct of its business as currently
conducted or as proposed to be conducted by the Company. All applicable fees,
royalties and other amounts due and payable by the Company to any person or to
the Company by any person in respect of such Intellectual Property have been
paid. The Company has taken all reasonably necessary actions to maintain and
protect (i) the Intellectual Property that it owns and (ii) the Intellectual
Property that it has the right to use and is contractually required to protect.
(c) Except for third party licenses listed in Section
3.13(c) of the Company Disclosure Schedule, the Company is the sole and
exclusive owner of its Intellectual Property including, but not limited to,
those listed or described on the Company Disclosure Schedule, or has the right
to the use thereof for the material covered thereby in connection with the
services or products in respect to which they have been or are now being used.
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(d) Except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, the Company (i) is not the subject of any pending
litigation or, to the Company's knowledge, any claim regarding infringement of
or misappropriation or misuse of any Intellectual Property of the Company or
other tangible right of any other person, (ii) does not have knowledge of any
such infringement, whether or not claimed by any other person, and (iii) does
not have knowledge of any facts or circumstances which would reasonably be
anticipated to result in any such litigation or claim or which would reasonably
lead the Company to conclude that the continued operation and conduct of any
aspect of its business would result in any such litigation or claim. To the
knowledge of the Company, except as set forth in Section 3.13(d) of the Company
Disclosure Schedule, there is no other person that is operating under or
otherwise using any name confusingly similar with any trade names, trademarks,
service names, service marks or logos included in the Intellectual Property
owned by the Company. To the Company's knowledge, no Intellectual Property
licensed by the Company from a third party is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Company. Except as set forth in Section 3.13(d) of the Company Disclosure
Schedule, no Intellectual Property of the Company is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use thereof by
the Company. Except as set forth in Section 3.13(d) of the Company Disclosure
Schedule, the Company has not entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property.
(e) To the Company's knowledge, there has been no
unauthorized use, disclosure, infringement or misappropriation by any third
party, including any employee or former employee of the Company, of any
Intellectual Property rights of the Company, any trade secret material to the
Company, or any Third Party Intellectual Property Rights.
(f) The Company is not nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights.
(g) Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, to the Company's knowledge, no material trade secrets
included in the Intellectual Property of the Company have been disclosed by the
Company to any person other than employees, agents and representatives of the
Company or Parent. Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, the Company has taken reasonable measures to protect all of
its trade secrets, including securing valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that the Company does
not already own by operation of law.
(h) Except for obligations that arise under the common law
of the appropriate jurisdiction, to the Company's knowledge, neither the Company
nor its employees has, other than confidentiality and other agreements assigning
inventions made prior to their employment with the Company, any written
agreements or arrangements with former employers of such employees relating to
trade secrets of such employers, the assignment of inventions of such employers,
or such employee's engagement in activities competitive with such employers.
Except for obligations that arise under the common law of the appropriate
jurisdiction, to the
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Company's knowledge, the activities of such employees on behalf of the Company
do not violate any agreements or arrangements known to the Company which any
such employees have with former employers.
3.14 Taxes.
(a) Except as set forth in Section 3.14(a) of the Company
Disclosure Schedule, the Company has duly and timely filed (including applicable
extensions granted without penalty) all material Tax Returns (as hereinafter
defined) required to be filed at or prior to the Effective Time, and such Tax
Returns are true and correct in all material respects, except where failure to
do so would not have a Material Adverse Effect, and the Company has paid in full
or made adequate provision in the financial statements of the Company (in
accordance with GAAP) for all material Taxes (as hereinafter defined) shown to
be due on such Tax Returns except where failure to do so would not have a
Material Adverse Effect. Except as set forth in Section 3.14(a) of the Company
Disclosure Schedule, as of the date hereof (i) the Company has not requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding, (ii) no claim for Taxes has become
a lien against the property of the Company or is being asserted against the
Company other than liens for Taxes not yet due and payable, (iii) no audit of
any Tax Return of the Company is being conducted by a Tax authority, (iv) no
extension of the statute of limitations on the assessment of any Taxes has been
granted to the Company and is currently in effect, and (v) there is no
agreement, contract or arrangement to which the Company is a party that may
result in the payment of any amount that would not be deductible by reason of
Sections 280G, 162 or 404 of the Code. The Company has not been nor will it be
required to include any adjustment in taxable income for any Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger.
(b) For the purposes of this Agreement, "Tax" or "Taxes"
shall mean all taxes, charges, fees, levies, penalties or other assessments
imposed by any United States federal, state, local or foreign taxing authority,
including, but not limited to income, excise, property, sales, transfer,
franchise, payroll, withholding, social security or other taxes, including any
interest, penalties or additions attributable thereto. For purposes of this
Agreement, "Tax Return" shall mean any return, report, information return or
other document (including any related or supporting information) with respect to
Taxes.
3.15 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
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(ii) "Facilities" shall mean all buildings and
improvements located on any real property leased or subleased by the Company.
(b) The Company represents and warrants as follows: (i) the
Company has received no notice (oral or written) of any noncompliance of the
Facilities or its past or present operations with Environmental and Safety Laws;
(ii) no notices, administrative actions or suits are pending or, to the
Company's knowledge, threatened relating to a violation of any Environmental and
Safety Laws; (iii) the Company has not been notified that it is a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act, or state analog statute, arising out of events
occurring prior to the Closing Date; (iv) to the Company's knowledge, the
Company's uses of and activities within the Facilities have at all times
complied with all Environmental and Safety Laws; and (v) the Company has all the
permits and licenses required by Environmental and Safety Laws to be issued and
are in full compliance with the terms and conditions of those permits.
3.16 Major Suppliers. Section 3.16 of the Company Disclosure Schedule
identifies those suppliers of significant goods or services with respect to
which, to the knowledge of the Company, alternative sources of supply are not
readily available on comparable terms and conditions. To the knowledge of the
Company, except as indicated in Section 3.16 of the Company Disclosure Schedule,
all supplies and services necessary for the conduct of the business of the
Company as presently conducted, may be obtained from alternate sources on terms
and conditions comparable to those presently available to the Company, and no
facts, circumstances or conditions exist which create a reasonable basis for
believing that the Company will be unable to continue to procure the supplies
and services necessary to conduct its business on substantially the same terms
and conditions as such supplies and services are currently procured.
3.17 List of Accounts. Set forth in Section 3.17 of the Company
Disclosure Schedule is: (a) the name and address of each bank or other
institution in which the Company maintains an account (cash, securities or
other) or safe deposit box; (b) the name and phone number of the contact person
at such bank or institution and (c) the account number of the relevant account
and a description of the type of account.
3.18 Employment Agreements. Section 3.18 of the Company Disclosure
Schedule contains the names, job descriptions and annual salary rates and other
compensation of all officers, directors and employees of the Company or
consultants whose annual compensation by the Company exceeds $75,000. A list of
all employee policies, employee manuals or other written statements of rules or
policies as to working conditions, vacation and sick leave, and a complete copy
of each has been made available to Parent. Except as set forth in Section 3.18
of the Company Disclosure Schedule, there are no employment, consulting,
severance or indemnification arrangements, agreements or understandings between
the Company and any officer, director, consultant or employee including, without
limitation, any contracts to employ executive officers, any severance, change in
control or similar arrangements with any officers, employees or agents of the
Company that will result in any obligation (absolute or contingent) of the
Company to make any payment to any officer, employee or agent of the Company
following either the consummation of the transactions contemplated hereby,
termination of employment, or both ("Company Employment Agreements").
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3.19 Employee Benefit Plans. The Company has no employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended).
3.20 Labor Matters. (a) Except as set forth in Section 3.20(a) of the
Company Disclosure Schedule, (a) the Company is not a party to or otherwise
bound by any collective bargaining agreement or other labor union contract and
currently there are no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit which could
affect the Company; (b) to the Company's knowledge, there are no controversies,
strikes, slowdowns, work stoppages or labor disturbances pending or threatened
between the Company and any of its employees, and the Company has not
experienced any such controversy, strike, slowdown, work stoppage or labor
disturbances within the past three years; (c) the Company has not breached or
otherwise failed to comply with the provisions of any collective bargaining or
union contract and there are no grievances outstanding against the Company under
any such agreement or contract; (d) there are no unfair labor practice
complaints pending against the Company before the National Labor Relations Board
or any other Governmental Entity or any current union representation questions
involving employees of the Company; (e) there are no pending claims against the
Company under any workers' compensation plan or policy or for long-term
disability; (f) the Company does not have any obligations under COBRA with
respect to any former employees or qualifying beneficiaries thereunder; (g) the
Company is currently in material compliance with all applicable laws relating to
the employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Entity and has withheld and paid to the
appropriate Governmental Entity or is holding for payment not yet due to such
Governmental Entity all amounts required to be withheld from employees of the
Company and is not liable for any arrears of wages, taxes, penalties or other
sums for failure to comply with any of the foregoing; (h) the Company has paid
in full to all their respective employees or adequately accrued for in
accordance with GAAP all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such employees, including all
compensation owing and due for over-time work; (i) the Company has provided its
employees with all relocation benefits, stock options, bonuses and incentives,
and all other compensation that such employee has earned up through the date of
this Agreement or that such employee was otherwise promised in their employment
agreements with the Company; (j) to the Company's knowledge, there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or threatened before any Governmental Entity with respect to
any Persons currently or formerly employed by the Company; (k) the Company is
not a party to, or otherwise bound by, any consent decree with, or citation by,
any Governmental Entity relating to employees or employment practices; (l) to
the Company's knowledge, there is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been asserted
or is now pending or threatened with respect to the Company; (m) there is no
charge of discrimination in employment or employment practices, for any reason,
including, without limitation, age, gender, race, religion or other legally
protected category, which has been asserted or is now pending or threatened
before the United States Equal Employment Opportunity Commission, or any other
Governmental Entity in any jurisdiction in which the Company has employed or
currently employs any Person; (n) to the Company's knowledge, the Company is in
material compliance with the requirements of the Americans With Disabilities
Act; and (o) the Company is in material compliance with the
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requirements of the Workers Adjustment and Retraining Notification Act ("WARN")
and has no liabilities pursuant to WARN.
