Exhibit 2.01
Execution Version
Agreement and Plan of Merger
This Agreement and Plan of Merger (this "Agreement") is made and entered into
as of July 10, 2000 (the "Agreement Date") by and among Interwoven, Inc., a
Delaware corporation ("Acquirer"), Neonyoyo, Inc., a Delaware corporation
("Company") and ▇▇▇▇▇ ▇▇▇ as representative of the stockholders of the Company.
Recitals
A. The parties intend that Company will be merged with and into Acquirer,
with Acquirer continuing as the surviving corporation (the "Merger"), all
pursuant to the terms and conditions of this Agreement and applicable law. The
parties also intend for the Merger to be treated as a "reorganization" under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and to be treated as a "purchase" transaction for accounting purposes.
B. The Boards of Directors of Acquirer and Company have determined that the
Merger is in the best interests of their respective companies and stockholders,
have approved and declared advisable this Agreement and, accordingly, have
agreed to effect the Merger provided for herein upon the terms and conditions of
this Agreement.
C. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to Acquirer's willingness to enter into this Agreement,
each of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ are entering into non-
competition agreements (the "Non-Competition Agreements") with Acquirer, to be
effective as of the Effective Time (as defined in Section 1.12) .
D. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to Acquirer's willingness to enter into this Agreement,
each of the Core Company Stockholders (as defined in Section 1.11) are executing
and delivering to Acquirer: (i) an Investment Representation Letter
substantially in the form of Exhibit A attached hereto (the "Investment
Representation Letter"), under which each such Core Company Stockholder will
provide certain representations and warranties to Acquirer, and will agree to
irrevocably vote all shares of Company capital stock owned by such Core Company
Stockholder in favor of the Merger and the transactions contemplated by the
Merger; (ii) an irrevocable proxy, and (iii) an agreement substantially in the
form attached hereto as Exhibit F (the "Continuation Agreements") regarding the
continuation of such person's employment by Acquirer after the Effective Time.
E. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to Acquirer's willingness to enter into this Agreement,
each of the Core Company Stockholders (as defined in Section 1.11) are executing
and delivering to Acquirer amendments to their Restricted Stock Agreements (the
amended agreements, collectively the "Restricted Stock Purchase Agreements")
that provides for changes to the vesting terms of their unvested Company capital
stock and unvested Company Options.
F. Upon the Effective Time of the Merger, and subject to the terms and
conditions hereof, (i) the shares of capital stock of Company that are
outstanding immediately prior to the effectiveness of the Merger will be
converted into cash and shares of Common Stock of Acquirer, (ii) options and
other rights to purchase Company capital stock that are outstanding immediately
prior to the effectiveness of the Merger will be converted into options and
other rights to purchase cash and Common Stock of Acquirer, and (iii) Company
will be merged with and into Acquirer, in each case, as provided in this
Agreement.
Now, therefore, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
Certain Definitions
As used in this Agreement, the following terms will have the meanings set
forth below:
1.1 "Acquirer Ancillary Agreements" means, collectively, each certificate
to be delivered by Acquirer or an officer or officers of Acquirer at the Closing
pursuant to Article 8 of this Agreement and each agreement (other than this
Agreement) which Acquirer is to enter into as a party thereto pursuant to this
Agreement.
1.2 "Acquirer Average Price Per Share" means $123.1375.
1.3 "Acquirer Common Stock" means the common stock, par value $0.001 per
share of Acquirer.
1.4 "Acquirer Shares Consideration" means five hundred fifty-two thousand
two hundred twenty eight (552,228) shares of Acquirer Common Stock.
1.5 "Cash Conversion Number" means the quotient (calculated to the fourth
decimal place) obtained by dividing (a) $10,000,000 by (b) the Company Fully
Diluted Share Number.
1.6 "Closing" has the meaning given in Section 7.1.
1.7 "Closing Date" has the meaning given in Section 7.1.
1.8 "Common Stock Conversion Number" means the quotient (calculated to the
fourth decimal place) obtained by dividing (a) the Acquirer Shares Consideration
by (b) the Company Fully-Diluted Share Number.
1.9 "Company Ancillary Agreements" means, collectively, the Certificate of
Merger, each certificate to be delivered by Company or an officer or officers of
Company at the Closing pursuant to Article 9 of this Agreement, and each other
agreement (other than this Agreement) which Company is to enter into as a party
thereto pursuant to this Agreement.
1.10 "Company Common Stock" means common stock, $0.000001 par value per
share, of Company.
1.11 "Company Fully Diluted Share Number" means the aggregate number of
shares of Company Common Stock, Company Preferred Stock, Company Options and any
other option, warrant or other security exercisable or exchangeable for, or
convertible into, Company Common Stock (each, on a fully exercised and converted
to Company Common Stock basis) that are issued and outstanding immediately prior
to the Effective Time.
1.12 "Company Options" has the meaning given in Section 2.3.
1.13 "Company Preferred Stock" means the Series A Preferred Stock,
$0.000001 par value per share, and the Series B Preferred Stock, $0.000001 par
value per share, of Company.
1.14 "Company Stockholders" means the record holders of issued and
outstanding Company Common Stock and Company Preferred Stock immediately prior
to the Effective Time of the Merger as set forth on Exhibit B attached hereto.
1.15 "Core Company Stockholders" means ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ Velakacharla and ▇▇▇▇▇ ▇▇▇.
1.16 The "Effective Time" means the date and time on which the Merger first
becomes legally effective under the laws of the State of Delaware as a result of
the filing with the Delaware Secretary of State of a Certificate of Merger in
substantially the form attached hereto as Exhibit C (the "Certificate of
Merger") and any required related certificates pursuant to, and in conformity
with, the requirements of Section 251 of the Delaware General Corporation Law
("Delaware Law") or such later mutually acceptable date and time as may be
specified in the Certificate of Merger.
1.17 "Encumbrance" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention device,
collateral assignment, claim, charge, restriction or other encumbrance of any
kind in respect of such asset (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
1.18 "Escrow Funds" has the meaning given in Section 2.4.
1.19 "Escrow Release Date" has the meaning given in Section 2.4.
1.20 "Governmental Authority" has the meaning given in Section 3.3.2.
1.21 "knowledge," means, with respect to any fact, circumstance, event or
other matter in question, the actual knowledge of such fact, circumstance, event
or other matter after reasonable inquiry of (a) an individual, if used in
reference to an individual, or (b) any officer or director of such party, if
used in reference to a person that is not an individual.
1.22 "Legal Requirements" means any federal, state, local, municipal or
other law, statute, constitution, resolution, ordinance, code, edict, decree,
rule, regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Authority.
1.23 "Material Adverse Change" or "Material Adverse Effect," when used with
reference to any entity or group of related entities, means any event, change,
violation, inaccuracy, circumstance or effect (regardless of whether or not such
events or changes are inconsistent with the representations or warranties made
by such party in this Agreement) that is or is reasonably likely to be,
individually or in the aggregate, materially adverse to the condition (financial
or otherwise), capitalization, properties, employees, assets (including
intangible assets), business, operations or results of operations of such entity
and its subsidiaries, taken as a whole with its subsidiaries; provided, however,
that in no event shall (i) a change in the price of the publicly traded stock of
Acquirer or (ii) any event, change, violation, inaccuracy, circumstance or
effect related to (A) the economy of the United States, or (B) the industry in
which such entity or group of related entities operates constitute, in and of
itself, a Material Adverse Change or Material Adverse Effect.
1.24 "person" means any individual, corporation (including any not-for-
profit corporation), partnership, limited liability partnership, joint venture,
estate, trust, firm, company (including any limited liability company or joint
stock company), association, organization, entity or Governmental Authority.
1.25 "Stockholder's Pro Rata Share" means each Company Stockholder's pro
rata portion of the Company Common Stock on an as converted to Common Stock
basis as set forth on Exhibit B hereto.
1.26 "subsidiary" of a specified entity means any corporation, partnership,
limited liability company, joint venture or other legal entity of which the
specified entity (either alone or through or together with any other subsidiary)
owns, directly or indirectly, 50% or more of the stock or other equity or
partnership interests the holders of which are generally entitled to vote for
the election of the Board of Directors or other governing body of such
corporation or other legal entity.
1.27 "Termination Date" means August 15, 2000.
Other capitalized terms defined elsewhere in this Agreement and not defined in
this Article 1 will have the meanings assigned to such terms in this Agreement.
ARTICLE 2
The Merger
2.1 Conversion of Shares.
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2.1.1 Conversion of Company Common Stock. Subject to the terms and
conditions of this Agreement, at the Effective Time, each share of Company
Common Stock held by a Company Stockholder that is issued and outstanding
immediately prior to the Effective
Time will, by virtue of the Merger and without the need for any further action
on the part of the holder thereof (except as expressly provided herein), be
converted into and represent the right to receive (i) the number of shares of
Acquirer Common Stock that is equal to the Common Stock Conversion Number and
(ii) cash equal to the Cash Conversion Number. The preceding provisions of this
Section 2.1.1 are subject to the provisions of Section 2.1.3 (regarding rights
of holders of Dissenting Shares), Section 2.1.4 (regarding the elimination of
fractional shares of Acquirer Common Stock), Section 2.1.5 (regarding the
continuation of vesting and repurchase rights) and Section 2.4 (regarding the
withholding of Escrow Funds).
2.1.2 Conversion of Company Preferred Stock. Subject to the terms and
conditions of this Agreement, at the Effective Time, each share of Company
Preferred Stock held by a Company Stockholder that is issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without the need for any further action on the part of the holder thereof
(except as expressly provided herein), in lieu of any liquidation preference
under the Company's Amended and Restated Certificate of Incorporation be
converted into and represent the right to receive (i) the number of shares of
Acquirer Common Stock that is equal to the Common Stock Conversion Number and
(ii) cash equal to the Cash Conversion Number. The preceding provisions of this
Section 2.1.2 are subject to the provisions of Section 2.1.3 (regarding rights
of holders of Dissenting Shares), Section 2.1.4 (regarding the elimination of
fractional shares of Acquirer Common Stock), Section 2.1.5 (regarding the
continuation of vesting and repurchase rights) and Section 2.4 (regarding the
withholding of Escrow Funds).
2.1.3 Dissenting Shares. As more fully set forth in Section 7.3, holders
of shares of Company Common Stock who have complied with all requirements for
perfecting stockholders' rights of appraisal, as set forth in Section 262 of
Delaware Law, shall be entitled to their rights under the Delaware Law with
respect to such shares.
2.1.4 Fractional Shares. No fractional shares of Acquirer Common Stock
will be issued in connection with the Merger. In lieu thereof, each holder of
Company Common Stock or Company Preferred Stock who would otherwise be entitled
to receive a fraction of a share of Acquirer Common Stock pursuant to Sections
2.1.1 or 2.1.2, computed after aggregating all shares of Acquirer Common Stock
to be received by such holder pursuant to Sections 2.1.1 and 2.1.2, will instead
receive from Acquirer, upon surrender of such holder's Company Certificates
pursuant to Article 7 hereof, an amount of cash (rounded to the nearest cent)
equal to the product obtained by multiplying (a) the Acquirer Average Price Per
Share by (b) the fraction of a share of Acquirer Common Stock that such holder
would otherwise have been entitled to receive.
2.1.5 Continuation of Vesting and Repurchase Rights. If any shares of
Company Common Stock outstanding immediately prior to the Effective Time are at
the Effective Time unvested or are subject to a repurchase option (other than a
right of first refusal) or any other condition providing that such shares may be
forfeited to Company upon any termination of the stockholder's employment,
directorship or other relationship with Company (and/or any affiliate of
Company) under the terms of any restricted stock purchase agreement, stock
option agreement (including any stock option agreement under the Company Plan
(as
defined below)) or other agreement with Company ("Unvested Company Shares"),
then such repurchase option or other condition shall be assigned to Acquirer and
the shares of Acquirer Common Stock issued upon the conversion of such Unvested
Company Shares in the Merger will be unvested shares and will continue to be
subject to the same repurchase options or conditions, as applicable, immediately
following the Effective Time as the Unvested Company Shares for which such
shares were exchanged were subject to immediately prior to the Effective Time.
The cash payable upon conversion of Unvested Company Shares shall be withheld by
Acquirer and paid to each such holder upon the vesting of the Acquirer Common
Stock issued upon conversion of Unvested Company Shares. The certificates
representing unvested shares of Acquirer Common Stock shall accordingly be
marked with appropriate legends noting such repurchase options or other
conditions. Company shall take all actions that may be necessary to ensure that,
from and after the Effective Time, Acquirer is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock purchase
agreement or other agreement.
2.2 Adjustments for Capital Changes. Notwithstanding the provisions of
Section 2.1, if Acquirer recapitalizes, either through a subdivision (or stock
split) of any of its outstanding shares of Acquirer Common Stock into a greater
number of such shares, or a combination (or reverse stock split) of any of its
outstanding shares of Acquirer Common Stock into a lesser number of such shares,
or reorganizes, reclassifies or otherwise changes its outstanding shares of
Acquirer Common Stock into the same or a different number of shares of other
classes or series of Acquirer stock (other than through a subdivision or
combination of shares provided for in the preceding clause), or declares a
dividend or other distribution on its outstanding shares payable in shares of
Acquirer Common Stock, in shares or securities convertible into shares of
Acquirer Common Stock and/or other Acquirer equity securities (each, a "Capital
Change"), at any time after the Agreement Date and prior to the Effective Time,
then the Acquirer Average Price Per Share and the Common Stock Conversion Number
will be appropriately adjusted.
2.3 Company Options. At the Effective Time, all outstanding options
(collectively, "Company Options") to purchase Company Common Stock, including
all Company Options granted under Company's Amended and Restated 2000 Stock Plan
(the "Company Plan"), will be assumed by Acquirer. Each Company Option so
assumed by Acquirer shall be entitled, in accordance with the terms of such
option, to purchase after the Effective Time (i) that number of shares of
Acquirer Common Stock, determined by multiplying (a) the number of shares of
Company Common Stock subject to such Company Option at the Effective Time by (b)
the Common Stock Conversion Number, and (ii) an amount of cash determined by
multiplying (a) the number of shares of Company Common Stock subject to such
Company Option at the Effective Time by (b) the Cash Conversion Number. After
the Effective Time, the exercise price for each such assumed Company Option will
equal the exercise price of the Company Option immediately prior to the
Effective Time divided by the Common Stock Conversion Number. If the foregoing
calculation results in an assumed option being exercisable for a fraction of a
share or a fraction of a cent, then the number of shares of Acquirer Common
Stock subject to such option will be rounded down to the nearest whole number,
the amount of cash subject to such option will be rounded down to the nearest
whole cent and the exercise price of such option will be rounded up to the
nearest cent. The term, exercisability, vesting schedule, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
other terms of the Company Options will otherwise be unchanged except that
Acquirer may, in its discretion after the Effective Time, accelerate the vesting
schedule of certain Company Options so that after the completion of one full
year of continuous employment from the date of grant, the rate at which such
Company Options will vest will be on a monthly basis over the remaining vesting
period. Continuous employment with Company will be credited to an optionee for
purposes of determining the number of shares that are vested after the Effective
Time. Acquirer will cause the Acquirer Common Stock issued upon exercise of the
assumed Company Options to be registered on Form S-8 of the Securities and
Exchange Commission ("SEC") as soon as is practicable, and in any event within
ten business days after the Effective Time, and will exercise reasonable
commercial efforts to maintain the effectiveness of such registration statement
for so long as such assumed Company Options remain outstanding and will reserve
a sufficient number of shares of Acquirer Common Stock for issuance upon
exercise thereof.
2.4 Escrow. (a) At the Effective Time, Acquirer will withhold from the
cash and shares of Acquirer Common Stock to be issued to Company Stockholders in
the Merger upon conversion of their Company Common Stock and Company Preferred
Stock pursuant to Sections 2.1.1 and 2.1.2 above, each Stockholder's Pro Rata
Share of (i) $1,000,000 (such withheld cash consideration, the "Escrow Cash")
and (ii) fifty-five thousand two hundred twenty three (55,223) shares of
Acquirer Common Stock to be paid in the Merger (such withheld shares of Acquirer
Common Stock, the "Escrow Shares"). The Escrow Cash, Escrow Shares, any New
Shares (as defined below) and any cash dividends paid in respect of Escrow
Shares or New Shares are collectively referred to herein as the "Escrow Fund."