(b) Except as set forth in Section 3.20 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
severance benefits or any other payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any current or former director, employee or other service
provider of the Company, (ii) increase any benefits otherwise payable by the
Company or (iii) result in the acceleration of the time of payment or vesting of
any such benefits, or increase in the amount of compensation of benefits due any
such person.
3.21 Contracts and Commitments. Section 3.21 of the Company
Disclosure Schedule contains a complete and accurate list of all contracts and
agreements (including, without limitation, oral and informal arrangements) of
the following categories to which the Company is a party or by which it is bound
as of the date of this Agreement.
(a) labor contracts or collective bargaining agreements;
(b) material manufacturing, distribution, franchise,
license, sales, agency or advertising contracts;
(c) contracts which require the payment in excess of $50,000
per year for (i) the purchase of inventory, materials, supplies or equipment
which are not cancelable (without material penalty, cost or other liability)
within one (1) year, (ii) management, consulting, service or other similar
contracts, (iii) advertising or marketing agreements or arrangements, and (iv)
other contracts made in the ordinary course of business involving annual
expenditures or liabilities in excess of $50,000 which are not cancelable
(without material penalty, cost or other liability) within ninety (90) days,
other than purchase orders made in the ordinary course of business consistent
with past practice;
(d) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments proving for the lending of money,
whether as borrower, lender or guarantor, in excess of $50,000;
(e) contracts (other than Leases) containing covenants
limiting the freedom of the Company to engage in any line of business or compete
with any person or operate at any location;
(f) joint venture or partnership agreements or joint
development or similar agreements;
(g) agreements, contracts or other arrangements with (i) the
Company or any affiliate of the Company or (ii) any current or former officer,
director or employee of the Company or any affiliate of the Company;
(h) leases or similar agreements with any person under which
(i) the Company is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible
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personal property owned by any person or (ii) the Company is a lessor or
sublessor of, or makes available for use by any person, any tangible personal
property owned or leased by the Company, in any such case which has an aggregate
future liability or receivable, as the case may be, in excess of $50,000 and is
not terminable by the Company by notice of not more than sixty (60) days for a
cost of less than $10,000;
(i) material license, option or other agreements relating in
whole or in part to the Intellectual Property described in Section 3.13
(including any license or other agreement under which the Company is licensee or
licensor of any such Intellectual Property);
(j) contracts or other instruments (including so-called
take-or-pay or keepwell agreements) under which (i) any person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of the Company or
(ii) the Company has directly or indirectly guaranteed indebtedness, liabilities
or obligations of any person (in each case other than endorsements for the
purpose of collection in the ordinary course of business);
(k) contracts or other instruments under which the Company
has, directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any person involving aggregate
payments in excess of $50,000;
(l) mortgages, pledges, security agreements, deeds of trust
or other instruments granting a lien or other encumbrance upon any property of
the Company;
(m) agreements or instruments involving aggregate payments
in excess of $50,000 providing for indemnification of any person with respect to
liabilities relating to any current or former business of the Company, or any
predecessor entity;
(n) contracts for the acquisition, sale or lease of any
assets or capital stock or other ownership interests outside the ordinary course
of business or involving aggregate payments in excess of $50,000 or to effect
any merger of the Company; and
(o) any exclusive retainer agreement or arrangement with
attorneys, accountants, actuaries, appraisers, investment bankers or other
professional advisors.
True copies of the written contracts identified in Section 3.21 of the
Company Disclosure Schedule have been delivered to Parent.
3.22 Absence of Breaches or Defaults. The Company is not and, to the
knowledge of the Company, no other party is, in default under, or in breach or
violation of, any contract identified on Section 3.21 of the Company Disclosure
Schedule and, to the knowledge of the Company, no event has occurred which, with
the giving of notice or passage of time or both would constitute a default under
any contact identified on Section 3.21 of the Company Disclosure Schedule,
except for defaults, breaches, violations or events which, individually or in
the aggregate, would not have a Material Adverse Effect on the Company. Other
than contracts which have terminated or expired in accordance with their terms,
each of the contracts identified on Section 3.21 of the Company Disclosure
Schedule is valid, binding and enforceable (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles
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(whether considered in a proceeding in equity or at law)) and is in full force
and effect, and assuming all consents required by the terms thereof or
applicable law have been obtained, such contracts will continue to be valid,
binding and enforceable and in full force and effect immediately following the
consummation of the transactions contemplated hereby, in each case except where
the failure to be valid, binding, enforceable and in full force and effect would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. No event has occurred which either entitles, or would, on notice or
lapse of time or both, entitle the holder of any indebtedness for borrowed money
affecting the Company (except for the execution or consummation of this
Agreement) to accelerate, or which does accelerate, the maturity of any
indebtedness affecting the Company, except as set forth in Section 3.22 of the
Company Disclosure Schedule.
3.23 Insurance. Section 3.23 of the Company Disclosure Schedule sets
forth a true and complete list of all insurance policies providing insurance
coverage of any nature to the Company. Such policies are sufficient for
compliance by the Company with all requirements of law and all material
agreements to which the Company is a party or by which any of its assets are
bound. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and the Company has complied with
all material terms and conditions of such policies, including premium payments.
None of the insurance carriers has indicated to the Company an intention to
cancel any such policy. The Company does not have any claim pending against any
of the insurance carriers under any of such policies and there has been no
actual or alleged occurrence of any kind which may give rise to any such claim.
3.24 Reorganization. Neither the Company nor, to the knowledge of the
Company, any of its directors, officers or stockholders has taken any action
which would prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a)(2)(E) of the Code.
3.25 Section 203 of the DGCL Not Applicable. The Board of Directors
of the Company has taken all actions so that the restrictions contained in
Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203) will not apply to the execution, delivery or performance of this
Agreement or to the consummation of the Merger or the other transactions
contemplated by this Agreement.
3.26 Brokers. Except as set forth in Section 3.26 of the Company
Disclosure Schedule, neither the Company nor any of its officers or directors
has employed any broker or finder or incurred any liability for any broker's
fees, commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement.
3.27 Minute Books. Except as set forth in Section 3.27 of the Company
Disclosure Schedule, the minute books of the Company made available to Parent
contain a complete and accurate summary of all meetings of directors and
stockholders or actions by written consent since the time of incorporation of
the Company through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately.
3.28 Vote Required. The affirmative vote of (i) the holders of a
majority of the shares of Company Common Stock, (ii) the holders of a majority
of the shares of Company
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Series A Preferred, voting separately as a class, and (ii) the holders a
majority of the shares of Company Series C Preferred, voting separately as a
class, in each case outstanding on the record date set for the Company
Stockholders Meeting (as defined in Section 6.1 below), are the only votes of
the holders of any of Company Capital Stock necessary to approve this Agreement
and the transactions contemplated hereby (including the amendment of the
Certificate of Designation of the Company Series A Preferred and the Certificate
of Designation of the Company Series C Preferred).
3.29 Employee Nondisclosure and Assignment of Inventions Agreements.
Except as set forth in Section 3.29 of the Company Disclosure Schedule, each
employee of the Company with access to Intellectual Property has executed and
delivered to the Company the standard agreement regarding confidentiality and
assignment of inventions in the form previously delivered to Parent.
3.30 Year 2000 Compliance. Except as set forth in Section 3.30 to the
Company Disclosure Schedule, (a) the software and hardware utilized by the
Company in connection with its business will deliver, receive, store and process
date information in the same manner before, during and after January 1, 2000 and
(b) no material expenditures are contemplated by the Company or, to the
Company's knowledge, are necessary to remediate such software and hardware in
connection with processing data information.
3.31 Representations Complete. None of the representations or
warranties made by the Company or the Company Stockholders herein or in any
Schedule hereto, including the Company Disclosure Schedule, or certificate
furnished by the Company pursuant to this Agreement, when all such documents are
read together in their entirety, contains or will contain at the Effective Time
any untrue statement of a material fact, or omits or will omit at the Effective
Time to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
For purposes of this Agreement, the phrases "knowledge of Parent and
Merger Sub," or "to Parent's and Merger Sub's knowledge" or references to the
absence of "notice to Parent and Merger Sub" and the like shall mean the actual
knowledge after due inquiry of those persons set forth on Schedule IV attached
hereto. Except as set forth in the disclosure schedule attached hereto (the
"Parent Disclosure Schedule"), Parent and Merger Sub hereby jointly and
severally represent and warrant to the Company as follows:
4.1 Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
the State of Delaware. Parent and Merger Sub have the corporate power and
authority to own or lease their respective properties and assets and to carry on
their respective businesses as they are now being conducted, and are duly
qualified to do business in each jurisdiction in which the nature of the
business conducted by them or the character or location of the properties and
assets owned or leased by them makes such qualification necessary, except where
the failure to be so qualified (i) would
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not individually or in the aggregate have a Material Adverse Effect or (ii)
would not adversely affect the ability of Parent or Merger Sub to consummate the
transactions contemplated hereby. The copies of the Certificate of Incorporation
and Bylaws of Parent and Merger Sub which have previously been made available to
the Company are true and correct copies of such documents as in effect as of the
date of this Agreement.
4.2 Authority; No Violation.
(a) Each of Parent and Merger Sub has the requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The Board of Directors of Parent has (i) unanimously approved this
Agreement and the Merger and all transactions contemplated hereby, (ii)
determined that the Merger is in the best interests of the stockholders of
Parent and is on terms that are fair to such stockholders and (iii) determined
that this Agreement is advisable and recommended that the stockholders of Parent
approve this Agreement and consummation of the Merger. The Board of Directors
and the stockholder of Merger Sub have approved this Agreement and the Merger
and all transactions contemplated hereby. Except for such approvals of Parent's
stockholders as may be required by law or Parent's Certificate of Incorporation,
no other corporate proceedings on the part of Parent or Merger Sub are necessary
to approve this Agreement and to consummate the transactions contemplated
hereby. This Agreement and all other agreements and documents to be entered into
in connection herewith have been duly and validly executed and delivered by
Parent and Merger Sub and (assuming due authorization, execution and delivery by
the Company and Company Stockholders) constitute valid and binding obligations
of Parent and Merger Sub, enforceable against each of them, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 4.2(b) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent and Merger Sub, nor the consummation by Parent and Merger Sub of the
transactions contemplated hereby, nor compliance by Parent and Merger Sub with
any of the terms or provisions hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of Parent or Merger Sub, or (ii) assuming
that the consents and approvals referred to in Section 4.5 hereof are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or Merger Sub or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of Parent or Merger Sub under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Parent or Merger Sub is a party, or by which either of them
or any of their respective properties or assets may be bound or affected.