Any shares of Acquirer Common Stock or other equity securities issued or
distributed by Acquirer (including shares issued upon a stock split, stock
dividend, recapitalization or other similar event) in respect of Escrow Shares
that have not been released (any such additional shares, the "New Shares") shall
be added to the Escrow Fund and become a part thereof. New Shares issued in
respect of shares of Acquirer Common Stock which have been released from the
Escrow Fund shall not be added to the Escrow Fund but shall be distributed to
the recordholders thereof. Cash dividends on Acquirer Common Stock shall not be
added to the Escrow Fund but shall be distributed to the recordholders thereof.
If a stockholder of the Company holds both vested shares of Company Common Stock
and Unvested Company Shares, then upon conversion of such shares of Company
Common Stock into Acquirer Common Stock, vested shares of Acquirer Common Stock
will be withheld and placed in escrow first and then, if all of such
stockholder's vested shares of Acquirer Common Stock have been withheld and
placed in escrow, shall such stockholder's unvested shares of Acquirer Common
Stock be withheld and placed in escrow. Acquirer will hold the certificates
representing such Escrow Shares as security for the Company Stockholders'
indemnification obligations for Damages (as defined in Section 11.2) under
Article 11 hereof. The Escrow Funds will be represented by a certificate or
certificates issued in the names of each Company Stockholder in proportion to
each Stockholder's Pro Rata Share and will be held by Acquirer, subject to the
terms and conditions of Article 11 hereof, until the day after the first
anniversary of the Closing Date (the "Escrow Release Date") subject to any such
Escrow Funds being withheld pursuant to Section 11.2(c).
(b) Each Company Stockholder shall be shown as the record owner on
Acquirer's books and records of such number of shares of the Escrow Fund as is
equal to such Stockholder's Pro Rata Share and shall have voting rights with
respect to the shares of Acquirer Common Stock held (and on any voting
securities added to the Escrow Fund in respect of such shares of Acquirer Common
Stock) in the Escrow Fund.
2.5 Effects of the Merger. At and upon the Effective Time of the Merger:
(a) the separate existence of Company will cease and Company will be
merged with and into Acquirer, and Acquirer will be the surviving corporation of
the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
pursuant to the terms of this Agreement and the Certificate of Merger;
(b) the Certificate of Incorporation of Acquirer immediately prior to
the Effective Time shall be the Certificate of Incorporation the Surviving
Corporation immediately after the Effective Time;
(c) the Bylaws of Acquirer will continue unchanged and be the Bylaws
of the Surviving Corporation immediately after the Effective Time;
(d) each share of Company Common Stock that is outstanding immediately
prior to the Effective Time will be converted as provided in this Article 2;
(e) each share of Company Preferred Stock that is outstanding
immediately prior to the Effective Time will be converted as provided in this
Article 2;
(f) each Company Option that is outstanding immediately prior to the
Effective Time will be assumed and converted as provided in this Article 2;
(g) the officers of the Surviving Corporation immediately after the
Effective Time will be those individuals who were the officers of Acquirer
immediately prior to the Effective Time, and each such individual shall,
immediately after the Effective Time, hold the same office or offices of the
Surviving Corporation as the office or offices that such individual held with
Acquirer immediately prior to the Effective Time;
(h) the members of the Board of Directors of the Surviving Corporation
immediately after the Effective Time will be the members of the Board of
Directors of Acquirer immediately prior to the Effective Time; and
(i) the Merger will, from and after the Effective Time, have all of
the effects provided by applicable law.
2.6 Securities Law Issues. Acquirer shall issue the shares of Acquirer
Common Stock to be issued to the Company Stockholders in the Merger pursuant to
Sections 2.1.1 and 2.1.2 pursuant to an exemption or exemptions from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and/or Regulation D promulgated under the
Securities Act and the exemption from qualification under the laws of the State
of California and other applicable state securities laws. Acquirer and Company
shall comply with all applicable provisions of, and rules under, the Securities
Act in connection with offering and issuance of shares of Acquirer Common Stock
in the Merger.
2.7 Tax Consequences. The parties intend that the Merger shall be treated
as a "reorganization" with the meaning of Section 368(a) of the Code. Each of
the parties hereto adopts this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income
Tax Regulations and agrees to use commercially reasonable efforts to cause the
Merger to qualify as a reorganization within the meaning of Section 368(a) of
the Code, including reporting the Merger for federal and state income tax
purposes in a manner consistent with such characterization.
2.8 Further Assurances. If, at any time before or after the Effective Time,
Acquirer believes or is advised that any further instruments, deeds, assignments
or assurances are reasonably necessary or desirable to consummate the Merger or
to carry out the purposes and intent of this Agreement at or after the Effective
Time, then Acquirer, the Surviving Corporation and their respective officers and
directors will execute and deliver all such proper deeds, assignments,
instruments and assurances and do all other things necessary or desirable to
consummate the Merger and to carry out the purposes and intent of this
Agreement.
ARTICLE 3
Representations and Warranties of Company
Company represents and warrants to Acquirer that, except as set forth in the
letter addressed to Acquirer from Company and dated as of the Agreement Date
(including all schedules thereto) which has been delivered by Company to
Acquirer concurrently herewith (the "Company Disclosure Letter"), each of the
representations, warranties and statements contained in the following sections
of this Article 3 is true and correct as of the Agreement Date and will be true
and correct on and as of the Closing Date (as defined in Section 7.1 hereof).
For all purposes of this Agreement, the statements contained in the Company
Disclosure Letter and its schedules shall also be deemed to be representations
and warranties made and given by Company under Article 3 of this Agreement.
3.1 Organization and Good Standing. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Company has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified or licensed to do business and is in good standing
in each jurisdiction where the properties owned, leased or operated by it or the
nature of its activities make such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed would not individually or
in the aggregate have a Material Adverse Effect on Company. Company is not in
violation of its Certificate of Incorporation or Bylaws.
3.2 Subsidiaries. Company does not have any subsidiary or any equity or
ownership interest, whether direct or indirect, in any corporation, partnership,
limited liability company,
joint venture or other business entity. Company is not obligated to make nor
bound by any agreement or obligation to make any investment in or capital
contribution in or on behalf of any other entity.
3.3 Power, Authorization and Validity.
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3.3.1 Power and Authority. Company has all requisite corporate
power and authority to enter into, execute, deliver and perform its obligations
under, this Agreement and all Company Ancillary Agreements and to consummate the
Merger. The execution, delivery and performance by Company of this Agreement,
each of the Company Ancillary Agreements and all other agreements, transactions
and actions contemplated hereby or thereby have been duly and validly approved
and authorized by all necessary corporate action on the part of the Company,
subject only to the approval and adoption of this Agreement and the approval of
the Merger by (i) Company Stockholders holding a majority of the outstanding
voting stock of the Company and (ii) a majority of the Company Preferred Stock.
3.3.2 No Consents. No consent, approval, permit, order,
authorization from, or registration, declaration or filing with, any court,
administrative agency, commission or other governmental authority (each, a
"Governmental Authority"), or any other person or entity, governmental or
otherwise (including any consent, approval, order, authorization, registration,
declaration or filing pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act")), is necessary or required to be made or
obtained by Company to enable Company to lawfully execute and deliver, enter
into, and to perform its obligations under, this Agreement and each of the
Company Ancillary Agreements, and for Company to consummate the Merger except
(a) the filing of the Certificate of Merger with the Delaware Secretary of
State, and (b) such other filings, if any, as may be required in order for
Company to comply with applicable federal and state securities laws.
3.3.3 Enforceability. This Agreement has been duly executed and
delivered by the Company. This Agreement and each of the Company Ancillary
Agreements are, or when executed by Company will be, valid and binding
obligations of Company, enforceable against Company in accordance with their
respective terms, subject to the effect of (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
3.4 Capitalization of Company.
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3.4.1 Outstanding Securities. The authorized capital stock of
Company consists entirely of: (a) 20,000,000 shares of Company Common Stock, of
which a total of 10,189,000 shares are issued and outstanding and (b) 2,800,000
shares of Company Preferred Stock, of which (i) 1,500,000 shares are designated
Series A Preferred Stock, all of which are issued and outstanding and (ii)
1,300,000 shares are designated Series B Preferred Stock, 1,098,905 shares of
which are issued and outstanding. The numbers of issued and outstanding shares
of Company Common Stock and Company Preferred Stock held by each of the Company
Stockholders are set forth in Exhibit A attached hereto. Except as expressly set
forth in Exhibit A attached hereto,no
shares of Company Common Stock or Company Preferred Stock are issued or
outstanding. Company holds no treasury shares. An aggregate of 2,000,000 shares
of Company Common Stock are reserved and authorized for issuance pursuant to the
Company Plan, of which options to purchase a total of 197,100 shares of Company
Common Stock are outstanding. There are no outstanding warrants to purchase
Company capital stock. Schedule 3.4.1(a) to the Company Disclosure Letter lists
for each person who holds Company Options, the name of the holder of each such
Company Option, the exercise price for each such Company Option, the number of
shares or other securities covered by each such Company Option, the
exercisability of each such Company Option, the vesting schedule and the extent
each such Company Option is vested as of the Agreement Date. Schedule 3.4.1(b)
to the Company Disclosure Letter lists for each person who holds Unvested
Company Shares, the name of the holder of each such Unvested Company Share, the
number of such Unvested Company Shares, the vesting schedule and the extent each
such Unvested Company Share is vested as of the Agreement Date. True and
complete copies of the standard agreement under the Company Plan and each
agreement for each Company Option that does not conform to the standard
agreement under the Company Plan have been delivered by Company to Acquirer. The
vesting or exercisability (or any other material terms) of any Company Option or
Unvested Company Share, will not accelerate or otherwise change as a result of
the execution and delivery of this Agreement or the consummation of the Merger
or the transactions contemplated hereby or the occurrence of any subsequent
event (such as the termination of employment of the option holder following
consummation of the Merger). No Company Options have been granted or are
outstanding except under and pursuant to the Company Plan.
3.4.2 Valid Issuance. As of the Closing Date, there will have been no
change in the authorized or outstanding capital stock of Company as represented
in Section 3.4.1. All issued and outstanding shares of Company Common Stock and
Company Preferred Stock have been duly authorized and validly issued, are fully
paid and nonassessable, are not subject to any preemptive right, right of first
refusal, right of first offer or right of rescission, and have been offered,
issued, sold and delivered by Company in compliance with (a) all registration or
qualification requirements (or applicable exemptions therefrom) of all
applicable securities laws and other applicable Legal Requirements and (b) all
requirements set forth in applicable agreements or instruments. All shares of
Company Common Stock subject to issuance under Company Options, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
All outstanding Company Options have been issued and granted in compliance with
(a) all registration or qualification requirements (or applicable exemptions
therefrom) of all applicable securities laws and other applicable Legal
Requirements and (b) all requirements set forth in applicable agreements or
instruments.
3.4.3 No Other Options, Warrants or Rights. Other than as set forth
in Sections 3.4.1 and 3.4.2 above, there are no options, warrants, convertible
securities or other securities, calls, commitments, conversion privileges,
preemptive rights, rights of first refusal, rights of first offer or other
rights or agreements outstanding to purchase or otherwise acquire (whether
directly or indirectly) any shares of Company's authorized but unissued capital
stock or any securities convertible into or exchangeable for any shares of
Company's capital stock or
obligating Company to grant, issue, extend, or enter into any such option,
warrant, convertible security or other security, call, commitment, conversion
privilege, preemptive right, right of first refusal, right of first offer or
other right or agreement to obtain any shares of Company's capital stock, and
there is no liability for dividends accrued but unpaid.
3.4.4 No Voting Arrangements or Registration Rights. Except as
contemplated by this Agreement, there are no voting agreements, voting trusts or
proxies applicable to any of Company's outstanding capital stock or any Company
Options or to the conversion of any shares of Company's capital stock in the
Merger pursuant to any agreement or obligation to which Company is a party or,
to Company's knowledge, pursuant to any other agreement or obligation. Company
is not under any obligation to register under the Securities Act any of its
presently outstanding shares of stock or other securities or any stock or other
securities that may be subsequently issued.
3.5 No Conflict. Neither the execution and delivery of this Agreement nor any
of the Company Ancillary Agreements by Company, nor the consummation of the
Merger or any of the other transactions contemplated hereby or thereby, will (a)
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default under
(i) any provision of the Certificate of Incorporation or Bylaws of Company, or
(ii) any federal, state, local or foreign judgment, writ, decree, order,
statute, rule or regulation applicable to Company or any of its material assets
or properties, or (b) require the consent, approval, assignment, notice,
release, waiver, authorization or other certificate of any third party to ensure
that, following the Effective Time, any agreement, contract, undertaking,
understanding, letter of intent, memorandum of understanding, binding
commitment, material instrument (including any note, bond, mortgage or
indenture), lease, license, permit, franchise, assignment, transaction,
obligation or Company Material Agreement (as defined in Section 3.11) to which
the Company is a party or by which Company or any of its material assets or
properties are bound or affected in order to continue to be in full force and
effect without any breach or violation thereof. Neither Company's entering into
this Agreement nor the consummation of the Merger or any other transaction
contemplated by this Agreement or any Company Ancillary Agreement will give rise
to, or trigger the application of, any rights of any third party that would come
into effect upon the consummation of the Merger.
3.6 Litigation. There is no action, suit, arbitration, mediation, proceeding,
claim or investigation pending against Company (or against any officer,
director, employee or agent of Company in their capacity as such or relating to
their employment, services or relationship with Company) before any court,
Governmental Authority or arbitrator, nor, to Company's knowledge, has any such
action, suit, arbitration, mediation, proceeding, claim or investigation been
threatened. There is no judgment, decree, injunction, rule or order of any
court, Governmental Authority or arbitrator outstanding against Company. To
Company's knowledge, there is no basis for any person to assert a claim against
Company based upon: (a) Company's entering into this Agreement or any Company
Ancillary Agreement or consummating the Merger or any of the transactions
contemplated by this Agreement or any Company Ancillary Agreement; or (b) a
claim of ownership of, or options, warrants or other rights to acquire ownership
of, any shares of the capital stock of Company or any rights as a Company
stockholder, including any option, warrant or preemptive rights or rights to
notice or to vote, other than the rights of the Company Stockholders with
respect to the Company Common Stock and Company Preferred Stock shown as being
owned by such persons on Schedule 3.4.1(a) hereof and the rights of holders of
Company Options shown as being owned by such persons on Schedule 3.4.1(b)
hereof.
3.7 Taxes.
-----
3.7.1 Company has timely filed all federal, state, local and foreign
tax and information returns required to be filed by it, has timely paid all
taxes required to be paid by it for which payment is due, except to the extent
that an accrual or reserve for such taxes has been reflected in accordance with
GAAP (as defined in Section 3.8) on the Balance Sheet (as defined in Section
3.8), has established an adequate accrual or reserve for the payment of all
taxes payable since inception (which accrual or reserve as of the Balance Sheet
Date is fully reflected on the Balance Sheet and in any more recent balance
sheet of Company provided by Company to Acquirer on or before the Agreement
Date), has made all necessary estimated tax payments and has no liability for
taxes in excess of the amount so paid or accruals or reserves so established.
All such returns and reports are true, correct and complete, and Company has
provided Acquirer with true and correct copies of such returns and reports.
Company is not delinquent in the payment of any tax or in the filing of any tax
returns, and no deficiencies for any tax have been threatened, claimed, proposed
or assessed against Company or any of the officers, employees or agents of
Company in their capacity as such. Company has not received any notification
from the Internal Revenue Service or any other taxing authority regarding any
issues that: (a) are currently pending before the Internal Revenue Service or
any other taxing authority (including but not limited to any sales or use tax
authority) regarding Company, or (b) have been raised by the Internal Revenue
Service or other taxing authority and not yet finally resolved. No tax return of
Company is under audit by the Internal Revenue Service or any state or local
taxing agency or authority and any such past audits (if any) have been completed
and fully resolved to the satisfaction of the applicable tax authority
conducting such audit and all taxes and any penalties or interest determined by
such audit to be due from Company have been paid in full to the applicable
taxing authorities. No tax liens are currently in effect against any assets of
Company other than liens which arise by operation of law for taxes not yet due
and payable. There is not in effect any waiver by Company of any statute of
limitations with respect to any taxes or extension of time for filing any tax
return which has not been filed; and Company has not consented to extend to a
date later than the date hereof the period in which any tax may be assessed or
collected by any taxing authority. Company is not a "personal holding company"
within the meaning of the Code. Company has not filed any election under Section
341(f) of the Code. Company has withheld all taxes, including but not limited to
federal and state income taxes, FICA, Medicare, FUTA and other taxes, required
to be withheld, and paid such withheld amounts to the appropriate tax authority
within the time prescribed by law. Since its inception, Company has not been a
"United States real property holding corporation," as defined in Section
897(c)(2) of the Code, and in Section 1.897-2(b) of the Treasury Regulations
issued thereunder (the "Regulations"), and Company has filed with the Internal
Revenue Service all statements, if any, which are required under Section 1.897-
2(h) of the Regulations.
3.7.2 No benefit payable or which may become payable by Company
pursuant to any Company Benefit Arrangement or as a result of or arising under
this Agreement or the Certificate of Merger will constitute an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise Tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code.
3.7.3 For the purposes of this Section, the terms "tax" and "taxes"
include all federal, state, local and foreign income, alternative or add-on
minimum income, gains, franchise, excise, property, property transfer, sales,
use, employment, license, payroll, ad valorem, documentary, stamp, withholding,
occupation, recording, value added or transfer taxes, governmental charges,
fees, customs duties, levies or assessments (whether payable directly or by
withholding), and, with respect to any such taxes, any estimated tax, interest,
fines and penalties or additions to tax and interest on such fines, penalties
and additions to tax.
3.8 Company Financial Statements. Company has delivered to Acquirer as an
attachment to the Company Disclosure Letter unaudited consolidated balance
sheets of Company as of June 30, 2000 and Company's unaudited consolidated
statements of operations, statements of cash flows and statements of changes in
stockholders' equity for the period from inception to June 30, 2000 (all such
financial statements of Company and any notes thereto are hereinafter
collectively referred to as the "Company Financial Statements"). The Company
Financial Statements: (a) are derived from and are in accordance with the books
and records of Company, (b) fairly present the financial condition of Company at
the dates therein indicated and the results of operations for the periods
therein specified, and (c) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods except for any absence of notes thereto. The unaudited
balance sheet of the Company as of June 30, 2000 (the "Balance Sheet Date")
included in the Company Financial Statements is hereinafter referred to as the
"Balance Sheet." Except as disclosed in the Company Financials, since the
Balance Sheet Date neither the Company nor any of its subsidiaries has any
liabilities required under GAAP to be set forth on a balance sheet (absolute,
accrued, contingent or otherwise) which are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Company, except for liabilities incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practices and liabilities
incurred in connection with this Agreement. All reserves established by Company
that are set forth in or reflected in the Balance Sheet are established in
accordance with GAAP. At the Balance Sheet Date, there were no material loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) which are not adequately provided for in the Balance Sheet as required by
said Statement No. 5. The Financial Statements comply in all material respects
with the American Institute of Certified Public Accountants' Statement of
Position 97-2.
3.9 Title to Properties. Company has good and marketable title to all of
its assets and properties free and clear of all Encumbrances, other than liens
for current taxes that are not yet due and payable and except for liens which in
the aggregate do not secure more than $10,000 in liabilities. All machinery,
vehicles, equipment and other tangible personal property owned or leased by
Company or used in its business are in good condition and repair, normal wear
and tear
excepted, and all leases of real or personal property to which Company is a
party are fully effective in accordance with their respective terms. Company is
not in violation of any zoning, building, safety or environmental ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties, nor has Company received any notice of
violation of law with which it has not complied. Company does not own any real
property. Schedule 3.9 to the Company Disclosure Letter sets forth a complete
and accurate list and a brief description of all personal property owned or
leased by Company with an individual value of $1,000 or greater.
3.10 Absence of Certain Changes. Since May 31, 2000 there has not been with
respect to Company any:
(a) Material Adverse Change in Company;
(b) amendment or change in the Certificate of Incorporation or
Bylaws;
(c) incurrence, creation or assumption by Company of (i) any
Encumbrance on any of the assets or properties of Company, (ii) any obligation
or liability or any indebtedness for borrowed money, or (iii) any contingent
liability as a guarantor or surety with respect to the obligations of others;
(d) grant or issuance of any options, warrants or other rights to
acquire from Company, directly or indirectly, except as described in Sections
3.4.1 and 3.4.2 hereof, or any offer, issuance or sale by Company of any debt or
equity securities of Company;
(e) except as described in Section 3.4.1 and as provided in the
amendments to the Restricted Stock Purchase Agreements any acceleration or
release of any vesting condition to the right to exercise any option, warrant or
other right to purchase or otherwise acquire any shares of Company's capital
stock, or any acceleration or release of any right to repurchase shares of
Company's capital stock upon the stockholder's termination of employment or
services with Company;
(f) payment or discharge by the Company of any liability of the
Company or Encumbrance on any asset or property of the Company of an amount in
excess of $10,000 for any liability or Encumbrance;
(g) purchase, license, sale, assignment or other disposition or
transfer, or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the assets, properties or
goodwill of Company other than a license of any product or products of Company;
(h) material damage, destruction or loss of any material property or
asset, whether or not covered by insurance;
(i) declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, the capital stock of Company, or
any split, combination or
recapitalization of the capital stock of Company or any direct or indirect
redemption, purchase or other acquisition of any capital stock of Company or any
change in any rights, preferences, privileges or restrictions of any outstanding
security of Company;
(j) change or increase in the compensation, including severance
compensation, payable or to become payable to any of the officers, directors, or
employees of Company, or in any bonus or pension, insurance or other benefit
payment or arrangement (including stock awards, stock option grants, stock
appreciation rights or stock option grants) made to or with any of such
officers, employees or agents except in connection with normal employee salary
or performance reviews and except as contemplated in this Agreement;
(k) change with respect to the management, supervisory or other key
personnel of Company;
(l) obligation or liability incurred by Company to any of its
officers, directors or stockholders, except for normal and customary
compensation and expense allowances payable to officers;
(m) making by Company of any loan, advance or capital contribution
to, or any investment in, any officer, director or stockholder of Company or any
firm or business enterprise in which any such person had a direct or indirect
material interest at the time of such loan, advance, capital contribution or
investment;
(n) entering into, amendment of, relinquishment, termination or non-
renewal by Company of any contract, lease, transaction, binding commitment or
other right or obligation; or any written, or, to the Company's knowledge, oral
indication or assertion, by the other party thereto of any material problems
with Company's services or performance under such contract, lease, transaction,
binding commitment or other right or obligation or its desire to so amend,
relinquish, terminate or not renew any such contract, lease, transaction,
commitment or other right or obligation;
(o) material change in the manner in which Company extends discounts,
credits or warranties to customers or othewise deals with its customers;
(p) entering into by Company of any transaction, contract or
agreement that by its terms requires or contemplates a current and/or future
financial commitment, expense (inclusive of overhead expense) or obligation on
the part of Company that involves in excess of $20,000; or
(q) any license, transfer or grant of a right under any Company IP
Rights (as defined in Section 3.13 below).
3.11 Contracts and Commitments/Licenses and Permits. Schedule 3.11 to the
Company Disclosure Letter sets forth a list of each of the following written or
oral contracts, agreements, leases, licenses, permits, assignments, mortgages,
transactions, obligations, binding
commitments or other instruments to which Company is a party or to which Company
or any of its assets or properties is bound:
(a) any contract or agreement providing for payments (whether fixed,
contingent or otherwise) by or to Company in an aggregate amount of $20,000 or
more;
(b) any contract providing for the development of any software,
content (including textual content and visual, photographic or graphics
content), technology or intellectual property for (or for the benefit or use of)
Company, or providing for the purchase or license of any software, content
(including textual content and visual or graphics content), technology or
intellectual property to (or for the benefit or use of) Company, which software,
content, technology or intellectual property is in any manner used or
incorporated (or is contemplated by Company to be used or incorporated) in
connection with any aspect or element of any product, service or technology of
Company (other than software generally available to the public at a per copy
license fee of less than $500 per copy);
(c) any joint venture or partnership contract or other agreement which
has involved, or is reasonably expected to involve, a sharing of profits,
expenses or losses with any other party;
(d) any contract or commitment for or relating to the employment of
any officer, employee or consultant of Company or any other type of contract or
understanding with any officer, employee or consultant of Company that is not
immediately terminable by Company without cost or other liability;
(e) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other agreement or commitment for
the borrowing of money or extension of a line of credit or for a leasing
transaction of a type required to be capitalized in accordance with Statement of
Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board;
(f) any lease or other agreement under which Company is lessee of or
holds or operates any items of tangible personal property or real property owned
by any third party;
(g) any agreement that restricts Company from engaging in any aspect
of its business; from participating or competing in any line of business or
market; from freely setting prices for Company's products, services or
technologies (including but not limited to most favored customer pricing
provisions); from engaging in any business in any market or geographic area; or
from soliciting potential employees, consultants, contractors or other suppliers
or customers;
(h) any Company IP Rights Agreement (as defined in Section 3.13);
(i) any agreement relating to the sale, issuance, grant, exercise,
award, purchase, repurchase or redemption of any shares of capital stock or
other securities of Company or any options, warrants or other rights to purchase
or otherwise acquire any such shares of
capital stock, other securities or options, warrants or other rights therefor,
except for those agreements conforming to the standard agreement under the
Company Plan;
(j) any contract with or commitment to any labor union; and
(k) any Governmental Permit (as defined in Section 3.14.3).
A true and complete copy of each agreement or document required by these
subsections (a) through (k) of this Section to be listed on Schedule 3.11 to the
Company Disclosure Letter (such agreements and documents being hereinafter
collectively referred to as the "Company Material Agreements") and a copy of
each Governmental Permit required by subsection (k) of this Section to be listed
on Schedule 3.11 to the Company Disclosure Letter has been delivered to
Acquirer's legal counsel.
3.12 No Default; No Restrictions. (a) Company is not, nor to the Company's
knowledge is any other party, in material breach or default under any Company
Material Agreement. No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or to the Company's
knowledge, would reasonably be expected to, (i) result in a violation or breach
of any of the provisions of any Company Material Agreement, or (ii) to Company's
knowledge, give any third party (A) the right to declare a default or exercise
any remedy under any Company Material Agreement, (B) the right to a rebate,
chargeback, penalty or change in delivery schedule under any Company Material
Agreement, (C) the right to accelerate the maturity or performance of any
obligation of Company under any Company Material Agreement, or (D) the right to
cancel, terminate or modify any Company Material Agreement. Company has not
received any written, or, to the Company's knowledge, oral notice or other
communication regarding any actual or possible violation or breach of, or
default under, any Company Material Agreement. Company has no material
liability for renegotiation of government contracts or subcontracts, if any.
(b) Company is not a party to, and no asset or property of Company is bound
or affected by, any judgment, injunction, order, decree, contract, covenant or
agreement (noncompete or otherwise) that restricts or prohibits, purports to
restrict or prohibit, Company or, following the Effective Time, the Surviving
Corporation or Acquirer, from freely engaging in any business now conducted or
contemplated by Company or from competing anywhere in the world (including any
contracts, covenants or agreements restricting the geographic area in which
Company may sell, license, market, distribute or support any products or
technology or provide services; or restricting the markets, customers or
industries that Company may address in operating its business; or restricting
the prices which Company may charge for its products or technology or services),
or includes any grants by Company of exclusive rights or licenses.
3.13 Intellectual Property.
---------------------
3.13.1 Company (i) owns and has independently developed, or (ii)
has the valid right or license to use, possess, develop, sell, license, copy,
distribute, market, advertise and/or dispose of all Intellectual Property (as
defined below) used in the conduct of the Company Business (as defined below)
(such Intellectual Property being hereinafter collectively referred to as the
"Company IP Rights"). Such Company IP Rights are sufficient for such conduct of
the
Company Business. As used herein, the term "Company Business" means the
business of Company as presently conducted. As used herein, the term
"Intellectual Property" means, collectively, all industrial and intellectual
property rights, including patents, patent applications, patent rights,
trademarks, trademark registrations and applications therefor, trade dress
rights, trade names, service marks, service ▇▇▇▇ registrations and applications
therefor, Internet domain names, Internet and World Wide Web URLs or addresses,
copyrights, copyright registrations and applications therefor, inventions, trade
secrets, know-how, customer lists, supplier lists, proprietary processes and
formulae, software source code and object code, algorithms, screen displays,
inventions, development tools, designs, specifications (or similar information
in electronic format) and all documentation and media constituting, describing
or relating to the foregoing, including manuals, programmers' notes, memoranda
and records. As used in this Section 3.13, "Company-Owned IP Rights" means
Company IP Rights which are owned or exclusively licensed to Company; and
"Company-Licensed IP Rights" means Company IP Rights which are not Company-Owned
IP Rights.
3.13.2 Neither the execution, delivery and performance of this
Agreement, the Certificate of Merger, or the consummation of the Merger and the
other transactions contemplated by this Agreement and/or by Company Ancillary
Agreements will, in accordance with their terms: (a) constitute a material
breach of or default under any instrument, contract, license or other agreement
governing any Company IP Right to which Company is a party (collectively, the
"Company IP Rights Agreements"); (b) cause the forfeiture or termination of, or
give rise to a right of forfeiture or termination of, any Company IP Right; or
(c) materially impair the right of Company or the Surviving Corporation to use,
possess, sell or license any Company IP Right or portion thereof. There are no
royalties, honoraria, fees or other payments payable by Company to any third
person (other than salaries payable to employees and independent contractors not
contingent on or related to use of their work product) as a result of the
ownership, use, possession, license in, sale, marketing, advertising or
disposition of any Company IP Rights by Company to the extent necessary for the
conduct of the Company Business and none will become payable as a result of the
consummation of the transactions contemplated by this Agreement in and of
themselves.
3.13.3 Neither the use, development, manufacture, marketing,
license, sale, furnishing or intended use of any product or service currently
licensed, utilized, sold, provided or furnished by Company or currently under
development by Company violates any license or agreement between Company and any
third party or infringes or misappropriates any Intellectual Property Right of
any other party; and there is no pending or threatened claim or litigation
contesting the validity, ownership or right of Company to exercise any Company
IP Right, nor has Company received any written notice asserting that any Company
IP Right or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other party.
3.13.4 Except as set forth in Schedule 3.13.4 to the Company
Disclosure Schedule, no current or former employee, consultant or independent
contractor of Company: (a) is in material violation of any term or covenant of
any employment contract, patent disclosure agreement, invention assignment
agreement, non-disclosure agreement, noncompetition agreement or any other
contract or agreement with any other party by virtue of such employee's,
consultant's, or independent contractor's being employed by, or performing
services for, Company or using, within the scope of his employment, trade
secrets or proprietary information of others without permission; or (b) has
developed any technology, software or other copyrightable, patentable, or
otherwise proprietary work for Company that is subject to any agreement under
which such employee, consultant or independent contractor has assigned or
otherwise granted to any third party any rights (including Intellectual
Property) in or to such technology, software or other copyrightable, patentable
or otherwise proprietary work. The employment of any employee of Company or the
use by Company of the services of any consultant or independent contractor does
not subject Company to any liability to any third party for improperly
soliciting such employee or consultant, or independent contractor to work for
Company, whether such liability is based on contractual or other legal
obligations to such third party.