4.3 Capitalization of Parent and Merger Sub.
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(a) As of December 31, 1998, Parent's authorized capital
stock consisted solely of (i) 100,000,000 shares of Parent Common Stock, of
which (A) 16,171,091 shares were issued and outstanding, (B) no shares were
issued and held in treasury (which does not include the shares reserved for
issuance set forth in clause (C) below) and no shares were held by Subsidiaries
of Parent, and (C) 12,225,000 shares were reserved for issuance upon the
exercise of outstanding options and 37,554,287 shares were reserved for issuance
upon the conversion or exchange of convertible or exchangeable securities
granted or issued by Parent; and (ii) 35,000,000 shares of Parent Preferred
Stock of which 8,440,002 shares were designated as Series A Preferred of which
8,440,002 shares were issued and outstanding, 9,500,000 shares were designated
as Series B Preferred, of which 9,499,874 shares were issued and outstanding,
and 11,597,112 shares were designated Series C Preferred, of which 11,547,112
shares were issued and outstanding. Each outstanding share of Parent Capital
Stock is, and all shares of Parent Capital Stock to be issued in connection with
the Merger will be, duly authorized and validly issued, fully paid and
nonassessable, and each outstanding share of Parent Capital Stock has not been,
and all shares of Parent Capital Stock to be issued in connection with the
Merger will not be, issued in violation of any preemptive or similar rights. As
of the date hereof, other than as set forth herein or in Section 4.3 of the
Parent Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, calls, commitments, agreements, or obligations of any character
calling for the purchase, redemption or issuance by Parent of any equity
securities of Parent, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of Parent Capital Stock and
neither Parent nor any Subsidiary has any obligation of any kind to issue any
additional securities or to pay for or repurchase any securities of Parent, its
Subsidiaries or its or their predecessors. Except as set forth in Section 4.3 of
the Parent Disclosure Schedule, Parent has no agreement, arrangement or
understanding to register any securities of Parent or any of its Subsidiaries
under the Securities Act or under any state securities law and has not granted
registration rights to any person or entity; copies of all such agreements have
previously been provided to the Company.
(b) Merger Sub's authorized capital stock consists solely of
10,000 shares of Common Stock, par value $.0001 per share ("Merger Sub Common
Stock"), of which, as of the date hereof, 1,000 shares are issued and
outstanding and none are reserved for issuance. As of the date hereof, all of
the outstanding shares of Merger Sub Common Stock are owned free and clear of
any liens, claims or encumbrances by Parent.
4.4 Subsidiaries. Section 4.4 of the Parent Disclosure Schedule sets
forth a list of all of Parent's subsidiaries ("Subsidiaries"). Except as set
forth in Section 4.4 of the Parent Disclosure Schedule, Parent owns directly or
indirectly each of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions) of each of such Subsidiaries.
4.5 Consents and Approvals. Neither the execution and delivery of
this Agreement by Parent or Merger Sub nor the consummation of the transactions
contemplated hereby will require any action or consent or approval of, or review
by, or registration or filing by Parent or any of its affiliates with, any third
party or any Governmental Entity, other than (i) registrations or other actions
required under federal and state securities laws as are contemplated by this
Agreement or (ii) consents or approvals of any Governmental Entity set forth in
Section 4.5 to the Parent Disclosure Schedule, except for those which would not,
individually or in the
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aggregate, reasonably be expected to have a Material Adverse Effect on Parent
and its Subsidiaries taken as a whole or a Material Adverse Effect on the
ability of the parties to consummate the transactions contemplated hereby.
4.6 Parent Financial Statements. Set forth in Section 4.6 of Parent
Disclosure Schedule are true and correct copies of (a) an audited consolidated
balance sheet of Parent at December 31, 1997, together with related audited
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, and (b) Parent's unaudited consolidated balance sheet (the
"Parent Balance Sheet") and income statement as of and for the year ended
December 31, 1998 (collectively, the "Parent Financial Statements"). Such Parent
Financial Statements have been prepared in accordance with GAAP (except that the
unaudited Parent Financial Statements do not contain all footnotes required by
GAAP and are subject to normal year-end audit adjustments that in the aggregate
will not be material) applied on a basis consistent throughout the periods
indicated and with each other. The Parent Financial Statements fairly present
the consolidated financial condition and operating results of Parent as of the
dates, and for the periods indicated therein, subject to normal year-end audit
adjustments. The books and records of Parent have been, and are being,
maintained in accordance with GAAP and any other applicable legal and accounting
requirements.
4.7 Absence of Undisclosed Liabilities. Except (i) as and to the
extent disclosed or reserved against in the Parent Balance Sheet, (ii) as
incurred in the ordinary course of business and consistent with past practice
and not prohibited by this Agreement, (iii) as incurred in connection with the
execution of this Agreement and (iv) as disclosed in Section 4.7 of the Parent
Disclosure Schedule, Parent, together with its Subsidiaries, does not have any
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, have or would have a Material Adverse Effect
on Parent and its Subsidiaries, taken as a whole.
4.8 Absence of Certain Changes. Since December 31, 1998, (a) except
as disclosed in Section 4.8 of Parent Disclosure Schedule, there has not been
any change that would have a Material Adverse Effect on the assets, business,
properties, operations or financial condition of Parent and its Subsidiaries,
taken as a whole, or any condition, event or occurrence that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect on Parent, (b) neither Parent nor any of its Subsidiaries has
participated in any transaction, or otherwise acted outside the ordinary course
of business, including, without limitation, declaring or paying any dividend or
declaring or making any distribution to its stockholders except out of the
earnings of Parent and (c) neither Parent nor any of its Subsidiaries has
increased the compensation of any of its officers or the rate of pay of any of
its employees, except as part of regular compensation increases in the ordinary
course of business.
4.9 Additional Representations and Warranties. Except as disclosed
in Section 4.9 of the Parent Disclosure Schedule, the representations and
warranties of Parent set forth in Sections 3.5, 3.6, 3.8, 3.9, 3.12, 3.14, 3.16
through 3.18 and 3.20 through 3.27 (the "Series C Representations") of that
certain Stock Purchase Agreement, dated May 26, 1998, by and among Parent,
General Atlantic Partners 46, L.P., GAP Coinvestment Partners, L.P. and Bayview
Investors, Ltd. (the "Series C Purchase Agreement") are true and correct in all
material respects as of the date hereof. For the purposes of this Section 4.9,
all capitalized terms used in the Series
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C Representations and not otherwise defined herein shall have the meanings given
to them in Section 1.1 of the Series C Purchase Agreement. All schedules
referred to in the Series C Representations shall refer to the applicable
schedules set forth in Section 4.9 of the Parent Disclosure Schedule.
4.10 Brokers. Except as set forth in Section 4.10 of the Parent
Disclosure Schedule, neither Parent, Merger Sub, nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement.
4.11 Vote Required. The affirmative vote of (i) the holders of a
majority of the shares of Parent Common Stock, (ii) the holders of a majority of
the shares of Parent Series A Preferred, voting separately as a class, (iii) the
holders of a majority of the shares of Parent Series B Preferred, voting
separately as a class, and (iv) the holders of a majority of the shares of
Parent Series C Preferred, voting separately as a class, in each case
outstanding on the record date set for the Parent Stockholders Meeting (as
defined in Section 6.1 below), are the only votes of the holders of any of
Parent Capital Stock necessary to approve this Agreement and the transactions
contemplated hereby.
4.12 Representations Complete. None of the representations or
warranties made by Parent or Merger Sub herein or in any Schedule hereto,
including the Parent Disclosure Schedule, or certificate furnished by the Parent
pursuant to this Agreement, when all such documents are read together in their
entirety, contains or will contain at the Effective Time any untrue statement of
a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
Parent, the Company shall carry on its business in the ordinary course
consistent with past practice. Without limiting the generality of the foregoing,
and except as previously disclosed by the Company to Parent in writing or as
otherwise contemplated by this Agreement or consented to in writing by Parent,
the Company shall not:
(a) declare or pay any dividends on, or make other
distributions in respect of, any of Company Capital Stock;
(b) (i) repurchase, redeem or otherwise acquire any shares
of Company Capital Stock, or any securities convertible into or exercisable for
any shares of Company Capital Stock, (ii) split, combine or reclassify any
shares of Company Capital Stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
Company Capital Stock, or (iii) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or
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exercisable for, or any rights, warrants or options to acquire, any such shares,
or enter into any agreement with respect to any of the foregoing; provided,
however, that Parent agrees that it shall review in good faith any proposal by
the Company to issue stock options in connection with the hiring of any new
employee or the engagement of any consultant or service provider by the Company;
(c) amend its Certificate of Incorporation or Bylaws;
(d) make any capital expenditures other than those which are
made in the ordinary course of business or are necessary to maintain existing
assets in good repair;
(e) enter into any new line of business, except as
contemplated hereby;
(f) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to the Company;
(g) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article I not being satisfied;
(h) make a material change in its methods of accounting in
effect at December 31, 1998, except as required by changes in GAAP or as
concurred with by the Company's independent auditors;
(i) (i) except as required by applicable law or as required
to maintain qualification pursuant to the Code, adopt, amend, or terminate any
employee benefit plan or any agreement, arrangement, plan or policy between the
Company and one or more of its current or former directors, officers or
employees, except that the Company may pay retention bonuses as described in
Section 5.1(i) of the Company Disclosure Schedule or (ii) except for normal
increases in the ordinary course of business consistent with past practice or
except as required by applicable law, increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any employment or similar agreement in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares); provided, however, that nothing contained herein shall
prohibit the Company (x) from paying 1998 bonuses under any employment agreement
or bonus arrangements listed in Section 5.1(i) of the Company Disclosure
Schedule (the "Bonus Arrangements") consistent with past practices, except that
in determining the amounts of such bonuses, the Company shall be entitled to
disregard the effect (including, without limitation, the cost) of any actions
taken by the Company in contemplation of the Merger or at the request of Parent,
or (y) from entering into the severance arrangements described in Section 5.1(i)
of the Company Disclosure Schedule;
(j) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease,
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encumber, assign or otherwise dispose of, any of its material assets, properties
or other rights or agreements;
(k) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, except for the
loan from Parent contemplated by Section 6.10 hereof; provided, however, that if
Company does not receive by January 29, 1999 the funds to be loaned by Parent
pursuant to and in accordance with the terms of the Promissory Note (as defined
in Section 6.10), then the provisions of this Section 5.1(k) shall not apply,
and the provisions of Sections 5(b)(iii), (c), (g) and (j) shall not apply to
the extent necessary to permit the Company to obtain alternative short-term
financing through the issuance of debt and/or convertible securities or the
granting of liens to secure such short-term financing; provided further,
however, that the immediately foregoing proviso shall not be deemed to be or
construed as a waiver by Parent or Merger Sub of any other provision of this
Agreement, including, without limitation, the condition to the Closing set forth
in Section 7.2(d) of this Agreement.