3.13.5 Company has taken reasonably necessary and appropriate
steps to protect, preserve and maintain the secrecy and confidentiality of
Company trade secrets and to preserve and maintain all Company's interests and
proprietary rights in such trade secrets. All officers, employees and
consultants of Company having access to proprietary information of Company, its
customers or business partners and inventions owned by Company, have executed
and delivered to Company an agreement regarding the protection of such
proprietary information and the assignment of Company's inventions to Company;
and copies of all such agreements have been made available to Acquirer's
counsel. Company has secured valid written assignments from all of Company's
consultants, contractors and employees who were involved in, or who contributed
to, the creation or development of any Company-Owned IP Rights, of the rights to
such contributions that may be owned by such persons or that Company does not
already own by operation of law. No current or former employee, officer,
director, consultant or independent contractor of Company has any right, license
claim or interest whatsoever in or with respect to any Company-Owned IP Rights.
3.13.6 (i) Schedule 3.13.6 to the Company Disclosure Letter
contains a true and complete list of all registrations made by or on behalf of
Company of any patents, copyrights, mask works, trademarks, service marks,
Internet domain names or Internet or World Wide Web URLs or addresses with any
governmental or quasi-governmental authority; and (ii) all applications,
registrations, filings and other formal written governmental actions made or
taken pursuant to federal, state and foreign laws by Company to secure, perfect
or protect its interest in Company IP Rights, including all patent applications,
copyright applications, and applications for registration of trademarks and
service marks. All registered patents, trademarks, service marks, Internet
domain names, Internet or World Wide Web URLs or addresses, and copyrights held
by Company are valid, subsisting and the Company is the record owner thereof.
3.13.7 Company owns, or is the exclusive licensee of, all right,
title and interest in and to all Company-Owned IP Rights free and clear of all
Encumbrances and licenses (other than licenses and rights listed in Schedule
3.13.8).
3.13.8 Schedule 3.13.8 to the Company Disclosure Letter contains
a true and complete list of (i) all licenses, sublicenses and other agreements
as to which Company is a party
and pursuant to which any person or entity is authorized to use any Company IP
Rights, other than shrink-wrap or click-wrap type end user licenses granted by
Company in the ordinary course of business the form of which has been made
available to Acquirer's counsel, and (ii) all licenses, sublicenses and other
agreements as to which Company is a party and pursuant to which Company is
authorized to use any third party Intellectual Property.
3.13.9 Neither Company nor any other party acting on its behalf,
has disclosed or delivered to any party any Company Source Code (as defined
below). No event has occurred, and no circumstance or condition exists, that
will, or would reasonably be expected to, result in the disclosure or delivery
by Company or any other party acting on Company's behalf to any party of any
Company Source Code (as defined below). Schedule 3.13.9 of the Company
Disclosure Letter identifies each contract, agreement and instrument (whether
written or oral) pursuant to which Company has deposited, or is or may be
required to deposit, with an escrowholder or any other party, any Company Source
Code. As used in this Section 3.13.9, "Company Source Code" means, collectively,
any software source code, or any material portion or aspect of the software
source code, or any material proprietary information or algorithm contained in
or relating to any software source code, of any Company-Owned IP Rights or any
other product marketed or currently proposed to be marketed by Company.
3.13.10 To the Company's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Company IP Rights by any
third party, including any employee or former employee of Company.
3.13.11 Except as set forth on Schedule 3.13.11 of the Company
Disclosure Schedule, (i) no government funding, facilities of a university,
college, other educational institution or research center; or funding from third
parties (other than funds received in consideration for capital stock of
Company) was used in the development of any computer software programs or
applications owned by the Company, and (ii) No current or former employee,
consultant or independent contractor of Company, who was involved in, or who
contributed to, the creation or development of any Company IP Rights, has
performed services for a government, university, college, or other educational
institution or research center during a period of time during which such
employee, consultant or independent contractor was also performing services for
Company.
3.14 Compliance with Laws.
--------------------
3.14.1 Company has materially complied, and is now and at the
Closing Date will be in material compliance with, all applicable federal, state
or local laws, ordinances, regulations, and rules, and all orders, writs,
injunctions, awards, judgments, and decrees, and to Company's knowledge, all
foreign laws, ordinances, regulations and rules, applicable to it or to its
assets, properties, and business (and any regulations promulgated thereunder)
(collectively, "Applicable Law"). Company holds all valid material licenses and
other governmental permits that are necessary and/or legally required to be held
by it to conduct its business as presently conducted.
3.14.2 All materials and products distributed or marketed by
Company have at all times made all disclosures to users or customers required by
Applicable Law and to the Company's knowledge none of such disclosures made or
contained in any such materials have been inaccurate, misleading or deceptive in
any material respect.
3.14.3 Company holds all material permits, licenses and approvals
from, and has made all material filings with, government (and quasi-
governmental) agencies and authorities, that are necessary for Company to
conduct its present business without any violation of Applicable Law
("Governmental Permits") and all such Governmental Permits are in full force and
effect. Company has not received any notice or other communication from any
Governmental Authority regarding (a) any actual or possible violation of law or
any Governmental Permit or any failure to comply with any term or requirement of
any Governmental Permit, or (b) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Permit.
3.14.4 Neither Company nor any director, officer or, to the
Company's knowledge, any agent or employee of Company has, for or on behalf of
Company, (a) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (b) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (c) made any other payment
in violation of Applicable Law.
3.15 Certain Transactions and Agreements. None of the officers and directors
of Company nor, to Company's knowledge, any member of their immediate families,
has any direct ownership interest in any firm or corporation that competes with,
or does business with, or has any contractual arrangement with, Company (except
with respect to any interest in less than two percent of the stock of any
corporation whose stock is publicly traded). None of the officers and directors
of Company nor, to Company's knowledge, any member of their immediate families,
has any indirect ownership interest in any firm or corporation that competes
with, or does business with, or has any contractual arrangement with, Company
(except with respect to any interest in less than two percent of the stock of
any corporation whose stock is publicly traded). None of the officers and
directors of Company nor, to Company's knowledge, any member of their immediate
families and, to Company's knowledge, none of the employees or stockholders of
Company or any member of their immediate families, is a party to, or otherwise
directly or indirectly interested in, any contract or informal arrangement with
Company, except for normal compensation for services as an officer, director or
employee thereof that have been disclosed to Acquirer. None of the officers and
directors of Company nor, to Company's knowledge, any member of their immediate
families and, to Company's knowledge, none of the employees and stockholders nor
any member of their immediate family has any interest in any property, real or
personal, tangible or intangible (including but not limited to any Company IP
Rights or any other Intellectual Property) that is used in, or that pertains to,
the business of Company, except for the rights of a stockholder.
3.16 Employees, ERISA and Other Compliance.
-------------------------------------
3.16.1 Company is in compliance in all material respects with all
applicable laws, agreements and contracts relating to employment, employment
practices, immigration, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters, and has made
commercially reasonable efforts to correctly classify employees as exempt
employees and non-exempt employees under the Fair Labor Standards Act. A list of
all employees, officers and consultants of Company and their current title
and/or job description and compensation is set forth on Schedule 3.16.1 to the
Company Disclosure Letter. Company does not have any employment contracts or
consulting agreements currently in effect that are not terminable at will (other
than agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
3.16.2 Company (a) is not now, nor has ever been, subject to a
union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization or (d) has any current labor disputes. Company has good
labor relations, and has no knowledge of any facts indicating that the
consummation of the Merger or any of the other transactions contemplated hereby
will have a material adverse effect on such labor relations, and has no
knowledge that any of its key employees intends to leave their employ. All of
the employees of Company are legally permitted to be employed by Company in the
United States of America in their current job capacities.
3.16.3 Company has no pension plan, which constitutes, or has
since the enactment of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") constituted, a "multiemployer plan" as defined in Section
3(37) of ERISA. No pension plan of Company is subject to Title IV of ERISA.
3.16.4 (a) Schedule 3.16.4 to the Company Disclosure Letter lists
each employment, severance or other similar contract, arrangement or policy,
each "employee benefit plan" as defined in Section 3(3) of ERISA and each plan
or arrangement providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement insurance or benefits for employees, consultants
or directors which is entered into, maintained or contributed to by Company and
covers any employee or former employee of Company. Such contracts, plans and
arrangements as are described in this Section 3.16.4 are hereinafter
collectively referred to as "Company Benefit Arrangements."
(b) Each Company Benefit Arrangement has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations that are
applicable to such Company Benefit Arrangement and each such Company Benefit
Arrangement that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA which is intended to qualify under Section 401(a) of the Code has
received a favorable opinion, advisory, notification and/or determination
letter, as applicable, that such plan satisfied the requirements of the Tax
Reform Act of 1986 and the GUST amendments (a copy of which letter(s) have been
delivered to Acquirer and its counsel), or has a remaining period of time to
apply for such letter. No Company Benefit Arrangement will be subject to any
surrender fees or service fees upon termination other than the normal and
reasonable administrative fees associated with the termination of benefit plans.
(c) Company has delivered to Acquirer or its counsel a complete and
correct copy and description of each Company Benefit Arrangement.
(d) Company has timely filed and delivered or made available to
Acquirer and its counsel the most recent annual report (Form 5500) for each
Company Benefit Arrangement that is an "employee benefit plan" as defined under
ERISA.
(e) Company has not ever been a participant in any "prohibited
transaction," within the meaning of Section 406 of ERISA with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) which
Company sponsors as employer or in which Company participates as an employer,
which was not otherwise exempt pursuant to Section 408 of ERISA (including any
individual exemption granted under Section 408(a) of ERISA), or which could
result in an excise tax under the Code.
(f) All contributions due and owing from Company with respect to any
of Company Benefit Arrangements have been made or have been accrued on Company's
financial statements (including the Company Financial Statements), and no
further contributions will be due or will have accrued thereunder as of the
Closing Date.
(g) To Company's knowledge, all individuals who, pursuant to the terms
of any Company Benefit Arrangement, are entitled to participate in any such
Company Benefit Arrangement, are currently participating in such Company Benefit
Arrangement or have been offered an opportunity to do so and have declined.
(h) Company will have no liability to any employee or to any
organization or any other entity as a result of the termination of any employee
leasing arrangement.
3.16.5 There has been no amendment to, written interpretation or
authorized announcement (whether or not written) by Company relating to, or
change in employee participation or coverage under, any Company Benefit
Arrangement that would increase materially the expense of maintaining such
Company Benefit Arrangement above the level of the expense incurred in respect
thereof during the calendar year 1999.
3.16.6 The group health plans (as defined in Section 4980B(g) of the
Code) that benefit employees of Company are in compliance, in all material
respects, with the continuation coverage requirements of Section 4980B of the
Code and Sections 601 through 608 of ERISA, the Americans with Disabilities Act
of 1990, as amended and the Family Medical Leave Act of 1993, as amended, and
the regulations thereunder, as such requirements affect Company and its
employees. As of the Closing Date, there will be no material outstanding,
uncorrected violations
under the Consolidation Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any of Company Benefit Arrangements, covered
employees, or qualified beneficiaries that could result in a Material Adverse
Effect on Company, or in a Material Adverse Effect on Acquirer after the
Effective Time.
3.16.7 Company is not a party to any: (a) agreement with any
executive officer or other key employee thereof (i) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Company in the nature of the Merger or any of the other
transactions contemplated by this Agreement or any Company Ancillary Agreement,
(ii) providing any term of employment or compensation guarantee, or (iii)
providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment, except as required by applicable law; or (b) agreement or plan,
including any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of the Merger or any of
the other transactions contemplated by this Agreement or any Company Ancillary
Agreement, or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement or any
Company Ancillary Agreement.
3.17 Corporate Documents. Company has made available to Acquirer for
examination all documents and information listed in the Company Disclosure
Letter or in any schedule thereto or in any other Exhibit or Schedule called for
by this Agreement which have been requested by Acquirer, including the
following: (a) copies of Company's Certificate of Incorporation and Bylaws as
currently in effect; (b) Company's minute book containing all records of all
proceedings, consents, actions, and meetings of Company Stockholders, board of
directors and any committees thereof; (c) Company's stock ledger, option ledger,
and warrant ledger and journal reflecting all stock issuances and transfers, and
all grants of options and warrants to purchase Company capital stock and other
Company securities; (d) all Governmental Permits, and all applications for such
Governmental Permits; and (e) all the Company Material Agreements.
3.18 No Brokers. Neither Company nor any affiliate of Company is obligated
for the payment of any fees or expenses of any investment banker, broker, finder
or similar party in connection with the origin, negotiation or execution of this
Agreement or in connection with the Merger or any other transaction contemplated
by this Agreement.
3.19 Books and Records. The books, records and accounts of Company (a) are
in all material respects true, complete and correct, (b) have been maintained in
accordance with good business practices, (c) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of the assets of
Company in all material respects, and (d) accurately and fairly reflect the
basis for the Company Financial Statements.
3.20 Insurance. Since its organization, Company has maintained, and now
maintains all legally required workers' compensation insurance and errors and
omissions, casualty, fire and general liability insurance. There is no material
claim pending under any of such policies or
bonds as to which coverage has been questioned in writing, denied or disputed by
the underwriters of such policies or bonds. All premiums due and payable under
all such policies and bonds have been timely paid and Company is otherwise in
material compliance with the terms of such policies and bonds. Company has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies. All policies of insurance now held by Company
are set forth in Schedule 3.20 to the Company Disclosure Letter, together with
the name of the insurer under each policy, the type of policy, the policy
coverage amount and any applicable deductible.
3.21 Environmental Matters.
---------------------
3.21.1 Company is in material compliance with all applicable
Environmental Laws (as defined below), which compliance includes the possession
by Company of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. Company has not received any written notice or, to Company's knowledge,
other communication, whether from a governmental body, citizens groups, employee
or otherwise, that alleges that Company is not in compliance with any
Environmental Law, and, to the Company's knowledge, there are no circumstances
that may prevent or interfere with the compliance by Company with any current
Environmental Law in the future. To Company's knowledge, no current or prior
owner of any property leased or possessed by Company has received any notice or
other communication (in writing or otherwise), whether from a government body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or Company is not in compliance with any Environmental Law. All
governmental authorizations currently held by Company pursuant to any
Environmental Law (if any) are identified in Schedule 3.21 of the Company
Disclosure Letter.
3.21.2 For purposes of this Section 3.21: (a) "Environmental Law"
means any federal, state or local statute, law regulation or other legal
requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (b) "Material of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law or that is otherwise a danger to health, reproduction or the
environment.
3.22 No Existing Discussions. Neither Company nor any director or officer or,
to Company's knowledge, employee, agent or stockholder of Company is engaged,
directly or indirectly, in any discussions or negotiations with any third party
relating to any Alternative Transaction (as defined in Section 5.7).
3.23 HSR Act. (a) Company is not a "$10 million person" as defined under
the rules and regulations of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the Company is not "engaged in
manufacturing" for purposes of the HSR Act.
(b) There is no person, or group of persons under Common Control, who
Control(s) Company. For the purposes of this Section, the term "Control" or
"Controlling" means either: (a) holding beneficial ownership, whether direct or
indirect through fiduciaries, agents, controlled entities or other means, of
fifty percent or more of the outstanding voting securities of an issuer; or (b)
in the case of an entity that has no outstanding voting securities, having the
right to fifty percent or more of the profits of the entity, or having the right
in the event of dissolution to fifty percent or more of the assets of the
entity; or (c) having the contractual power presently to designate fifty percent
or more of the directors of a corporation, or in the case of unincorporated
entities, of individuals exercising similar functions. For the purposes of this
Section, "Common Control" means sharing an Ultimate Acquirer. For the purposes
of this Section, "Ultimate Acquirer" means a person who is not Controlled by any
other entity.
3.24 Disclosure. To the Company's knowledge, neither this Agreement, its
Exhibits and Schedules and the Company Disclosure Letter, nor any Company
Ancillary Agreements delivered by Company to Acquirer under this Agreement,
taken together, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which such statements
were made, not misleading.