(l) other than (i) agreements in the ordinary course of
business that do not require payments by the Company in excess of $100,000 per
year per individual agreement or an aggregate of $300,000 per year for all such
agreements and (ii) agreements not in the ordinary course of business that do
not require payments by the Company in excess of $50,000 per year per individual
agreement or an aggregate of $200,000 per year for all such agreements, create,
renew, amend or terminate or give notice of a proposed renewal, amendment or
termination of, any material contract, agreement or lease for goods, services or
office space to which the Company is a party or by which the Company or its
properties are bound; or
(m) agree to do any of the foregoing.
5.2 Covenants of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement or with the prior written consent of
the Company, Parent and its Subsidiaries shall carry on their respective
businesses in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, and except as previously disclosed by
Parent to the Company in writing or as otherwise contemplated by this Agreement
or consented to in writing by the Company, Parent shall not, and shall not
permit any of its Subsidiaries to:
(a) amend its Certificate of Incorporation or Bylaws;
(b) declare or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, in respect of any Parent Capital
Stock or any other securities subsequently authorized and issued by Parent,
except that any Subsidiary of Parent may pay dividends or make other
distributions to Parent or any other Subsidiary of Parent;
(c) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(d) sell, transfer, license, sublicense or otherwise dispose
of any material assets;
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(e) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue, or in any of the conditions to the
Merger set forth in Article I not being satisfied;
(f) enter into any new line of business except as
contemplated hereby;
(g) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof; or
(h) other than (i) agreements in the ordinary course of
business that do not require payments by the Company in excess of $200,000 per
year per individual agreement or an aggregate of $600,000 per year for all such
agreements and (ii) agreements not in the ordinary course of business that do
not require payments by the Company in excess of $100,000 per year per
individual agreement or an aggregate of $400,000 per year for all such
agreements, create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract, agreement or lease
for goods, services or office space to which the Company is a party or by which
the Company or its properties are bound; or
(i) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS.
6.1 Preparation of Information Statement.
(a) As promptly as practicable after the execution of this
Agreement, Parent and Company shall jointly prepare a document or documents
(together with all amendments thereto, the "Information Statement") that will
constitute a disclosure document for the offering of the Parent Capital Stock to
be issued to Company's stockholders pursuant to the Merger and the proxy
statement relating to the special meeting of Company's stockholders (the
"Company Stockholders' Meeting") and either the obtaining of a written consent
of Parent's Stockholders or the special meeting of Parent's stockholders (the
"Parent Stockholders' Meeting"), as the case may be, to be obtained or held for
the purpose of approving this Agreement, the Merger and the transactions
contemplated hereby. Parent and Company shall each use reasonable commercial
efforts to cause the Information Statement to comply with applicable federal and
state securities laws requirements and with the applicable provisions of the
DGCL. Parent or Company, as the case may be, shall furnish promptly to the other
such information concerning its business and financial statements and affairs
as, in the reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Information Statement, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. As promptly as practicable after the preparation of the
Information Statement, the Information Statement shall be mailed to the
stockholders of Company and of Parent. The Information Statement shall include
the approval of the Merger and recommendation of the Board of Directors of
Company to Company's stockholders that they vote in favor of
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approval of this Agreement, the Merger and the transactions contemplated hereby,
and the approval of the Merger and recommendation of the Board of Directors of
Parent to Parent's stockholders that they vote in favor of approval of this
Agreement, the Merger and the transactions contemplated hereby. Anything to the
contrary contained herein notwithstanding, the Information Statement shall not
include any information with respect to any party or its affiliates or
associates, the form and content of which information shall not have been
approved by such party prior to such inclusion, unless required by applicable
law.
(b) No amendment or supplement to the Information Statement
shall be made without the approval of Parent and Company, which approval shall
not be unreasonably withheld or delayed. None of the information supplied by
either party for inclusion in the Information Statement shall, at the date it or
any amendments or supplements thereto are mailed to stockholders of Parent in
connection with the Parent Stockholders' Meeting or the solicitation of written
consents of the stockholders of Parent, as the case may be, and to stockholders
of Company in connection with the Company Stockholders' Meeting, at the time of
the Company Stockholders' Meeting, at the time of the Parent Stockholders'
Meeting or date upon which a written consent is solicited, as the case may be,
and at the Effective Time, 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 or circumstance relating to Company or Parent, or any of their respective
subsidiaries, or any of their respective officers or directors, should be
discovered by either party that should be set forth in an amendment or a
supplement to the Information Statement, such party shall promptly inform the
other party in writing.
(c) Parent assumes no liability for, and the Holders (as
defined in Section 9.1 hereof) shall indemnify and hold harmless Parent, its
officers, directors, employees, advisors and agents and each person who controls
(within the meaning of the Securities Act) or the Securities Exchange Act of
1934, as amended (the "Exchange Act")) Parent from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue, or allegedly untrue,
statement of a material fact contained in any information disclosed in the
Information Statement or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent the same
are caused by or contained in any information concerning the Company or any
Holder furnished in writing to Parent by the Company or any Holders for
inclusion in the Information Statement, provided, however, that the liability of
the Holders under this paragraph (d) shall be several and not joint with respect
to any such untrue statements or omissions to state material facts regarding any
Holder contained in any information furnished by such Holder.
(d) Neither the Company nor any Holder assumes liability
for, and Parent shall indemnify and hold harmless the Holders, the Company, its
officers, directors, employees, advisors and agents and each person who controls
(within the meaning of the Securities Act or the Exchange Act) the Company from
and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue, or allegedly untrue, statement of a material fact contained in any
information disclosed in the Information Statement or arising out of or based
upon any omission or alleged omission to
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state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent the same are caused by or
contained in any information concerning Parent or Merger Sub furnished in
writing to the Company for inclusion in the Information Statement.
6.2 Stockholders' Meetings. Company shall call and hold the Company
Stockholders' Meeting, and Parent shall call and hold the Parent Stockholders'
Meeting, or solicit written stockholder consent, as the case may be, as promptly
as practicable after the date hereof for the purpose of voting upon the approval
of this Agreement, the Merger and the transactions contemplated hereby pursuant
to the Information Statement, and Company and Parent shall use all reasonable
efforts to hold the Company Stockholders' Meeting and Parent Stockholders'
Meeting, if any, on the same day and as soon as practicable after the date
hereof. Company shall use all reasonable efforts to solicit from its
stockholders proxies in favor of the approval of this Agreement, the Merger and
the transactions contemplated hereby pursuant to the Information Statement and
shall take all other action necessary or advisable to secure the vote or consent
of stockholders required by the DGCL to obtain such approval. Parent shall use
all reasonable efforts to solicit from its stockholders proxies in favor of the
approval of this Agreement, the Merger and the transactions contemplated hereby
pursuant to the Information Statement and shall take all other action necessary
or advisable to secure the vote or consent of stockholders required by the DGCL
to obtain such approval. Each of the parties hereto shall take all other action
necessary or, in the opinion of the other parties hereto, advisable to promptly
and expeditiously secure any vote or consent of stockholders required by
applicable law and such party's Certificate of Incorporation and Bylaws to
effect the Merger.
6.3 Access to Information.
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, the Company shall afford to the
officers, employees, accountants, counsel and other representatives of Parent,
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, records, officers,
employees, accountants, counsel and other representatives and, during such
period, the Company shall make available to Parent all information concerning
its business, properties and personnel as Parent may reasonably request. The
Company shall not be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. All information furnished to
Parent pursuant to this Section 6.3(a) shall be subject to, and Parent shall
hold all such information in confidence in accordance with, the provisions of
the confidentiality agreement, dated November 23, 1998 (the "Confidentiality
Agreement"), between Parent and the Company.
(b) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, Parent shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Company, access, during normal business hours
during the period prior to the Effective Time, to such information
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regarding Parent and its Subsidiaries as shall be reasonably necessary prepare
the Information Statement or which may be reasonably necessary for the Company
to confirm that the representations and warranties of Parent contained herein
are true and correct and that the covenants of Parent contained herein have been
performed in all material respects. Neither Parent nor any of its Subsidiaries
shall be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of Parent's
customers, jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. The Company shall have the same
obligations to Parent, with respect to all information furnished by Parent to
the Company pursuant to this Section 6.3(b), as Parent has to the Company under
the Confidentiality Agreement with respect to information furnished thereunder
by the Company to Parent, as if the Company were the receiving party under the
Confidentiality Agreement.
(c) No investigation by Parent or the Company or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
6.4 Public Disclosure. Unless otherwise permitted by this Agreement,
Parent and the Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law.
6.5 Intentionally Deleted.
6.6 Legal Requirements. Each of Parent, Merger Sub and the Company
will, and will cause their respective subsidiaries to, take all reasonable
actions necessary to comply promptly with all legal requirements which have been
or which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
6.7 Blue Sky Laws. Parent shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Capital Stock in connection with the
Merger. The Company shall use its best efforts to assist Parent as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent Capital Stock in
connection with the Merger.
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6.8 Company Stock Option Plan. At the Effective Time, the Company
Stock Option Plan and each outstanding option to purchase shares of Company
Common Stock under the Company Stock Option Plan, whether vested or unvested,
will be assumed by Parent and any outstanding repurchase rights shall be
assigned to Parent. Section 6.8 of the Company Disclosure Schedule sets forth a
true and complete list as of the date hereof of all holders of outstanding
options under the Company Stock Option Plan including the number of shares of
Company Common Stock subject to each such option, the exercise or vesting
schedule, the exercise price per share and the term of each such option. On the
Closing Date, the Company shall deliver to Parent an updated Section 6.8 of the
Company Disclosure Schedule current as of such date. Each such option so assumed
by Parent under this Agreement shall continue to have, and be subject to, the
same terms and conditions set forth in the Company Stock Option Plan immediately
prior to the Effective Time, except that (i) such option will be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such option immediately prior to the Effective Time multiplied by the Exchange
Ratio and rounded down to the nearest whole number of shares of Parent Common
Stock, and (ii) the per share exercise price for the shares of Parent Common
Stock issuable upon exercise of such assumed option will be equal to the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent. Consistent
with the terms of the Company Stock Option Plan and the documents governing the
outstanding options thereunder, except as disclosed in Section 3.2(a) of the
Company Disclosure Schedule, the Merger will not terminate any of the
outstanding options under the Company Stock Option Plan or accelerate the
exercisability or vesting of such options or the shares of Parent Common Stock
upon Parent's assumption of the options in the Merger. It is the intention of
the parties that the options so assumed by Parent qualify following the
Effective Time as incentive stock options as defined in Section 422 of the Code
to the extent such options qualified as incentive stock options prior to the
Effective Time. Within ten (10) business days after the Effective Time, Parent
will issue to each person who immediately prior to the Effective Time was a
holder of an outstanding option under the Company Stock Option Plan a document
in form and substance satisfactory to the Company evidencing the foregoing
assumption of such option by Parent.
6.9 Board Representation; Appointment of Certain Officers. Promptly
following the Effective Time, consistent with applicable law and its Bylaws, the
Board of Directors of Parent shall (i) increase the number of members of its
Board of Directors by two and elect two designees nominated by the Company
Stockholders and designated to the Stockholders Agent (as defined below) to fill
such vacancies, to serve as such until the next annual meeting of Parent
stockholders or such time as their successors shall have been duly elected or
appointed and qualified, and (ii) appoint ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as an Executive Vice
President of Parent and the President, Internet Services Division of Parent.
6.10 Loan to the Company. Parent agrees that, upon the execution and
delivery by the Company of a promissory note in the form attached hereto as
Exhibit B (the "Promissory Note"), Parent shall lend funds to the Company in an
amount up to $1,500,000 in accordance with the terms of such Promissory Note,
with the first advance under such Promissory Note to occur not later than
January 29, 1999.
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6.11 Reorganization. Parent and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
qualified as a "reorganization" described in Section 368(a)(2)(E) of the Code.
6.12 Control of Operations. Nothing contained in this Agreement shall
give Parent, directly or indirectly, the right to control or direct the
operations of the Company prior to the Effective Time. Prior to the Effective
Time, each of Parent and the Company shall exercise, consistent with the terms
and conditions of this Agreement, complete control and supervision over its
respective operations.
6.13 Change of Corporate Names.
(a) The parties agree that, following the execution of this
Agreement and not later than February 19, 1999:
(i) The Company shall take all necessary and
appropriate action, including, without limitation, the amendment of its
Certificate of Incorporation, to (x) change the corporate name of the Company to
a name other than, and not in conflict with, either the name "▇▇▇▇▇▇▇.▇▇▇, Inc."
or the name "Advantix, Inc.", (y) concurrently allow Parent to amend its
Certificate of Incorporation to change its corporate name to "▇▇▇▇▇▇▇.▇▇▇, Inc."
and (z) allow Parent to qualify to do business under the name "▇▇▇▇▇▇▇.▇▇▇,
Inc." in any jurisdiction in which Parent reasonably deems it necessary or
appropriate to so qualify. For purposes hereof, a name shall be deemed "in
conflict with" another name if such name would limit the ability of Parent to
use such name in connection with the operation of its businesses in any
jurisdiction in which Parent conducts such businesses.
(ii) Immediately following completion of the actions
contemplated by paragraph (a)(i) above, Parent shall take all necessary and
appropriate action, including, without limitation, the amendment of its
Certificate of Incorporation, to (x) change the corporate name of Parent to the
name "▇▇▇▇▇▇▇.▇▇▇, Inc." and (y) qualify to do business under the name
"▇▇▇▇▇▇▇.▇▇▇, Inc." in those jurisdictions in which the Company is required to
permit Parent to qualify to do business pursuant to paragraph (i) above.
(b) Parent hereby covenants and agrees that, upon completion
of the actions set forth in clause (x) of paragraph (a)(ii) above, Parent shall
authorize and permit the Company to continue to use, and shall take any and all
necessary action to facilitate the use by the Company of, the name "▇▇▇▇▇▇▇.▇▇▇"
as a "d/b/a" or otherwise in the conduct of the Company's business pending the
Closing in a manner consistent with the previous conduct thereof, and Parent
shall not challenge or interfere in any manner with such continued usage.
(c) Parent and the Company hereby expressly acknowledge and
agree that the actions contemplated to be taken by the parties pursuant to this
Section 6.13 pertain solely and exclusively to the change of the parties'
respective corporate names prior the Closing in order to facilitate the
integration of the parties' businesses following the Effective Time and for
other sound business reasons. Parent and the Company hereby further expressly
acknowledge and agree that no assignment by the Company to Parent prior to
Closing of any right, title or interest of the Company in and to any of its
trademarks, trademark applications, trade names,
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URLs, domain names or other Intellectual Property (whether related to the name
"▇▇▇▇▇▇▇.▇▇▇" or otherwise) is intended or contemplated by this Section 6.13 and
no such assignment shall be deemed to have occurred as a result hereof.
(d) Notwithstanding anything in this Agreement to the
contrary, in the event that this Agreement is terminated pursuant to Article
VIII hereof or for any other reason whatsoever, Parent promptly shall take all
necessary and appropriate action, including, without limitation, the amendment
of its Certificate of Incorporation, to (x) change its name to a name other
than, and not in conflict with, the name "▇▇▇▇▇▇▇.▇▇▇, Inc.", (y) allow the
Company to qualify to do business under the name "▇▇▇▇▇▇▇.▇▇▇, Inc." in any
jurisdiction in which the Company reasonably deems it necessary or appropriate
to so qualify, and (z) amend any registration statement theretofore filed by
Parent under the Securities Act, prior to the effective date of such
registration statement to effect such name change and to remove all references
therein to "▇▇▇▇▇▇▇.▇▇▇" (except where such references may be required for the
purpose of providing adequate disclosure about Parent's business). For purposes
hereof, a name shall be deemed "in conflict with" the name "▇▇▇▇▇▇▇.▇▇▇, Inc."
if such name would limit the ability of the Company to use such name in
connection with the operation of its business in any jurisdiction in which the
Company conducts such business.
(e) The Company and Parent shall each bear their own costs
and expenses incurred in effecting the actions contemplated by this Section 6.13
(which expenses on the part of the Company shall be deemed not to be included in
the Company Expense Fee Cap (as defined in Section 10.2 hereof)); provided,
however, that (i) in the event that this Agreement is terminated as a result of
a breach of this Agreement by either the Company or a Company Stockholder,
Parent shall be entitled to recover its costs and expenses, including without
limitation reasonable legal fees and expenses, incurred in connection with
effecting the actions contemplated by this Section 6.13, and (ii) in the event
that this Agreement is terminated as a result of a breach of this Agreement by
either Parent or Merger Sub, the Company shall be entitled to recover its costs
and expenses, including without limitation reasonable legal fees and expenses,
incurred in connection with effecting the actions contemplated by this Section
6.13.
6.14 Best Efforts and Further Assurances. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
6.15 Amendments to Certificates of Designation.
(a) By executing this Agreement, each of the Company
Stockholders holding Company Series A Preferred hereby waives any and all rights
to receive any distribution under Section A.1 of the Certificate of Designation
of Series A Preferred Stock of the Company (the "Series A Certificate") as a
result of the consummation of the transactions contemplated in this Agreement
and agrees to vote all shares of Company Series A Preferred held by it in favor
of the amendment of the Series A Certificate to eliminate all rights to receive
any distribution under
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Section A.1 of the Series A Certificate which might otherwise be receivable as a
result of the transactions contemplated by this Agreement.
(b) By executing this Agreement, each of the Company
Stockholders holding Company Series C Preferred hereby waives any and all rights
to receive any distribution under Section B.1 of the Certificate of Designation
of Series C Preferred Stock of the Company (the "Series C Certificate") as a
result of the consummation of the transactions contemplated in this Agreement.
and agrees to vote all shares of Company Series C Preferred held by it in favor
of the amendment of the Series C Certificate to eliminate all rights to receive
any distribution under Section B.1 of the Series C Certificate which might
otherwise be receivable as a result of the transactions contemplated by this
Agreement.
6.16 Stockholder Voting Agreements; Irrevocable Proxies.
Each of the Company Stockholders agrees, concurrently with the execution
of this Agreement, to execute a Stockholder Voting Agreement in the form
attached hereto as Exhibit C (each a "Stockholder Voting Agreement"). In
addition, each Company Stockholder hereby agrees to vote for approval of this
Agreement and the Merger pursuant to the Stockholder Voting Agreement or
pursuant to an irrevocable proxy in the form attached hereto as Exhibit D (each
an "Irrevocable Proxy").