3.25 Tax Free Reorganization. Neither Company nor, to Company's knowledge,
any affiliate of the Company, has taken any action or knows of any fact,
agreement, plan or other circumstances that poses a material risk to the status
of the Merger as a reorganization under the provisions of Section 368(a) of the
Code.
ARTICLE 4
Representations and Warranties of Acquirer
Acquirer hereby represent and warrant to Company that, except as set forth in
the letter addressed to Company from Acquirer and dated as of the Agreement Date
which has been delivered by Acquirer to Company concurrently herewith (the
"Acquirer Disclosure Letter"), each of the representations, warranties and
statements contained in the following Sections of this Article 4 are true and
correct as of the Agreement Date and will be true and correct on and as of the
Closing Date. For all purposes of this Agreement, the statements contained in
the Acquirer Disclosure Letter and its schedules shall also be deemed to be
representations and warranties made and given by Acquirer under Article 4 of
this Agreement.
4.1 Organization and Good Standing. Acquirer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted. Acquirer is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the property owned, leased or operated by it
or the nature its activities makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed would not individually
or in the aggregate have a Material Adverse Effect on Acquirer. Acquirer has
made available to Company true and complete copies of the
Certificates of Incorporation and Bylaws of Acquirer as currently in full force
and effect. Acquirer is not in violation of its Certificate of Incorporation or
Bylaws.
4.2 Power, Authorization and Validity.
---------------------------------
4.2.1 Power and Authority. Acquirer has all requisite corporate
power and authority to enter into, execute, deliver and perform its obligations
under, this Agreement and all the Acquirer Ancillary Agreements and to
consummate the Merger. The execution, delivery and performance by Acquirer of
this Agreement, each of the Acquirer Ancillary Agreements and all other
agreements, transactions and actions contemplated hereby or thereby have been
duly and validly approved and authorized by all necessary corporate action on
the part of Acquirer. Neither the Merger nor the execution, delivery and
performance of this Agreement and each of the Acquirer Ancillary Agreements by
Acquirer requires the approval of Acquirer's stockholders.
4.2.2 No Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency, commission or other Governmental Authority, or any other person or
entity, governmental or otherwise (including any consent, approval, order,
authorization, registration, declaration or filing pursuant to the HSR Act), is
necessary or required to be made or obtained by Acquirer to enable Acquirer to
lawfully execute and deliver, enter into, and to perform their respective
obligations under, this Agreement, each of the Acquirer Ancillary Agreements,
and for Acquirer to consummate the Merger, except for: (a) the filing of the
Certificate of Merger with the Delaware Secretary of State as required under
Delaware Law, (b) the filing by Acquirer with the Securities and Exchange
Commission ("SEC") or any state securities law authorities of any notices or
filings required in connection with the exemptions from the registration or
qualification requirements of the Securities Act and/or applicable state
securities laws which Acquirer relies on in issuing shares of Acquirer Common
Stock pursuant to this Agreement; (c) the filing by Acquirer of such reports and
information with the SEC under the Securities Exchange Act of 1934, as amended
("Exchange Act") and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement, the Merger and
the other transactions contemplated by this Agreement; (d) the filing by
Acquirer with the SEC of the Form S-3 registration statement to be filed by
Acquirer pursuant to this Agreement; (e) the filing by Acquirer with the SEC of
the Form S-8 registration statement to be filed by Acquirer pursuant to this
Agreement; (f) such other filings as may be required by the Nasdaq Stock Market
with respect to the Merger and the other transactions contemplated by this
Agreement, and the issuance of the shares of Acquirer Common Stock and the
assumption of Company by Acquirer in the Merger; and (g) such other filings, if
any, as may be required in order for Acquirer to comply with applicable federal
and state securities laws.
4.2.3 Enforceability. This Agreement has been duly executed and
delivered by Acquirer. This Agreement and each of the Acquirer Ancillary
Agreements are, or when executed by Acquirer will be, valid and binding
obligations of Acquirer, enforceable against Acquirer in accordance with their
respective terms, subject to the effect of (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors
generally and (b) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
4.3 Capitalization of Acquirer.
--------------------------
(a) The authorized capital stock of Acquirer consists of
100,000,000 shares of common stock, par value $0.001 per share, of which there
were 24,140,864 shares issued and outstanding as of July 7, 2000; and 5,000,000
shares of Preferred Stock, par value $0.001 per share, of which no shares are
issued or outstanding as of July 7, 2000. All outstanding shares of Acquirer
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
As of July 7, 2000: (i) there were options outstanding to purchase an aggregate
of 5,515,166 shares of Acquirer Common Stock pursuant to Acquirer's stock option
plans; and (ii) 528,864 shares of Acquirer Common Stock reserved for future
issuance under Acquirer's 1999 Employee Stock Purchase Plan. All shares of
Acquirer Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and
nonassessable.
(b) The Acquirer Common Stock to be issued in the Merger, and the
Acquirer Common Stock to be issued upon the exercise of assumed Company Options,
when issued in accordance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable and will be issued in compliance with all
applicable material federal and state securities laws.
4.4 No Conflict. Neither the execution and delivery of this Agreement nor any
of the Acquirer Ancillary Agreements by Acquirer, nor the consummation of the
Merger or any of the other transactions contemplated hereby or thereby, will (a)
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of or constitute a default under
(i) any provision of the Certificates of Incorporation or Bylaws of Acquirer, or
(ii) any federal, state, local or foreign judgment, writ, decree, order,
statute, rule or regulation applicable to Acquirer or any of their respective
material assets or properties, or (b) except as set forth in Schedule 4.4 to the
Acquirer Disclosure Letter, require the consent, approval, assignment, notice,
release, waiver, authorization or other certificate of any third party to ensure
that, following the Effective Time, any agreement, contract, undertaking,
understanding, letter of intent, memorandum of understanding, commitment
(whether verbal or in writing), material instrument (including any note, bond,
mortgage or indenture), lease, license, permit, franchise, assignment,
transaction, obligation to which Acquirer is a party or by which Acquirer or any
of its material assets or properties are bound or affected in order to continue
to be in full force and effect without any breach or violation thereof. Neither
Acquirer's entering into this Agreement nor the consummation of the Merger or
any other transaction contemplated by this Agreement or any Acquirer Ancillary
Agreement or will give rise to, or trigger the application of, any rights of any
third party that would come into effect upon the consummation of the Merger.
4.5 SEC Filings; Financial Statements.
---------------------------------
(a) Acquirer has filed all forms, reports and documents required to
be filed by Acquirer with the SEC since the effective date of the registration
statement for Acquirer's initial public offering, and has made available to
Company such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that Acquirer may
file subsequent to the date hereof) are referred to herein as the "Acquirer SEC
Reports." As of their respective dates, the Acquirer SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Acquirer SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed
Acquirer SEC Report that was filed prior to the Agreement Date.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Acquirer SEC Reports (the
"Acquirer Financials"), (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 1O-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented in all material respects the consolidated financial position of
Acquirer and its subsidiaries as at the respective dates thereof and the
consolidated results of Acquirer's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may not
contain footnotes and were or are subject to normal and recurring year-end
adjustments. The audited balance sheet of Acquirer contained in Acquirer SEC
Reports as of December 31, 1999 is hereinafter referred to as the "Acquirer
Balance Sheet." Except as disclosed in the Acquirer Financials, since December
31, 1999 neither Acquirer nor any of its subsidiaries has any liabilities
required under GAAP to be set forth on a balance sheet (absolute, accrued,
contingent or otherwise) which are, individually or in the aggregate, material
to the business, results of operations or financial condition of Acquirer and
its subsidiaries taken as a whole, except for liabilities incurred since the
date of the Acquirer Balance Sheet in the ordinary course of business consistent
with past practices and liabilities incurred in connection with this Agreement.
4.6 Absence of Certain Changes. Except as set forth in the Acquirer SEC
Reports (other than disclosure set forth in the Risk Factors sections of the
Acquirer SEC Reports) in a manner that makes the relevance of such information
to this Section 4.6 readily apparent from the text of such disclosure, since the
date of the Acquirer Balance Sheet, Acquirer has operated its business in the
ordinary course consistent with past practice and there has not occurred: (a)
any change, event or condition (whether or not covered by insurance) that has
resulted in a Material Adverse Change in Acquirer; (b) amendment or change in
the Certificate of Incorporation or Bylaws of Acquirer; (c) any material change
in accounting methods or practices (including any change in depreciation or
amortization policies or rates) by Acquirer or any material revaluation by
Acquirer of any of its material assets; or (d) any declaration, setting aside,
or payment of a dividend on or the making of any other distribution in respect
of the capital stock of Acquirer, or
any split, combination or recapitalization of the capital stock of Acquirer or
any direct or indirect redemption, purchase or other acquisition of any capital
stock of Acquirer or any change in any rights, preferences, privileges or
restrictions of any outstanding security of Acquirer.
4.7 Tax Free Reorganization. Neither Acquirer nor, to Acquirer's knowledge,
any affiliate of Acquirer, has taken any action or knows of any fact, agreement,
plan or other circumstances that poses a material risk to the status of the
Merger as a reorganization under the provisions of Section 368(a) of the Code.
ARTICLE 5
Pre Closing Covenants of Company
During the time period from the Agreement Date until the earlier to occur of
(a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, Company covenants and agrees with Acquirer as
follows:
5.1 Advice of Changes. Company will promptly advise Acquirer in writing of
any (a) event occurring subsequent to the Agreement Date that would render any
representation or warranty of Company contained in this Agreement, if made on or
as of the date of such event or the Closing Date, untrue or inaccurate in any
material respect, (b) material breach of any covenant or obligation of the
Company pursuant to this Agreement or any Company Ancillary Agreement, or (c)
Material Adverse Change in Company.
5.2 Maintenance of Business. Company will use commercially reasonable
efforts to carry on and preserve its business and its relationships with
customers, advertisers, suppliers, employees and others with whom Company has
contractual relations in substantially the same manner as it has prior to the
Agreement Date. If Company becomes aware of a material deterioration in the
relationship with any key customer, key advertiser, key supplier or key
employee, it will promptly bring such information to the attention of Acquirer
in writing and, if requested by Acquirer, will exert reasonable commercial
efforts to promptly restore the relationship.
5.3 Conduct of Business. Company will not, without the prior written
consent of Acquirer, except as described in Section 5.3 of the Company
Disclosure Letter:
(a) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person;
(b) lend any money, other than reasonable and normal advances to
employees for bona fide expenses;
(c) enter into any material transaction or agreement or take any
other similar action;
(d) grant any Encumbrance on any of its assets;
(e) sell, transfer or dispose of any of its assets;
(f) enter into any material lease or contract for the purchase or
sale of any property, whether real or personal, tangible or intangible;
(g) pay any bonus, increased salary, severance or special
remuneration to any officer, director, employee or consultant (except pursuant
to arrangements disclosed in writing to Acquirer prior to the Agreement Date or
disclosed in writing subsequent to the Agreement Date and approved in writing by
Acquirer) or amend or enter into any employment, consulting agreement or
severance agreement with any such person;
(h) change any of its accounting methods except as required by GAAP;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of its capital stock, redeem, repurchase or otherwise
acquire any of its capital stock or other securities (except for the repurchase
of stock from employees, directors, consultants or contractors of Company in
connection with the termination of their services with Company at the original
purchase price of such stock), pay or distribute any cash or property to any
stockholder or security holder of Company or make any other cash payment to any
stockholder or security holder of Company that is unusual or extraordinary;
(j) amend or terminate any contract, agreement or license to which
Company is a party except those amended or terminated which are not material in
amount or effect;
(k) waive or release any material right or claim;
(l) issue, sell, create or authorize any shares of its capital stock
of any class or series or any other of its securities (other than pursuant to
the exercise of any Company Options outstanding on the Agreement Date and
disclosed on Schedule 3.4.1(a)), or issue, grant or create any warrants,
obligations, subscriptions, options, convertible securities, or other
commitments to issue shares of its capital stock or any securities that are
potentially exchangeable for, or convertible into, shares of its capital stock;
(m) subdivide or split or combine or reverse split the outstanding
shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or series or affecting any other of its securities;
(n) merge, consolidate or reorganize with, or acquire, or enter into
any other business combination with, any corporation, partnership, limited
liability company or any other entity (other than Acquirer) or enter into any
negotiations, discussions or agreement for such purpose;
(o) amend its Certificate of Incorporation or Bylaws;
(p) license any of its technology or Intellectual Property, or
acquire any Intellectual Property (or any license thereto) from any third party;
(q) materially change any insurance coverage;
(r) agree to any audit assessment by any tax authority or file any
federal or state income or franchise tax return unless copies of such returns
have first been delivered to Acquirer for its review at a reasonable time prior
to filing;
(s) modify or change the exercise or conversion rights or exercise
or purchase prices of any capital stock of Company, any Company stock options,
warrants or other Company securities, or accelerate or otherwise modify (i) the
right to exercise any option, warrant or other right to purchase any capital
stock or other securities of Company or (ii) the vesting or release of any
shares of capital stock or other securities of Company from any repurchase
options or rights of refusal held by Company or any other party or any other
restrictions; or
(t) agree to do any of the things described in the preceding
clauses 5.3(a) through 5.3(s).
5.4 Regulatory Approvals. Company will promptly execute and file, or join in
the execution and filing, of any application, notification or any other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Authority, which may be reasonably required, or which
Acquirer may reasonably request, in connection with the consummation of the
Merger or any other transactions contemplated by this Agreement or any Company
Ancillary Agreement. Company will use commercially reasonable efforts to obtain,
and to cooperate with Acquirer to promptly obtain, all such authorizations,
approvals and consents.
5.5 Necessary Consents. Company will use commercially reasonable efforts to
promptly obtain such written consents and authorizations of third parties, give
notices to third parties and take such other actions as may be necessary or
appropriate in order to effect the consummation of the Merger and the other
transactions contemplated by this Agreement, to enable Acquirer to carry on
Company's business immediately after the Effective Time and to keep in effect
and avoid the breach, violation of, termination of, or adverse change to, any
agreement or contract to which Company is a party or is bound or by which any of
its assets is bound.
5.6 Litigation. Company will notify Acquirer in writing promptly after
learning of any claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration panel, board or
governmental agency, initiated by or against it, or known by Company to be
threatened against Company or any of its officers, directors, employees or
stockholders in their capacity as such.
5.7 No Other Negotiations. Company will not, and Company will not authorize,
encourage or permit any officer, director, employee, stockholder, affiliate or
agent of Company or any attorney, investment banker or other person on Company's
or their behalf to, directly or indirectly: (i) solicit, initiate, encourage or
induce the making, submission or announcement of, any offer or proposal from any
party concerning any Alternative Transaction (as defined below) or take any
other action that could reasonably be expected to lead to an Alternative
Transaction or a proposal therefor; (ii) consider any inquiry, offer or proposal
received from any party concerning any Alternative Transaction (other than to
respond to such inquiry, offer or proposal by indicating that Company is not
interested in any Alternative Transaction); (iii) furnish any
information regarding Company to any person or entity in connection with or in
response to any inquiry, offer or proposal for or regarding any Alternative
Transaction (other than to respond to such inquiry, offer or proposal by
indicating that Company will not consider any Alternative Transaction); (iv)
participate in any discussions or negotiations with any person or entity with
respect to any Alternative Transaction (other than to respond to such inquiry,
offer or proposal by indicating that Company will not consider any Alternative
Transaction); (v) otherwise cooperate with, facilitate or encourage any effort
or attempt by any person or entity (other than Acquirer) to effect any
Alternative Transaction; or (vi) execute, enter into or become bound by any
letter of intent, agreement, commitment or understanding between Company and any
third party that is related to, provides for or concerns any Alternative
Transaction. Company will promptly notify Acquirer orally and in writing of any
inquiries or proposals received by Company, directors, officers, stockholders,
employees or agents regarding any Alternative Transaction and will, identify the
party making the inquiry or proposal and the nature and terms of any inquiry or
proposal. Any violation of the restrictions set forth in this Section by any
officer, director or employee of Company or any attorney, investment banker or
other director or representative of Company shall be deemed a breach of this
Section 5.7 by Company. As used herein, the term "Alternative Transaction"
means any commitment, agreement or transaction involving or providing for (a)
the possible disposition of all or any substantial portion of Company's
business, assets or capital stock, whether by way of merger, consolidation, sale
of assets, sale of stock, stock exchange, tender offer and/or any other form of
business combination, or (b) any initial public offering of capital stock or
other securities of Company pursuant to a registration statement filed under the
Securities Act.
5.8 Access to Information. Company will allow Acquirer and its agents
access at reasonable times to the files, books, records, technology, contracts,
personnel and offices of Company, including any and all information relating to
Company's taxes, commitments, contracts, leases, licenses, financial condition
and real, personal and intangible property, subject to the terms of the
Confidentiality Agreement between Company and Acquirer dated as of June 23, 2000
(the "Confidentiality Agreement"). Company will cause its accountants to
cooperate with Acquirer and Acquirer's agents in making available all financial
information reasonably requested by Acquirer, including the right to examine all
working papers pertaining to all financial statements prepared or audited by
such accountants.
5.9 Satisfaction of Conditions Precedent. Company will use commercially
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Article 9, and Company will use commercially
reasonable efforts to cause the Merger and the other transactions contemplated
by this Agreement to be consummated in accordance with this Agreement.
5.10 Company Benefit Arrangements. As soon as practicable after the
execution of this Agreement, Company and Acquirer shall confer and work together
in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements. Upon the request of Acquirer, Company will terminate
any Company Benefit Arrangement and any leased employee arrangement or
professional employee organization immediately prior to the Effective Time.
5.11 Information Statement. Company and Acquirer will use commercially
reasonable efforts to prepare and finalize the information statement. As
promptly as practicable after the Agreement Date, but in no event more than two
business days following the Agreement Date, Company will send to the Company
Stockholders such information statement for the purpose of considering and
approving the Merger Agreement, the Merger and the transactions contemplated
hereby.
5.12 Approval of Company Stockholders. (a) Promptly after the Agreement
Date, Company will take all action necessary in accordance with the Delaware Law
and its Certificate of Incorporation and Bylaws to (i) convene a special meeting
of Company Stockholders to be held as promptly as practicable for the purpose of
voting upon approval and adoption of this Agreement and approval of the Merger
(the "Company Stockholders' Meeting"), or (ii) obtain the written consent of a
majority of Company's outstanding capital stock entitled to vote and a majority
of the outstanding Company Preferred Stock.
(b) If Company holds a Company Stockholders' Meeting, Company will
use commercially reasonable efforts to solicit from its stockholders proxies in
favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action necessary to secure the vote or consent of
its stockholders required by the rules of Delaware Law to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, Company
may adjourn or postpone the Company Stockholders' Meeting to the extent
necessary to ensure that there are sufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Company Stockholders' Meeting. Company shall ensure
that the Company Stockholders' Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited by the Company in connection with the
Company Stockholders' Meeting are solicited, in compliance with the Delaware
Law, its Certificate of Incorporation and Bylaws and all other applicable legal
requirements. Company's obligation to call, give notice of, convene and hold the
Company Stockholders' Meeting shall not be limited to or otherwise affected by
the commencement, disclosure, announcement or submission to Company of any
Alternative Transaction, or by any withdrawal, amendment or modification of the
recommendation of the Board of Directors of Company with respect to this
Agreement or the Merger.
(c) The Board of Directors of Company shall recommend that Company's
stockholders vote in favor of and adopt and approve this Agreement and approve
the Merger at the Company Stockholders' Meeting. The information statement sent
to all Company Stockholders shall include a statement to the effect that the
Board of Directors of Company has recommended that Company's stockholders vote
in favor of and adopt and approve this Agreement and the Merger at the Company
Stockholders' Meeting. Neither the Board of Directors of Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Acquirer, the recommendation of
the Board of Directors of Company that Company's stockholders vote in favor of
and adopt and approve this Agreement and the Merger.
(d) The Company shall use commercially reasonable efforts to have
this Agreement approved by such percentage of Company's outstanding voting
securities as is required by the terms of Section 280G(b)(5)(B) of the Code to
avoid the treatment of any payment or benefit under any contract, agreement or
other arrangement, including those entered into in connection with this
Agreement, the Merger and the transactions contemplated hereby, as a parachute
payment which will cause the Acquirer to lose a deduction pursuant to Section
280G of the Code, and to cause such stockholder approval to have been obtained
in a manner which satisfies all applicable requirements of Section 280G(b)(5)(B)
of the Code and the proposed Treasury Regulations thereunder, including (without
limitation) Q-7 of Section 1.280G-1 of such proposed regulations.
5.13 Tax Free Reorganization. Company will cooperate with Acquirer and take
commercially reasonable actions as may be necessary to qualify the Merger as a
"reorganization" within the meaning of the Code.
5.14 Tax Representation Letter. Company shall make such reasonable
representations as are requested by its counsel for the purpose of their
rendering the tax opinions discussed in Sections 8.6 and 9.7.
5.15 Investment Representation Letters. Company shall use commercially
reasonable efforts to cause each Company Stockholder to execute and deliver to
Acquirer prior to the Closing Date an Investment Representation Letter.
ARTICLE 6
Acquirer Covenants
During the time period from the Agreement Date until the earlier to occur of
(a) the Effective Time or (b) the termination of this Agreement in accordance
with Article 10, Acquirer covenants and agrees as follows:
6.1 Advice of Changes. Acquirer will promptly advise Company in writing of
any (a) event that would render any representation or warranty of Acquirer
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, to be untrue or inaccurate in any material respect, (b) material
breach of any covenant or obligation of Acquirer pursuant to this Agreement, any
Acquirer Ancillary Agreement, or (c) Material Adverse Change in Acquirer.
6.2 Regulatory Approvals. Acquirer will promptly execute and file, or join
in the execution and filing, of any application, notification or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Authority which may be reasonably required, or which the
Company may reasonably request in connection with the consummation of the Merger
or any other transactions contemplated by this Agreement or any Acquirer
Ancillary Agreement. Acquirer will use commercially reasonable efforts to
obtain all such authorizations, approvals and consents. Notwithstanding
anything in this Agreement to the contrary, neither Acquirer nor any of its
affiliates shall be under any obligation to make proposals, execute or carry out
agreements or submit to orders providing for the sale or other disposition or
holding separate (through the establishment of a trust or otherwise) of any
assets or
categories of assets of Acquirer, or any of its affiliates or Company, or the
holding separate of the shares of Company Common Stock or imposing or seeking to
impose any limitation on the ability of Acquirer or any of its subsidiaries or
affiliates to conduct their business or own such assets or to acquire, hold or
exercise full rights of ownership of the shares of Company Common Stock.
6.3 Satisfaction of Conditions Precedent. Acquirer will use commercially
reasonable efforts to satisfy or cause to be satisfied all of the conditions
precedent which are set forth in Article 8, and Acquirer will use commercially
reasonable efforts to cause the Merger and the other transactions contemplated
by this Agreement to be consummated in accordance with the terms of this
Agreement.
6.4 Blue Sky Laws. Acquirer shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the Merger.
6.5 Tax Free Reorganization. Acquirer will cooperate with Company and take
commercially reasonable actions as may be necessary to qualify the Merger as a
"reorganization" within the meaning of the Code.
6.6 Indemnification. From and after the Effective Time, Acquirer shall
cause the Surviving Corporation to indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date of this Agreement
or who becomes prior to Effective Time, an officer, director or employee of
Company (the "Indemnified Parties") in respect of acts or omissions occurring on
or prior to the Effective Time to the extent provided under the Company's
Certificate of Incorporation, Bylaws and indemnification agreements in effect on
the date hereof, provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law.
6.7 Employee Benefit Arrangements. As soon as practicable after the
execution of this Agreement, Company and Acquirer shall confer and work together
in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements. Following the Effective Time, Acquirer, in its sole
discretion, shall either: (i) continue (or cause Company to continue) to
maintain the Company Employee Benefit Arrangements on substantially the same
terms in the aggregate as in effect immediately prior to the Effective Time, or
(ii) arrange for each participant in the Company Employee Benefit Arrangements
("Company Participants") to participate in any similar plans of the Acquirer
("Acquirer Plans") on terms no less favorable than those offered to similarly
situated employees of Acquirer, or (iii) a combination of clauses (i) and (ii).
Each Company Participant who continues to be employed by the Company or any of
its subsidiaries immediately following the Effective Time shall, to the extent
permitted by law and applicable tax qualification requirements, and subject to
any generally applicable break in service or similar rule, receive credit for
purposes of eligibility to participate and vesting under the Acquirer Plans for
years of service with the Company or its subsidiaries. To the extent consistent
with law and applicable tax qualification requirements, Acquirer shall cause any
and all pre-existing condition limitations, eligibility waiting periods and
evidence of insurability
requirements under any group health plans to be waived with respect to such
Company Participants and their eligible dependents and shall provide them with
credit for any co-payments and deductibles prior to the Effective Time for
purposes of satisfying any applicable deductible, out-of-pocket, or similar
requirements under any Acquirer Plans in which they are eligible to participate
immediately after the Effective Time. Notwithstanding any of the foregoing to
the contrary, none of the provisions contained herein shall operate to duplicate
any benefit provided to any employee of the Company or the funding of and such
benefit.
6.8 Tax Representation Letter. Acquirer shall make such reasonable
representations as are requested by Company's counsel for the purpose of their
rendering the tax opinions referred to in Sections 8.6 and 9.7.
6.9 Cash in Respect of Unvested Stock and Options. Acquirer shall maintain
sufficient cash available to pay the cash payable upon the vesting of unvested
Acquirer Common Stock issued in the Merger and the cash payable upon the
exercise of Company Options assumed in the Merger.
ARTICLE 7
Closing Matters
7.1 The Closing. Subject to termination of this Agreement as provided in
Article 10, the closing of the transactions to consummate the Merger (the
"Closing") will take place at the offices of Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California at 10:00 a.m., Pacific Time on the first business
day after all of the conditions to Closing set forth in Sections 8 and 9 hereof
have been satisfied and/or waived in accordance with this Agreement, or on such
other day or time as Acquirer and Company may mutually agree (the "Closing
Date"). Concurrently with the Closing or at such later date and time as may be
mutually agreed by Acquirer and Company, the Certificate of Merger will be filed
with the Delaware Secretary of State.
7.2 Exchange.
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7.2.1 At the Effective Time, outstanding shares of Company Common
Stock and Company Preferred Stock (other than Dissenting Shares for which
dissenters rights have been or will be perfected in accordance with Delaware
Law), will, by virtue of the Merger and without further action, cease to exist,
and all such shares will be converted into the right to receive from Acquirer
such amount of cash and the number of shares of Acquirer Common Stock to which
such holder is entitled pursuant to Sections 2.1.1 and 2.1.2, subject to the
provisions of Section 2.1.4 (regarding the elimination of fractional shares of
Acquirer Common Stock) and Section 2.4 (regarding the withholding of the Escrow
Fund). At the Effective Time, Acquirer shall make available to ChaseMellon
Shareholder Services, L.L.C. (the "Exchange Agent") cash and certificates
representing Acquirer Common Stock to be issued in exchange for outstanding
shares of Company Common Stock and cash in an amount sufficient to permit the
payment of cash in lieu of fractional shares pursuant to Section 2.1.4. Within
ten business days after the Effective Time, the Exchange Agent shall cause to be
mailed to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock or Company Preferred Stock (the "Company
Certificates") and which shares were converted into the right to receive cash
and shares of Acquirer Common Stock pursuant to Sections 2.1.1 or 2.1.2, (a) a
letter of transmittal in customary form (which shall specify that delivery shall
be effected, and risk of loss and title to the Company Certificates shall pass,
only upon delivery of the Company Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Acquirer may reasonably
specify) and (b) instructions for use in effecting the surrender of the Company
Certificates in exchange for cash and certificates representing shares of
Acquirer Common Stock and cash in lieu of fractional shares. Upon surrender of a
Company Certificate for cancellation or upon delivery of an affidavit of lost
certificate and an indemnity in form and substance satisfactory to Acquirer (the
"Affidavit") to the Exchange Agent or to such other agent or agents as may be
appointed by Acquirer, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, (a) Acquirer
or its transfer agent will issue to each tendering holder of a Company
Certificate or an Affidavit, certificates (a "Tendering Company Holder") for the
number of shares of Acquirer Common Stock to which such holder is entitled
pursuant to Sections 2.1.1 and 2.1.2, subject to the provisions of Section 2.1.4
(regarding the elimination of fractional shares of Acquirer Common Stock) and
Section 2.4 (regarding the withholding of Escrow Shares); and (b) Acquirer or
its transfer agent will pay by check to each Tendering Company Holder cash in
the amounts payable to such holder in accordance with the provisions of Sections
2.1.1, 2.1.2 and 2.1.4.
7.2.2 No dividends or distributions payable to holders of record
of Acquirer Common Stock after the Effective Time will be paid to the holder of
any unsurrendered Company Certificate unless and until the holder of such
unsurrendered Company Certificate surrenders such Company Certificate or an
Affidavit to the Exchange Agent as provided above. Subject to the effect, if
any, of applicable escheat and other laws, following surrender of any Company
Certificate or Affidavit, there will be delivered to the person entitled
thereto, without interest, the amount of any dividends and distributions
theretofore paid with respect to Acquirer Common Stock so withheld as of any
date subsequent to the Effective Time and prior to such date of delivery.
7.2.3 After the Effective Time there will be no further
registration of transfers on the stock transfer books of Company or its transfer
agent of any shares of capital stock of Company that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Certificates or an Affidavit are presented for any reason, they will be canceled
and exchanged as provided in this Section 7.2.
7.2.4 Until Company Certificates or an Affidavit representing
shares of Company Common Stock that are outstanding immediately prior to the
Effective Time are surrendered pursuant to Section 7.2.1 above, such Company
Certificates will be deemed, for all purposes, to evidence ownership of the
number of shares of Acquirer Common Stock into which such shares of Company
Common Stock and Company Preferred Stock will have been converted pursuant to
Sections 2.1.1 and 2.1.2, respectively, subject to the provisions of Section
2.1.4 (regarding the elimination of fractional shares of Acquirer Common Stock)
and Section 2.5 (regarding the withholding of Escrow Shares).
7.3 Appraisal Rights. If holders of Company Common Stock are entitled to
appraisal rights pursuant to Delaware Law in connection with the Merger, any
shares held by Company Stockholders who exercise and perfect such appraisal
rights ("Dissenting Shares") shall not be converted into a right to receive cash
and Acquirer Common Stock, but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to Delaware Law. Company shall give Acquirer prompt notice (and
in no event more than two business days) of any demand received by Company for
appraisal of Company Common Stock, and Acquirer shall have the right to control
all negotiations and proceedings with respect to such demand. Company agrees
that, except with the prior written consent of Acquirer, it will not voluntarily
make any payment with respect to, or settle or offer to settle, any such demand
for appraisal. In the event that any Company Stockholder fails to make an
effective demand for payment or otherwise loses his status as a holder of
Dissenting Shares, Acquirer shall, as of the later of the Effective Time of the
Merger or ten business days from the occurrence of such event, issue and
deliver, upon surrender by such stockholder of its Company Certificate or
Certificates, the cash and shares of Acquirer Common Stock and any cash payment
in lieu of fractional shares, in each case without interest thereon, to which
such stockholder would have been entitled to under Section 2.1.2 of this
Agreement.
ARTICLE 8
Conditions to Obligations of Company
Company's obligations to consummate the Merger are subject to the fulfillment
or satisfaction, on and as of the Closing, of each of the following conditions
(any one or more of which may be waived by Company, but only in a writing signed
by Company):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Acquirer set forth in this Agreement (a) that are qualified as to
materiality will be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made on
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates), and at the Closing Company will have received
a certificate to such effect executed by an officer of Acquirer.