6.17 Stockholders Agreement. Parent shall execute, and use its best
efforts to cause the other parties to that certain Stockholders Agreement dated
as of May 26, 1998 among Parent, General Atlantic Partners 46, L.P., GAP
Coinvestment Partners, L.P., Bayview Investors, Ltd., and the several
stockholders of Parent named therein (the "Stockholders Agreement") to execute
an Amended and Restated Stockholders Agreement (the "Amended Stockholders
Agreement") in substantially the form attached hereto as Exhibit E, subject to
such amendments as shall be reasonably required to effect the Equity Financing
contemplated by Section 7.3(f); provided, however, that no such amendment shall
be made to Sections 4.2.1, 4.5 and 8.3(b) of the Amended Stockholders Agreement
in a manner that would materially and adversely affect the rights of the TCI
Series C Stockholders (as defined in the Amended Stockholders Agreement) without
the prior written consent of The TCI Series C Stockholders.
6.18 Investor Rights Agreement. Parent shall execute, and use its
best efforts to cause the other parties to that certain Amended and Restated
Investor Rights Agreement dated May 26, 1998 among Parent and the several
stockholders of Parent named therein (the "Investor Rights Agreement") to
execute a Second Amended and Restated Investor Rights Agreement (the "Second
Amended Investor Rights Agreement") in substantially the form attached hereto as
Exhibit F, subject to such amendments as shall be reasonably required to effect
the Equity Financing contemplated by Section 7.3(f); provided, however, that no
such amendment shall be made to Sections 3(b)(ii), 7(a) and 11(d) of the Second
Amended Investor Rights Agreement in a manner that would materially and
adversely affect the rights of the TCI Stockholders (as defined in the Second
Amended Investor Rights Agreement) without the prior written consent of The TCI
Stockholders.
6.19 Company Stock Option Plan. The Company shall use its best
efforts to comply with all federal and California securities law requirements in
connection with the grant
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of stock options previously made or to be made under the Company Stock Option
Plan, to the reasonable satisfaction of Parent and its legal counsel.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote or written consent of (i) the holders
of the outstanding shares of Company Capital Stock as of the record date set for
the Company Stockholders' Meeting, (ii) Parent, as the sole stockholder of
Merger Sub and (iii) such holders of the outstanding shares of Parent Capital
Stock outstanding as shall be required to approve the transactions contemplated
hereby as of the record date set for determining stockholders entitled to vote
at the Parent Stockholders' Meeting or take action by written consent, as the
case may be.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(c) Governmental Approval. The Company, Parent and its
Subsidiaries shall have timely obtained from each Governmental Entity all
approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby
(each a "Requisite Regulatory Approval"), including such approvals, waivers and
consents as may be required under the Securities Act and under state blue sky
laws (other than those filings, approvals, waivers and consents relating to the
Merger or affecting Parent's ownership of Company or any of its properties that,
if not obtained would not have a Material Adverse Effect to either party).
(d) Tax-Free Reorganization. The Company shall have received
an opinion from its tax advisors to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a)(2)(E) of the Code, and such
opinion shall have been reviewed and approved by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP on behalf
of Parent. In rendering such opinion, the Company's tax advisors shall be
entitled to rely upon representations of Parent and Company and certain
stockholders of Company.
(e) Investor Rights Agreement. Parent, the Company
Stockholders designated in Section 6.18 of the Company Disclosure Schedule, and
all other parties required to
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amend the Investor Rights Agreement pursuant to its terms shall have executed
the Second Amended Investor Rights Agreement.
(f) Employment Agreements. The persons listed on Section
7.1(f) of the Company Disclosure Schedule shall have entered into employment
agreements with Parent in form and substance reasonably satisfactory to the
parties thereto and the Board of Directors of Parent shall have approved the
grant of options to purchase Parent Common Stock as set forth in such employment
agreements.
(g) Stockholders Agreements. Parent, the Company
Stockholders designated in Section 6.18 of the Company Disclosure Schedule, and
all other parties required to amend the Stockholders Agreement pursuant to its
terms shall have executed the Amended Stockholders Agreement.
7.2 Conditions to Obligations of Parent and Merger Sub. The
obligation of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction or waiver by Parent and Merger Sub at or prior to the Effective
Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date. Parent shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's conduct or operation of the
business of the Company following the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of the Company, taken as a whole.
(e) Third Party Consents. Parent shall have been furnished
with evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger under
the contracts of the Company set forth on Section 3.4 of the Company Disclosure
Schedule.
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(f) Legal Opinion. Parent shall have received a legal
opinion from ▇▇▇▇▇ ▇▇▇▇ LLP in substantially the form attached hereto as Exhibit
G.
(g) Stockholder Representation Agreements. Parent shall have
received from each holder of Company Capital Stock listed on Schedule II
attached hereto an executed Stockholder Representation Agreement in
substantially the form attached hereto as Exhibit H.
(h) Approval of Company Stockholders. Either (i)
stockholders of the Company holding at least 92% of the outstanding Company
Capital Stock shall have voted their shares of Company Capital Stock in favor
of, or executed a written consent approving, the Merger or (ii) Parent shall
have received notices from Company stockholders holding no more than 8% of the
outstanding Company Capital Stock that such stockholders have elected to
exercise their appraisal rights under Section 262 of the DGCL.
7.3 Conditions to the Obligations of Company and Company
Stockholders. The obligation of the Company to effect the Merger is also subject
to the satisfaction or waiver by the Company at or prior to the Effective Time
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. The Company shall have
received a certificate signed (i) on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent and (ii) on behalf of Merger
Sub by the President of Merger Sub, in each case to the foregoing effect.
(b) Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed (i)
on behalf of Parent by the Chief Executive Officer and the Chief Financial
Officer of Parent and (ii) on behalf of Merger Sub by the President of Merger
Sub, in each case to such effect.
(c) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Parent's business following the
Merger shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other Governmental Entity, domestic or foreign, seeking
the foregoing be pending.
(d) No Material Adverse Changes. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of Parent and its Subsidiaries, taken as a
whole.
(e) Legal Opinion. Company shall have received a legal
opinion from ▇▇▇▇▇▇▇ Phleger & ▇▇▇▇▇▇▇▇ LLP in substantially the form attached
hereto as Exhibit I.
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(f) Equity Financing. Parent shall have received a written
commitment from General Atlantic Partners to purchase shares of Series D
Preferred Stock of Parent (the "Parent Series D Preferred") in an aggregate
amount not less than $10 million at a combined pre-money valuation of Parent and
Company of no less than $190 million (assuming consummation of the Merger).
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters presented
in connection with the Merger by the stockholders of the Company:
(a) by mutual consent of the Company, Parent and Merger Sub
in a written instrument, if the Board of Directors of each so determines by a
vote of a majority of the members of its entire Board;
(b) by either Parent or the Company upon written notice to
the other party (i) ten (10) days after the date on which any request or
application for a Requisite Regulatory Approval shall have been denied or
withdrawn at the request or recommendation of the Governmental Entity which must
grant such Requisite Regulatory Approval, unless within the 60-day period
following such denial or withdrawal a petition for rehearing or an amended
application has been filed with the applicable Governmental Entity; provided,
however, that no party shall have the right to terminate this Agreement pursuant
to this Section 8.1(b)(i) if such denial or request or recommendation for
withdrawal shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein or (ii) if any Governmental Entity of competent jurisdiction shall
have issued a final nonappealable order enjoining or otherwise prohibiting the
Merger;
(c) by either Parent or the Company if the Merger shall not
have been consummated on or before [May 20, 1999] unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Parent or the Company if any approval of the
stockholders of the Company or Parent required for the consummation of the
Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of such stockholders or at any adjournment
or postponement thereof;
(e) by either Parent or the Company if there shall have been
a material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party, which breach is not cured within
thirty (30) days following written notice to the party committing such breach,
or which breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 8.1(e) unless the breach of representation or warranty,
together with all other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby under
Section 7.2(a) (in the case of a breach of representation
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or warranty by the Company) or Section 7.3(a) (in the case of a breach of
representation or warranty by Parent);
(f) by either Parent or the Company if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been cured
within thirty (30) days following receipt by the breaching party of written
notice of such breach from the other party hereto, or which breach, by its
nature, cannot be cured prior to the Closing.
8.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect except that (i) the
last sentence of Section 6.3(a), the last sentence of Section 6.3(b), and each
of Sections 6.4, 6.11, 8.2, 10.2, 10.3, 10.4, 10.5 and 10.8 shall survive any
termination of this Agreement and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
8.3 Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the stockholders of the
Company; provided, however, that after any approval of the transactions
contemplated by this Agreement by the Company's stockholders, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the Company stockholders hereunder or which otherwise changes any
of the principal terms of this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, each
of the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
INDEMNIFICATION AND ESCROW FUND
9.1 Indemnity; Escrow Fund. The holders of Company Capital Stock
immediately prior to the Effective Time (collectively, the "Holders") (pro rata
in accordance with each such Holder's percentage interest in Company Capital
Stock immediately prior to the Effective Time; except that each holder shall be
solely responsible for all Damages (as defined below) arising from any breach of
the representations, warranties or covenants set forth in each
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such Holder's Stockholder Voting Agreement or Stockholder Representation
Agreement, as the case may be and for breaches of the representations and
warranties given on a several and not joint basis in Article III) shall jointly
and severally indemnify and hold harmless Parent and the Surviving Corporation
(as used in this Article IX, the "Holder Indemnified Parties" and/or "Parent
Indemnifying Parties") in respect of any and all loss, expense, liability or
other damage, including, without limitation, reasonable attorneys' fees,
accountants' fees, and all other reasonable costs and expenses of litigation,
investigation, defense or settlement of claims (including costs of all appeals
related thereto) or threats thereof and amounts paid in settlement to the extent
of the amount of such loss, expense, liability or other damage (collectively,
"Damages") that Parent or the Surviving Corporation incur by reason of any
breach by the Company or any Company Stockholder of any representation,
warranty, covenant or agreement of the Company or any Company Stockholder
contained herein (subject to the foregoing limitation regarding warranties given
on a several rather than a joint basis) ("Company Indemnifiable Items").