8.2 Covenants. Acquirer will have performed and complied in all material
respects with all of its covenants contained in this Agreement on or before the
Closing (to the extent that such covenants require performance by Acquirer on or
before the Closing), and at the Closing Company will have received a certificate
to such effect executed by an officer of Acquirer.
8.3 No Material Adverse Change. There will not have been any Material
Adverse Change in Acquirer since the Agreement Date, whether or not resulting
from a breach in any representation, warranty or covenant in this Agreement, and
at the Closing Company will have received a certificate to such effect executed
by an officer of Acquirer.
8.4 Compliance with Law; No Legal Restraints; No Litigation. There will
not be issued or enacted or adopted, or threatened in writing by any
Governmental Authority, any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action or proceeding, or
any judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on the Merger or any other material transaction
contemplated by this Agreement or any Acquirer Ancillary Agreements. No
litigation or proceeding will be threatened in writing or pending with the
probable effect of enjoining or preventing the consummation of the Merger or any
of the other material transactions contemplated by this Agreement or with the
probable effect of having a Material Adverse Effect on Acquirer.
8.5 Government Consents. There will have been obtained at or prior to the
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any Governmental Authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
lawfully consummate the Merger, including but not limited to requirements under
applicable federal and state securities laws.
8.6 Company Tax Opinion. Company shall have received an opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel to Company, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization under Section 368(a) of the Code and that each of Acquirer and
Company will be a party to the reorganization within the meaning of Section
368(b) of the Code and such opinion shall not have been withdrawn or modified in
any material respect; provided however, that if counsel to the Company does not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to Company if counsel to Acquirer renders such opinion to Company.
8.7 No Order; HSR Act. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or been terminated.
8.8 Opinion of Acquirer's Counsel. Company will have received from Fenwick
& West LLP, counsel to Acquirer, an opinion opining to the matters set forth in
Exhibit D.
ARTICLE 9
Conditions to Obligations of Acquirer
The obligations of Acquirer to consummate the Merger are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Acquirer, but only in a
writing signed by Acquirer):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of Company set forth in this Agreement (a) that are qualified as to
materiality will be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been
made at the Closing Date (except for any such representations or warranties
that, by their terms, speak only as of a specific date or dates, in which case
such representations and warranties that are qualified as to materiality shall
be true and correct, and such representations and warranties that are not
qualified as to materiality shall be true and correct in all material respects,
on and as of such specified date or dates), and at the Closing Acquirer will
have received a certificate to such effect executed by Company's President or
Chief Executive Officer. The representations and warranties of each Company
Stockholder set forth in such Company Stockholder's Investment Representation
Letter shall be true and correct in all material respects.
9.2 Covenants. Company will have performed and complied in all material
respects with all of its covenants contained in this Agreement at or before the
Closing (to the extent that such covenants require performance by Company at or
before the Closing), and at the Closing Acquirer will have received a
certificate to such effect executed by Company's President or Chief Executive
Officer.
9.3 No Material Adverse Change. There will not have been any Material
Adverse Change in Company since the Agreement Date, whether or not resulting
from a breach in any representation, warranty or covenant in this Agreement, and
at the Closing Acquirer will have received a certificate to such effect executed
by Company's President or Chief Executive Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. There will
not be any issued, enacted or adopted, or threatened in writing by any
Governmental Authority any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action or proceeding, or
any judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on: (a) the Merger or any other material
transaction contemplated by this Agreement or any Company Ancillary Agreement;
or (b) Acquirer's right (or the right of any Acquirer subsidiary) to own,
retain, use or operate any of its products, properties or assets (including
securities, properties or assets of Company) on or after consummation of the
Merger or seeking a disposition or divestiture of any such properties or assets.
No litigation or proceeding will be threatened in writing or pending with the
probable effect of enjoining or preventing the consummation of any of the
transactions contemplated by this Agreement, or with the probable effect of
having a Material Adverse Effect on Company or Acquirer.
9.5 Government Consents. There will have been obtained at or prior to the
Closing Date such consents, approvals, permits, orders, authorizations from, or
registrations, declarations or filings with, and there will have been taken all
such other actions by, any Governmental Authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
consummate the Merger, including but not limited to requirements under
applicable federal and state securities laws.
9.6 Opinion of Company's Counsel. Acquirer shall have received from ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel to Company, an
opinion opining to the matters set forth in Exhibit E.
9.7 Acquirer Tax Opinion. Acquirer shall have received an opinion of
Fenwick & West LLP, counsel to Acquirer, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization under Section 368(a)
of the Code and that each of Acquirer and Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code and such opinion
shall not have been withdrawn or modified in any material respect; provided
however, that if counsel to Acquirer does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to Acquirer
if counsel to Company renders such opinion to Acquirer.
9.8 Company Stockholder Approvals. This Agreement, the Merger and the
Company Ancillary Agreements will have been duly and validly approved and
adopted, as required by applicable law and Company's Certificate of
Incorporation and Bylaws, by the valid and affirmative vote of at least 90% of
the outstanding shares of Company capital stock.
9.9 Investment Representation Letters; Exemptions Available. Acquirer: (a)
will have received an executed counterpart of an Investment Representation
Letter executed by each Company Stockholder who approved and adopted this
Agreement, the Merger and the Company Ancillary Agreements; and (b) must be
reasonably satisfied that there are not more than thirty-five Company
Stockholders who are not "accredited investors" within the meaning of Regulation
D promulgated under the Securities Act or that the issuance of Acquirer Common
Stock in the Merger is otherwise exempt from registration under the Securities
Act pursuant to Section 4(2) thereof.
9.10 Employment Matters. (i) Each of the Non-Competition Agreements shall
be in full force and effect, (ii) each of the Continuation Agreements signed by
the Core Company Stockholders shall be in full force and effect, (iii) all but
one of the Company's engineers shall have executed and delivered to Acquirer a
Continuation Agreement, and (iv) each person who signed a Continuation Agreement
shall be employed by and providing services to the Company.
9.11 Ancillary Agreements. Each of (i) the amendments to the Restricted
Stock Purchase Agreements, (ii) the Core Company Stockholders Indemnification
Letter, and (iii) the Investment Representation Letters executed by the Core
Company Stockholders shall be in full force and effect.
9.12 Payment of Transaction Expenses. Company shall have paid all
Transaction Expenses payable by it.
9.13 No Order; HSR Act. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or been terminated.
ARTICLE 10
Termination of Agreement
10.1 Termination by Mutual Consent. This Agreement may be terminated at any
time prior to the Effective Time by the mutual written consent of Acquirer and
Company.
10.2 Unilateral Termination.
10.2.1 Either Acquirer or Company, by giving written notice to the
other, may terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger.
10.2.2 Either Acquirer or Company, by giving written notice to the
other, may terminate this Agreement if the Merger shall not have been
consummated by midnight Pacific Time on the Termination Date; provided, however,
that the right to terminate this Agreement pursuant to this Section 10.2.2 shall
not be available to any party whose failure to perform in any material respect
any of its obligations or covenants under this Agreement results in the failure
of any condition set forth in Article 8 or Article 9.
10.2.3 Either Acquirer or Company may terminate this Agreement at any
time prior to the Effective Time if the other has committed a material breach of
(a) any of such party's representations and warranties contained in this
Agreement; or (b) any of such party's covenants contained in this Agreement, in
either case to an extent that the conditions set forth in Section 8.1, 8.2, 9.1
or 9.2, as applicable, shall not be satisfied, and has not cured such material
breach within ten days after the party seeking to terminate this Agreement has
given the other party written notice of the material breach and its intention to
terminate this Agreement pursuant to this Section 10.2.3.
10.2.4 No Liability for Termination. Termination of this Agreement by
a party (the "Terminating Party") in accordance with the provisions of this
Section 10 will not give rise to any obligation or liability on the part of the
Terminating Party on account of such termination; provided, however, that
nothing herein shall relieve a party from liability for a willful breach of this
Agreement. The provisions of Article 10 and Article 13 shall survive any
termination of this Agreement.
ARTICLE 11
Survival of Representations, Indemnification
and Remedies, Continuing Covenants
11.1 Survival of Representations. All representations, warranties and
covenants of Company contained in this Agreement and the other agreements,
certificates and documents contemplated hereby will remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any of
the parties to this Agreement, until that date which is the earlier of (a) the
termination of this Agreement in accordance with its terms or (b) the second
anniversary of the Effective Time; provided, however, that the representations
and
warranties of the Company contained in Sections 3.4 (Capitalization) and 3.7
(Taxes) and the representations and warranties of the Company Stockholders
contained in their Investment Representation Letters will remain operative and
in full force and effect, until the expiration of the applicable statute of
limitations for the claim which seeks recovery of Damages arising out of a
breach of such representations or warranties (the expiration of such applicable
representation, warranty or covenant, the "Release Date").
11.2 Agreement to Indemnify. (a) Each Company Stockholder will severally,
and not jointly, based on each Stockholder's Pro Rata Share, indemnify and hold
harmless, Acquirer and the Surviving Corporation and their respective officers,
directors, agents, representatives, stockholders and employees, and each person,
if any, who controls or may control Acquirer or the Surviving Corporation within
the meaning of the Securities Act or the Exchange Act (each hereinafter referred
to individually as a "Acquirer Indemnified Person" and collectively as "Acquirer
Indemnified Persons") from and against any and all claims, demands, suits,
actions, causes of actions, losses, costs, damages, liabilities and expenses
including reasonable attorneys' fees, other professionals' and experts'
reasonable fees, and court or arbitration costs (hereinafter collectively
referred to as "Damages") incurred, paid or accrued (in accordance with GAAP) in
connection with, resulting from or arising out of: (i) any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by Company in this Agreement or in the
Company Disclosure Letter or in any certificate delivered by or on behalf of
Company or an officer of Company pursuant hereto; or (ii) any Excess Transaction
Expenses (as defined in Section 13.7).
(b) Each Company Stockholder will indemnify and hold harmless the
Acquirer Indemnified Persons from and against any and all Damages incurred in
connection with, resulting from or and arising out of any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by such Company Stockholder in such
Company Stockholder's Investment Representation Letter.
(c) Any claim of indemnity made by a Acquirer Indemnified Person
under this Section 11.2 must be raised in a writing delivered to the
Representative (as defined below) by no later than the applicable Release Date
and, if raised by such date, such claim shall survive the Release Date until
final resolution thereof. Escrow Funds, other than Escrow Funds having a value
(calculated pursuant to Section 11.3(a)) equal to the amount of Damages asserted
in any Claim (as defined in Section 11.5) which has not been resolved pursuant
to the terms hereof prior to the Escrow Release Date, shall be released to the
Company Stockholders on the Escrow Release Date or, in the case of any such
withheld Escrow Funds, upon the final resolution of such Claim.
(d) The amount which any party is or may be required to pay to or
on behalf of any other person pursuant to Article 11 shall be reduced (including
retroactively) by (i) any amounts received by an Acquirer Indemnified Person
from an insurance carrier or paid and resolved by an insurance carrier on behalf
of the insured (in a manner which shall result in no further liability to an
Acquirer Indemnified Person), in either case net of any applicable premium
adjustment, retrospectively rated premium, deductible, retention, cost or
reserve paid or held by
or for the benefit of the insured ("Insurance Proceeds"), (ii) other amounts
actually recovered by or on behalf of such Acquirer Indemnified Person in
reduction of the related Damages or (iii) any tax benefit claimed by Acquirer as
a result of any Damages, such tax benefit being calculated at Acquirer's
incremental effective rate of tax. If a Acquirer Indemnified Person shall have
received the payment required by this Agreement from an indemnifying party in
respect of Damages and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Damages as specified above, then such
indemnified person shall pay to such indemnifying party a sum equal to the
amount of such Insurance Proceeds or other amounts actually received.
11.3 Limitation.
----------
(a) Cap On Indemnity Obligation. In seeking indemnification for
Damages under Section 11.2, the Acquirer Indemnified Persons shall first
exercise their remedies with respect to the Escrow Funds deposited in escrow
pursuant to the terms of Section 2.4 and Article 11 hereof and then, may seek
recovery of such Damages against any other assets of the Company Stockholders up
to a total deemed value of $7,800,000 limited, with respect to each Company
Stockholder, by the Stockholder's Pro Rata Share. Claims for fraudulent conduct
or fraudulent misrepresentation shall not be subject to the limitations of this
paragraph. The value of a share of Acquirer Common Stock shall, for purposes of
satisfying claims for Damages, be deemed to equal the Acquirer Average Price Per
Share, regardless of its actual fair market value as of the time that a claim
for indemnification may be made or satisfied. In the event of a Capital Change
after the Effective Time, the Acquirer Average Price Per Share will, for
purposes of this Section 11.3, be proportionally and equitably adjusted. For
income tax purposes, the use of Acquirer Common Stock to satisfy a Claim (as
defined in Section 11.5 hereof) shall be treated as a purchase price adjustment.
(b) Basket. The indemnification provided for in Section 11.2 shall
not apply unless and until the aggregate Damages for which one or more Acquirer
Indemnified Persons seeks or has sought indemnification hereunder exceeds a
cumulative aggregate of $250,000 (including any adjustments pursuant to Section
11.2(d)) (the "Basket"), in which event Company Stockholders shall, subject to
the other limitations herein, be liable to indemnify the Acquirer Indemnified
Persons for all Damages; provided, however, that the Basket shall not apply to
any indemnification claim for fraudulent conduct or fraudulent misrepresentation
on the part of Company or a Company Stockholder or a claim for Excess
Transaction Expenses.
11.4 Appointment of Representative. By voting in favor of the Merger,
each of the Company Stockholders approves the designation of and designates
▇▇▇▇▇ ▇▇▇ as the Representative of the Company Stockholders and as the attorney-
in-fact and agent for and on behalf of each Company Stockholder with respect to
claims for indemnification under Article 11 and the taking by the Representative
of any and all actions and the making of any decisions required or permitted to
be taken by the Representative under this Agreement, including the exercise of
the power to: (a) authorize the release or delivery to Acquirer of Escrow Funds
in satisfaction of indemnity claims by Acquirer or any other Acquirer
Indemnified Person pursuant to Article 11; (b) agree to, negotiate, enter into
settlements and compromises of, demand arbitration of, and comply with orders of
courts and awards of arbitrators with respect to, such
claims; (c) arbitrate, resolve, settle or compromise any claim for indemnity
made pursuant to Article 11; and (d) take all actions necessary in the judgment
of the Representative for the accomplishment of the foregoing. The
Representative will have authority and power to act on behalf of each Company
Stockholder with respect to the disposition, settlement or other handling of all
claims under Article 11 hereof and all rights or obligations arising under
Article 11. The Company Stockholders will be bound by all actions taken and
documents executed by the Representative in connection with Article 11, and
Acquirer will be entitled to rely on any action or decision of the
Representative. In performing the functions specified in this Agreement, the
Representative will not be liable to any Company Stockholder in the absence of
gross negligence or willful misconduct on the part of the Representative. The
Company Stockholders shall severally indemnify the Representative and hold him
harmless against any loss, liability or expense incurred without gross
negligence or willful misconduct on the part of the Representative and arising
out of or in connection with the acceptance or administration of his duties
hereunder. Any out-of-pocket costs and expenses reasonably incurred by the
Representative in connection with actions taken by the Representative pursuant
to the terms of Article 11 (including the hiring of legal counsel and the
incurring of legal fees and costs) will be paid by the Company Stockholders to
the Representative pro rata based on each Stockholder's Pro Rata Share.
11.5 Notice of Claim. As used herein, "Claim" means a claim for
indemnification of Acquirer or any other Acquirer Indemnified Person for Damages
under Article 11. Acquirer may give notice of a Claim under this Agreement
whether for its own Damages or for Damages incurred by any other Acquirer
Indemnified Person. Acquirer may give written notice of a Claim executed by an
officer of Acquirer (a "Notice of Claim") at any time Acquirer or any other
Acquirer Indemnified Person suffers Damages or is subject to a claim, demand,
suit, action, cause of action or other dispute that may give rise to a Claim.