(b) Parent and Merger Sub shall indemnify and hold harmless
the Holders (as used in this Article IX, the "Parent Indemnified Parties" and/or
"Holder Indemnifying Parties") in respect of any and all Damages that the
Holders incur by reason of the breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement of the Parent or Merger Sub
contained herein ("Parent Indemnifiable Items").
(c) To secure performance of the Holders' indemnification
obligations hereunder, the Escrow Shares shall be deposited with the Escrow
Agent in accordance with Section 2.3 hereof. The Escrow Fund shall be available
to compensate Parent and the Surviving Corporation for any Damages that Parent
and the Surviving Corporation incur by reason of any Company Indemnifiable Item.
Subject to Section 2.3(b) and Article IX hereof, the Escrow Shares shall be held
in the Escrow Fund for the Escrow Period. Any Escrow Shares or funds remaining
in the Escrow Fund upon expiration of the Escrow Period shall be distributed to
the Holders pro rata in accordance with their percentage interests in Company
Capital Stock immediately prior to the Effective Time, provided that any Holder
making a withdrawal in accordance with Section 2.3(b) hereof shall receive such
Holder's interest in cash, pro rata in accordance with such Holder's percentage
interests in Company Capital Stock immediately prior to the Effective Time.
9.2 Claims.
(a) Claims by Parent. Upon receipt by the Escrow Agent on or
before the last day of the Escrow Period of a certificate of Parent (an
"Officer's Certificate") setting forth a claim under this Article IX and
specifying in reasonable detail (i) the individual items of such Damages
included in the amount so stated, (ii) the date each such item was paid or
properly accrued or arose, and (iii) the nature of the Company Indemnifiable
Item to which such item is related, the Escrow Agent shall, subject to the
provisions of Sections 9.3(a) and 9.7 hereof, deliver to Parent out of the
Escrow Fund, as promptly as practicable, Parent Capital Stock, cash (or a
certified or bank cashier's check or wire transfer) or other assets held in the
Escrow Fund having a fair market value (determined in accordance with Section
2.4 of the Escrow Agreement) equal to such Damages, in the same proportion of
Parent Capital Stock, cash and such other
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assets as constitutes the Escrow Fund at the time of such delivery, whereupon
the Holders shall have no further liability to Parent with respect to the claim
set forth in such Officer's Certificate.
(b) Claims by Holders. Upon receipt by Parent on or before
the last day of the Escrow Period of a certificate of the Stockholders' Agent
(as defined below) (the "Agent's Certificate") setting forth a claim under this
Article IX and specifying in reasonable detail (i) the individual items of such
Damages included in the amount so stated, (ii) the date each such item was paid
or properly accrued or arose, and (iii) the nature of the Parent Indemnifiable
Item to which such item is related, Parent shall, subject to the provisions of
Sections 9.3(b) and 9.7 hereof, deliver to Stockholders' Agent a certified check
or wire transfer payable to the Stockholders' Agent, as agent for the Holders,
in the amount of such Damages, whereupon Parent shall have no further liability
to the Holders with respect to the claim set forth in such Agent's Certificate.
9.3 Objections to Claims. Objections to Claims by Parent. At the
time of delivery of any Officer's Certificate to the Escrow Agent, a duplicate
copy of such Officer's Certificate shall be delivered to the Stockholders' Agent
(defined in Section 9.4 below) and for a period of twenty (20) days after such
delivery, the Escrow Agent shall make no delivery of Parent Capital Stock or
other property pursuant to Section 9.2 hereof unless the Escrow Agent shall have
received written authorization from the Stockholders' Agent to make such
delivery. After the expiration of such twenty (20) day period, the Escrow Agent
shall make delivery of the Parent Capital Stock or other property in the Escrow
Fund in accordance with Section 9.2(a) hereof; provided, that no such payment or
delivery may be made if the Stockholders' Agent shall object in a written
statement specifying in reasonable detail the basis for such objection to the
claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent and to Parent prior to the expiration of such
twenty (20) day period.
(b) Objections to Claims by Holders. Parent shall have a
period of twenty (20) days after the time of delivery of any Agent's Certificate
to Parent to object to any claim made by Holders pursuant to Section 9.2(b)
above, by delivery to the Stockholders' Agent of an objection in a written
statement specifying in reasonable detail the basis for such objection, to the
claim made in the Agent's Certificate.
9.4 Attempt to Resolve Conflicts; Arbitration.
(a) In case (i) the Stockholders' Agent shall object in
writing to any claim or claims by Parent made in any Officer's Certificate or
otherwise in accordance with Section 9.3(a) above, or (ii) Parent shall object
in writing to the Stockholders' Agent within twenty (20) days of receipt of any
claim for indemnification hereunder in accordance with Section 9.3(b) above, the
party receiving such objection shall have twenty (20) days to respond in a
written statement to the objection. If after such twenty (20) day period there
remains a dispute as to any claims, the Stockholders' Agent and Parent shall
attempt in good faith for twenty (20) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Stockholders'
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties. If a claim is being made against
the Escrow Fund, such memorandum shall be furnished to the Escrow Agent and the
Escrow Agent shall be entitled to rely on such memorandum and shall distribute
the Parent Capital Stock or
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other property from the Escrow Fund within ten (10) days of delivery of such
memorandum in accordance with the terms thereof. If a claim is being made
against Parent, Parent shall deliver funds in accordance with the terms of such
memorandum to Stockholders' Agent within ten (10) days of the date of such
memorandum.
(b) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholders' Agent may, by written notice to
the other, demand binding arbitration of the matter unless the Damages are at
issue in pending litigation with a third party. If the Damages are at issue in
pending litigation, then the arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration in accordance with the
procedures set forth on Exhibit J hereto
(c) Application may also be made to a court of competent
jurisdiction for confirmation of any decision or award of the arbitrator, for an
order of the enforcement and for any other remedies which may be necessary to
effectuate such decision or award. The parties hereto hereby consent to the
jurisdiction of the arbitrator and of such court and waive any objection to the
jurisdiction of such arbitrator and court.
(d) If a dispute is submitted for arbitration as provided in
this Section 9.4 with respect to a claim by a Holder Indemnified Party, the
Escrow Agent shall continue to hold Escrow Shares and other assets in the Escrow
Fund having a value (determined in accordance with Section 2.4 of the Escrow
Agreement) sufficient to cover the Damages related to such dispute (the
"Contested Damages") (but only to the extent that there are Escrow Shares or
other assets remaining in the Escrow Fund) until: (i) delivery of a copy of a
settlement agreement executed by Parent and the Stockholders' Agent setting
forth instructions to the Escrow Agent as to the release of such Escrow Shares
that shall be made with respect to the Contested Damages; (ii) delivery of a
copy of the final decision of the arbitrators setting forth instructions to the
Escrow Agent as to the release of Escrow Shares that shall be made with respect
to the Contested Damages; or (iii) receipt of a court order or judgment
directing the Escrow Agent to act with respect to the distribution of any Escrow
Shares. The Escrow Agent shall thereupon release the Escrow Shares from the
Escrow Fund (to the extent Escrow Shares are then held in the Escrow Fund) in
accordance with such settlement agreement, arbitrator's instructions, court
order or judgment, as applicable. If any controversy arises involving any party
to this Agreement (other than the Escrow Agent) concerning the subject matter of
this Agreement, including Contested Damages, the Escrow Agent will not be
required to resolve the controversy.
(e) If a dispute is submitted for arbitration as provided in
this Section 9.4 with respect to a claim by a Parent Indemnified Party, then
within ten (10) days of (i) execution of a copy of a settlement agreement
executed by Parent and the Stockholders' Agent relating to the amount of the
Damages owed to the Holders; (ii) delivery of a copy of the final decision of
the arbitrators setting forth the amount of Damages owed to the Holders or (iii)
receipt of a court order or judgment directing Parent to pay Damages to the
Holders, Parent shall thereupon deliver a certified check or wire transfer to
the Stockholders' Agent payable to the Stockholders' Agent, as agent for the
Holders, in accordance with such settlement agreement, arbitrator's instructions
or judgment, as applicable, whereupon Parent shall have no further liability to
the Holders with
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respect to the claim determined by such settlement agreement, arbitrator's
instructions or judgment.
(f) ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ shall be constituted and appointed as
agent ("Stockholders' Agent") for and on behalf of the Holders to give and
receive notices and communications, to authorize delivery to Parent of the
Parent Capital Stock or other property from the Escrow Fund in satisfaction of
claims by Parent, to settle any other claims for indemnification, to object to
such deliveries, to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Stockholders' Agent for the accomplishment of
the foregoing. Such agency may be changed by the holders of a majority in
interest of the Escrow Fund from time to time upon not less than ten (10) days'
prior written notice to Parent. No bond shall be required of the Stockholders'
Agent, and the Stockholders' Agent shall receive no compensation for his
services. Notices or communications to or from the Stockholders' Agent shall
constitute notice to or from each of the stockholders of the Company. If at any
time there is no Stockholders' Agent, then any action contemplated to be taken
by the Stockholders' Agent hereunder, and any power granted to the Stockholders'
Agent, may be exercised by Holders representing a majority of the beneficial
interests in the Escrow Fund (in such case, as used herein "Stockholders' Agent"
shall mean such Holders). In the event that any claim, agreement, negotiation,
settlement, compromise or demand for arbitration shall relate solely to the
Holders of a specific class or series of Escrow Shares, then the Stockholders'
Agent shall act with respect to such claim, agreement, negotiation, settlement,
compromise or demand for arbitration in accordance with the instructions of the
Holders of a majority of shares of such class or series of Escrow Shares.
(g) The Stockholders' Agent shall not be liable for any act
done or omitted hereunder as Stockholders' Agent while acting in good faith and
in the exercise of reasonable judgment, and any act taken or omitted to be taken
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The stockholders of the Company shall severally indemnify the
Stockholders' Agent and hold him harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Stockholders'
Agent and arising out of or in connection with the acceptance or administration
of his duties hereunder.
(h) The Stockholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising its
rights hereunder; provided, that the Stockholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about the
Company to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
9.5 Actions of the Stockholders' Agent. A decision, act, consent or
instruction of the Stockholders' Agent shall constitute a decision of all
stockholders of the Company for whom shares of Parent Capital Stock otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each such stockholder of the Company, and the Escrow Agent
and Parent may rely upon any decision, act, consent or instruction of the
Stockholders' Agent as being the decision, act, consent or instruction of each
and every such
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stockholder of the Company. The Escrow Agent and Parent are hereby relieved from
any liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Stockholders' Agent.
9.6 Third-Party Claims.
(a) In the event that a third party asserts or threatens a
claim which Parent believes may result in a demand against the Escrow Fund,
Parent shall notify the Stockholders' Agent of such claim, and the Stockholders'
Agent on behalf of the stockholders of the Company for whom shares of Parent
Capital Stock otherwise issuable or payable to them are deposited in the Escrow
Fund shall be entitled, at such stockholders' expense, to participate in any
defense of such claim. Unless the Stockholders' Agent elects to assume such
defense (with counsel reasonably acceptable to Parent, and, provided, that the
Stockholders' Agent has the reasonable means to put on such a defense), Parent
shall have the right to settle any such claim (with its own counsel); provided,
that Parent may not effect the settlement of any such claim without the consent
of the Stockholders' Agent, which consent shall not be unreasonably withheld. In
the event that the Stockholders' Agent has consented to any such settlement, the
Stockholders' Agent and the former stockholders of the Company shall have no
power or authority to object under Section 9.3 or any other provision of this
Article IX to the amount of any claim by Parent against the Escrow Fund for
indemnity with respect to such settlement.
(b) In the event that a third party asserts or threatens a
claim involving a Parent Indemnifiable Item, Parent shall be entitled to
participate in any defense of such claim. Unless Parent elects to assume such
defense, the Stockholders' Agent shall have the right to settle any such claim
(with counsel reasonably acceptable to Parent); provided, that Stockholders'
Agent may not effect the settlement of any such claim without the consent of the
Parent, which consent shall not be unreasonably withheld.
9.7 Limitations.
(a) The parties hereto understand and agree that the
indemnity obligations under this Article IX shall terminate twelve (12) months
from the Closing Date, except insofar as a claim for indemnification under this
Article IX has been asserted and such claim has not been resolved in accordance
with the terms of the this Agreement, the Escrow Agreement or otherwise.
(b) Notwithstanding the foregoing, neither the Parent
Indemnifying Parties nor the Holder Indemnifying Parties shall have any
liability for indemnification under this Article IX unless and until the
aggregate amount of Damages suffered by the Holder Indemnified Parties or the
Parent Indemnified Parties, as the case may be, exceeds $250,000 (the "Threshold
Amount"). The Holder Indemnified Parties or the Parent Indemnified Parties, as
the case may be, shall be indemnified for all Damages in excess of the Threshold
Amount; provided, however, that (i) the indemnification obligations of the
Company and Company Stockholders hereunder shall be limited to an amount equal
to the amount deposited in the Escrow Fund pursuant to Section 2.3 and (ii) the
indemnification obligations of Parent hereunder shall be limited to $5,000,000;
provided, further, that this paragraph shall not apply to any Company Expenses
in excess of the Company Expense Fee Cap (each as defined in Section 10.2
below). For the
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purposes of this Article IX, the shares of Parent Capital Stock in the Escrow
Fund shall be deemed to have a value of $2.10 per share. The parties hereby
agree that except (x) as provided in Section 9.7(c) hereof, and (y) for matters
contemplated by Sections 6.1(c), 6.1(d) and 9.8 hereof, Parent and the Surviving
Corporation may seek to be made whole for any Damages only from the Escrow Fund
and shall have no other remedy at law or in equity against the Company, the
Surviving Corporation or the Holders other than as set forth in Section 9.7(c).
(c) Notwithstanding any other provision of this Article IX,
the terms of this Article IX shall not apply to any claims arising out of or
resulting from alleged fraudulent conduct; (ii) any claims under any securities
law that may not be waived or limited, or (iii) any claims relating to grossly
negligent, reckless, willful, intentional or fraudulent breach of any
representation, warranty, covenant or obligation by the Company, Company
Stockholders or Parent.
9.8 No Limitation. Notwithstanding any other provision of this
Agreement, nothing contained in this Article IX shall limit the liability of any
party for any breach of any representation, warranty or covenant if the Merger
does not close.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and Agreements. The
representations and warranties in this Agreement shall terminate one year from
the date of the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be. Each party agrees that, except for
the representations and warranties contained in this Agreement, the Parent
Disclosure Schedule, the Company Disclosure Schedule and the other agreements
contemplated by this Agreement, no party hereto has made any other
representations and warranties, and each party hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to execution and delivery of this Agreement or the Merger contemplated
herein, notwithstanding the delivery or disclosure to any other party or any
party's representatives of any documentation or other information with respect
to any one or more of the foregoing.
10.2 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses; provided, however, that if the Merger
is consummated, Parent shall pay promptly upon demand the amount of all expenses
incurred by the Company and the Holders (collectively, "Company Expenses"),
including, without limitation, legal and accounting expenses and fees and
expenses owed to Updata Capital Corporation, up to an amount equal to the
difference between (a) $[305,000] (including fees and expenses payable to Updata
Capital Corporation) and (b) amount of Company Expenses paid by the Company
prior to the Closing (the "Company Expense Fee Cap"). Any Company Expenses in
excess of the Company Expense Fee Cap shall be recoverable by Parent in
accordance with Section 9 hereof.
10.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed
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by registered or certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to Parent, to:
Advantix, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Executive Vice President
Chief Financial Officer
with a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
and
(b) if to the Company, to:
▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
with a copy to
▇▇▇▇▇ ▇▇▇▇, LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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(c) if to the Stockholders' Agent, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
10.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
(WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
CALIFORNIA LAW) EXCEPT TO THE EXTENT MANDATORILY GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE. PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY CALIFORNIA STATE OR FEDERAL COURT SITTING IN
ORANGE COUNTY, CALIFORNIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND PARENT, MERGER SUB AND THE COMPANY EACH HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH CALIFORNIA STATE COURT OR SUCH FEDERAL COURT.
PARENT, MERGER SUB AND THE COMPANY EACH HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING.
10.5 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Merger is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner to the fullest extent
permitted by applicable law in order that the Merger may be consummated as
originally contemplated to the fullest extent possible.
10.6 Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties hereto; provided, however, that
Parent may assign its rights, interests and obligations hereunder to any
successor or parent entity of Parent whose shares are registered under Section
12 of the Exchange Act (or will be so registered at the Effective Time). Subject
to the preceding sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything contained in this
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Agreement to the contrary, other than Section 6.3, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and permitted assigns any rights or
remedies under or by reason of this Agreement.
10.7 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.8 Entire Agreement. This Agreement (including the Exhibits,
Schedules, the Parent Disclosure Schedule and the Company Disclosure Schedule)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
PARENT
ADVANTIX, INC.
By:
-------------------------------------
Name:
Title:
MERGER SUB
ADVANTIX ACQUISITION CORP.
By:
-------------------------------------
Name:
Title:
COMPANY
▇▇▇▇▇▇▇.▇▇▇, INC.
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By:
-------------------------------------
Name:
Title:
[SIGNATURE PAGE TO MERGER AGREEMENT]
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COMPANY STOCKHOLDERS
ATTRACTOR INSTITUTIONAL LP
By: Attractor Ventures LLC,
its General Partner
By:
-------------------------------------
Name:
Title:
ATTRACTOR DEARBORN PARTNERS LP
By: Attractor Ventures LLC,
its General Partner
By:
-------------------------------------
Name:
Title:
ATTRACTOR LP
By: Attractor Ventures LLC,
its General Partner
By:
-------------------------------------
Name:
Title:
▇▇▇▇ ▇▇▇▇▇' idealab!,
a California corporation
By:
-------------------------------------
Name:
Title:
[SIGNATURE PAGE TO MERGER AGREEMENT]
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▇▇▇▇▇ GLOBAL INVESTMENTS, LTD.
By: ▇▇▇▇▇ Capital Management, Inc.,
its Trading Advisor
By:
-------------------------------------
Name:
Title:
REMINGTON INVESTMENTS STRATEGIES, L.P.
By: ▇▇▇▇▇ Capital Advisors, L.L.C.,
its General Partner
By:
-------------------------------------
Name:
Title:
MULTI-STRATEGIES FUND, L.P.
By: ▇▇▇▇▇ Capital Management, Inc.,
its Trading Advisor
By:
-------------------------------------
Name:
Title:
[SIGNATURE PAGE TO MERGER AGREEMENT]
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MULTI-STRATEGIES FUND LTD.
By: ▇▇▇▇▇ Capital Advisors, L.L.C.,
its General Partner
By:
-------------------------------------
Name:
Title:
idealab! Capital Partners I-A, L.P.
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Member,
idealab! Capital Management I, LLC,
General Partner of idealab!
Capital Partners I-A, LP
idealab! Capital Partners I-B, L.P.
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Member,
idealab! Capital Management I, LLC,
General Partner of idealab!
Capital Partners I-B, LP
[SIGNATURE PAGE TO MERGER AGREEMENT]
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----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
[SIGNATURE PAGE TO MERGER AGREEMENT]
List of Exhibits
----------------
Exhibit A Form of Escrow Agreement
Exhibit B Form of Promissory Note
Exhibit C Form of Stockholder Voting Agreement
Exhibit D Form of Irrevocable Proxy
Exhibit E Form of Amended Stockholders Agreement
Exhibit F Form of Second Amended Investor Rights Agreement
Exhibit G Form of Opinion of Company's counsel
Exhibit H Form of Stockholder Representation Agreement
Exhibit I Form of Opinion of Parent's counsel
Exhibit J Arbitration Procedures
▇▇▇▇▇▇▇.▇▇▇ Inc. agrees to furnish to the Securities and Exchange Commission a
copy of the foregoing exhibits upon request of the Securities and Exchange
Commission.
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