In the event that Acquirer is requested to deliver a Notice of Claim on behalf
of any other Acquirer Indemnified Person, Acquirer will do so promptly after
Acquirer becomes aware of the existence of any potential claim by a Acquirer
Indemnified Person for indemnity from the Company Stockholders under Article 11.
Acquirer shall deliver a Notice of Claim before the applicable Release Date,
arising from or relating to:
(a) (i) any inaccuracy, misrepresentation, breach of, or default in,
any of the representations, warranties or covenants given or made by Company in
this Agreement or in the Company Disclosure Letter or in any certificate
delivered by Company or an officer of Company pursuant hereto, or (ii) any
Excess Transaction Expenses;
(b) the assertion, whether orally or in writing, against Acquirer or
against any other Acquirer Indemnified Person of a claim, demand, suit, action,
arbitration, investigation, inquiry or proceeding brought by a third party
against such Indemnified Person (in each such case, a "Third-Party Claim") that
is based upon, or includes assertions that would, if true, constitute: (i) any
inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by Company in this
Agreement or in the Company Disclosure Letter or in any certificate delivered by
or on behalf of Company or an officer of Company pursuant hereto, or (ii) any
Excess Transaction Expenses.
Until the applicable Release Date, no delay on the part of Acquirer in
giving the Representative a Notice of Claim will relieve the Representative or
any Company Stockholder from any of its obligations under Article 11 unless (and
then only to the extent) that the Representative or the Company Stockholders are
materially prejudiced thereby.
11.6 Defense of Third-Party Claims.
-----------------------------
(a) Acquirer shall defend any Third-Party Claim, and the costs and
expenses incurred by Acquirer in connection with such defense (including but not
limited to reasonable attorney's fees, other professionals' and experts' fees
and court or arbitration costs) shall be included in the Damages for which
Acquirer may seek indemnity prusuant to a Claim made by any Acquirer Indemnified
Person hereunder.
(b) The Representative shall have the right to receive copies of all
pleadings, notices and communications with respect to the Third-Party Claim to
the extent that receipt of such documents by the Representative does not affect
any privilege relating to the Acquirer Indemnified Person, and may participate
in settlement negotiations with respect to the Third-Party Claim. No Acquirer
Indemnified Person shall enter into any settlement of a Third-Party Claim
without the prior written consent of the Representative (which consent shall not
be unreasonably withheld), provided, that if the Representative shall have
consented in writing to any such settlement, then the Representative shall have
no power or authority to object to any Claim by any Acquirer Indemnified Person
for indemnity under Section 11.2 hereof for the amount of such settlement; and
the Company Stockholders will remain responsible to indemnify the Acquirer
Indemnified Persons for all Damages they may incur arising out of, resulting
from or caused by the Third-Party Claim to the fullest extent provided in
Article 11 hereof.
11.7 Contents of Notice of Claim. Each Notice of Claim by Acquirer given
pursuant to Section 11.5 will contain the following information:
(a) that Acquirer has incurred, paid or properly accrued (in
accordance with GAAP) or, in good faith, believes it will have to incur, pay or
accrue (in accordance with GAAP), Damages in an aggregate stated amount arising
from such Claim (which amount may be the amount of damages claimed by a third
party in an action brought against any Acquirer Indemnified Person based on
alleged facts, which if true, would give rise to liability for Damages to such
Acquirer Indemnified Person under Article 11); and
(b) a brief description, in reasonable detail (to the extent
reasonably available to Acquirer), of the facts, circumstances or events giving
rise to the alleged Damages based on Acquirer's good faith belief thereof,
including the identity and address of any third-party claimant and copies of any
formal demand or complaint, the amount of Damages, the date each such item was
incurred, paid or accrued, or the basis for such anticipated liability, and the
specific nature of the breach to which such item is related.
11.8 Resolution of Notice of Claim. Any Notice of Claim given to the
Representative will be resolved as follows:
(a) Uncontested Claims. In the event that, within twenty business
days after a Notice of Claim is received by the Representative, the
Representative does not contest such Notice of Claim in writing to Acquirer as
provided in Section 11.8(b) (an "Uncontested Claim"), the Representative will be
conclusively deemed to have consented, on behalf of all Company Stockholders, to
the recovery by the Acquirer Indemnified Person of the full amount of Damages
specified in the Notice of Claim in accordance with this Article 11, including
the forfeiture of Escrow Funds and, without further notice, to have stipulated
to the entry of a final judgment for damages against the Company Stockholders
for such amount in any court having jurisdiction over the matter where venue is
proper.
(b) Contested Claims. In the event that the Representative gives
Acquirer written notice contesting all or any portion of a Notice of Claim (a
"Contested Claim") within the twenty business day period specified in Section
11.8(a), then: (i) such Contested Claim will be resolved by either (A) a written
settlement agreement executed by Acquirer and the Representative or (B) in the
absence of such a written settlement agreement, by binding arbitration between
Acquirer and the Representative in accordance with the terms and provisions of
Section 11.8(c).
(c) Arbitration of Contested Claims. Each of Acquirer, Company and
the Company Stockholders agree that any Contested Claim will be submitted to
mandatory, final and binding arbitration before J.A.M.S./ENDISPUTE or its
successor ("J.A.M.S."), pursuant to the United States Arbitration Act, 9 U.S.C.,
Section 1 et seq. and that any such arbitration will be conducted in San Mateo
County, California. Either Acquirer or the Representative may commence the
arbitration process called for by this Agreement by filing a written demand for
arbitration with J.A.M.S. and giving a copy of such demand to each of the other
parties to this Agreement. The arbitration will be conducted in accordance with
the provisions of J.A.M.S' Streamlined Arbitration Rules and Procedures in
effect at the time of filing of the demand for arbitration, subject to the
provisions of Section 11.8(c) of this Agreement. The parties will cooperate with
J.A.M.S. and with each other in promptly selecting an arbitrator from J.A.M.S.'
panel of neutrals, and in scheduling the arbitration proceedings in order to
fulfill the provisions, purposes and intent of this Agreement. The parties
covenant that they will participate in the arbitration in good faith, and that
they will share in its costs in accordance with subparagraph (i) below. The
provisions of this Section 11.8(c) may be enforced by any court of competent
jurisdiction, and the party seeking enforcement will be entitled to an award of
all costs, fees and expenses, including attorneys' fees, to be paid by the party
against whom enforcement is ordered. Judgment upon the award rendered by the
arbitrator may be entered in any court having competent jurisdiction.
(i) Payment of Costs. Acquirer on the one hand, and Company
Stockholders (through the Representative), on the other hand, will bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award.
(ii) Burden of Proof. Except as may be otherwise expressly
provided herein, for any Contested Claim submitted to arbitration, the burden of
proof will be as
it would be if the claim were litigated in a judicial proceeding governed by
California law exclusively.
(iii) Award. Upon the conclusion of any arbitration proceedings
hereunder, the arbitrator will render findings of fact and conclusions of law
and a final written arbitration award setting forth the basis and reasons for
any decision reached (the "Final Award") and will deliver such documents to the
Representative and Acquirer, together with a signed copy of the Final Award. The
Final Award will constitute a conclusive determination of all issues in
question, binding upon the Company Stockholders, the Representative and
Acquirer, and will include an affirmative statement to such effect.
(iv) Timing. The Representative, Acquirer and the arbitrator
will conclude each arbitration pursuant to this Section 11.8 as promptly as
possible for the Contested Claim being arbitrated.
(v) Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(vi) Exclusive Remedy. Following the Effective Time, except
as specifically otherwise provided in this Agreement, arbitration conducted in
accordance with this Agreement will be the sole and exclusive remedy of the
parties for any Claim made pursuant to Article 11.
11.9 Distribution Upon Termination of Escrow Period Within ten business
days following the Escrow Release Date, Acquirer shall deliver to the Company
Stockholders all of the Escrow Funds in excess of any amount of Escrow Funds
necessary to satisfy any then unsatisfied, unresolved or contested claims for
Damages specified in any Notice of Claim delivered to the Representative before
the Escrow Release Date. As soon as all such claims have been finally resolved,
Acquirer shall deliver to the Company Stockholders all remaining Escrow Funds
not applied to the satisfaction of such claims.
ARTICLE 12
Registration Rights
12.1 Certain Definitions. For purposes of this Article 12:
(a) Registration. The terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable Securities" means
(i) the shares of Acquirer Common Stock that are issued to the Company
Stockholders in the Merger pursuant to Sections 2.1.1 and 2.1.2 hereof (which
shares are not Escrow Shares) and (ii) any shares of Acquirer Common Stock that
may be issued as a dividend or other distribution (including shares of Acquirer
Common Stock issued in a subdivision and split of Acquirer's
outstanding Common Stock) with respect to, or in exchange for, or in replacement
of, shares of Acquirer Common Stock described in clause (i) of this Section
12.1(b) or in this clause (ii); excluding in all cases, however, from the
definition of "Registrable Securities" any such shares that are: (w) registered
under the Securities Act other than pursuant to a registration statement filed
pursuant to this Agreement; (x) sold by a person in a transaction in which
rights under this Agreement with respect to such shares are not assigned in
accordance with the terms of this Agreement; (y) sold pursuant to a registration
statement filed pursuant to this Agreement; or (z) sold pursuant to Rule 144
promulgated under the Securities Act or otherwise sold to the public. Only
shares of Acquirer Common Stock shall be Registrable Securities. Except as
provided in clause (ii) of the first sentence of this Section 12.1(b), the term
"Registrable Securities" does not include any shares of Acquirer Common Stock
that were not issued in connection with the Merger.
(c) Holder. The term "Holder" means a Company Stockholder who is
the original holder of any Registrable Securities or any assignee of record of
any Registrable Securities to whom rights under this Agreement have been duly
assigned in accordance with the provisions of this Agreement.
(d) Form S-3. The term "Form S-3" means a registration statement
filed under Form S-3 under the Securities Act, as such is in effect at the
Effective Time, or any successor form of registration statement under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of a substantial amount of information by reference to other
documents filed by Acquirer with the SEC.
(e) Rule 415. The term "Rule 415" means Rule 415 promulgated under
the Securities Act, as such Rule may be amended from time to time, or any
similar or successor rule or regulation hereafter adopted by the SEC.
12.2 Form S-3 Shelf Registration.
---------------------------
(a) Filing and Registration Period. Subject to the terms and
conditions of this Agreement, as promptly as practicable following the date that
Acquirer becomes eligible to use Form S-3, and consistent with the requirements
of applicable law, Acquirer shall prepare and file with the SEC a registration
statement on Form S-3 for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the then outstanding Registrable Securities (the
"Shelf Registration"). Prior to filing such Shelf Registration with the SEC,
Acquirer shall consult with the Stockholder Representative with respect to the
portions of the Shelf Registration that describe the manners in which resales of
Acquirer Common Stock may be made in reliance on the Shelf Registration, which
portions shall be reasonably satisfactory to the Stockholder Representative.
Acquirer shall use commercially reasonable efforts to cause such Shelf
Registration to be declared effective as soon as practicable after its filing
and to keep the Shelf Registration continuously effective under the Securities
Act for a period of time (such period of time being hereinafter called the
"Registration Period") commencing on the date the Shelf Registration is declared
effective under the Securities Act by the SEC (the "Date of Effectiveness") and
ending at the end of the thirtieth day that the Shelf Registration and any
Subsequent Registration (as
defined below) have, in the aggregate, been effective, provided that in the
event that Acquirer exercises its right to prohibit sales under Sections 12.2(f)
or 12.3(b) below or that any Holder is prohibited from selling pursuant to
Section 12.2(g) below, then Acquirer shall extend the Registration Period
hereunder by the number of days that such sales were so prohibited. Acquirer
shall have no duty or obligation to keep the Shelf Registration (or any
Subsequent Registration, as defined below) effective after the expiration of the
Registration Period.
(b) Subsequent Registration. If the Shelf Registration is filed
with the SEC and becomes effective under the Securities Act, and the Shelf
Registration or a Subsequent Registration (as defined below) thereafter ceases
to be effective for any reason at any time during the Registration Period, then
Acquirer shall use all reasonable efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and in any event shall, within
thirty days of such cessation of effectiveness, file an amendment to the Shelf
Registration seeking to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" registration statement
pursuant to Rule 415 covering all of the then outstanding Registrable Securities
(a "Subsequent Registration"). If a Subsequent Registration is filed, Acquirer
shall use its best efforts to cause the Subsequent Registration to be declared
effective as soon as practicable after such filing and to keep such registration
statement continuously effective until the end of the Registration Period.
(c) Supplements and Amendments. During the Registration Period,
Acquirer shall supplement and amend the Shelf Registration or Subsequent
Registration, as applicable, if, as and when required by the Securities Act, the
rules and regulations promulgated thereunder or the rules, regulations or
instructions applicable to the registration form used by Acquirer for such Shelf
Registration.
(d) Timing and Manner of Sales. Any sale of Registrable Securities
pursuant to a Shelf Registration or a Subsequent Registration under this Section
12.2 may be made only during the Registration Period. In addition, any sale of
Registrable Securities pursuant to a Shelf Registration or a Subsequent
Registration under this Section 12.2 may only be made in accordance with the
method or methods of distribution of such Registrable Securities that are
described in the registration statement for the Shelf Registration (or
Subsequent Registration, as applicable) and permitted by such form of
registration statement. Subject to any other agreements between the Holder and
Acquirer or Surviving Corporation, notwithstanding the terms and conditions of
this Section 12, a Holder may also sell Registrable Securities in a bona fide
private offering if the selling Holder provides Acquirer with a written opinion
of counsel, satisfactory to counsel to Acquirer acting in a reasonable manner,
that such offer and sale is an exempt transaction under the Securities Act and
applicable state securities laws, complies with all requirements for such
exemptions and is not made with use of the prospectus for the Shelf Registration
(or Subsequent Registration, if applicable).
(e) No Underwritings. No sale of Registrable Securities under any
Shelf Registration (or Subsequent Registration) effected pursuant to this
Section 12.2 may be effected pursuant to any underwritten offering without
Acquirer's prior written consent, which may be withheld in its sole and absolute
discretion.
(f) Material Events. In the event of a material development or
potential material development involving Acquirer that requires Acquirer under
the Securities Act and the regulations thereunder to amend the registration
statement for the Shelf Registration (or Subsequent Registration, as applicable)
in order to cause the prospectus to be current, then Acquirer will give written
notice to all Holders as soon as practicable that (i) the Shelf Registration (or
Subsequent Registration, as applicable) must be amended and (ii) no sale of
Registrable Securities may be made under the Shelf Registration (or Subsequent
Registration, as applicable) until such Shelf Registration (or Subsequent
Registration, as applicable) has been amended. In the event that Acquirer
determines that an amendment to the registration statement is necessary as
provided above, it will use commercially reasonable efforts to file and cause
such amendment to become effective as soon as practicable; whereupon it will
notify the Holders that the prospectus is current. In the event that sales under
the Shelf Registration (or Subsequent Registration) are prohibited pursuant to
this Section 12.2(f), then after such Shelf Registration (or Subsequent
Registration) has been amended, Acquirer will give written notice to all Holders
as soon as practicable that sales under the Shelf Registration (or Subsequent
Registration) may resume.
(g) Trading Window Compliance. The Holders acknowledge that the
Acquirer ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Compliance Program and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Policy, as such
may be amended from time to time, a current copy of which has been provided to
Company prior to the Closing (the "Acquirer Trading Policy") requires that those
directors, officers and employees of Acquirer and its subsidiaries and those
other persons whom Acquirer determines to be "Access Personnel" or otherwise
subject to the "trading window" and pre-clearance requirements of the Acquirer
Trading Policy (and members of their immediate families and households) are
permitted to effect trades in Acquirer securities: (i) only during those
specified time periods ("trading windows") in which such persons are permitted
to make sales, purchases or other trades in Acquirer's securities under the
"trading window" provisions of the Acquirer Trading Policy; and (ii) only after
pre-clearance of such sales, purchases or other trades with Acquirer's ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Compliance Officer. If a Holder is or becomes subject to the "trading
window" and/or "pre-clearance" provisions of the Acquirer Trading Policy
described above, then, notwithstanding anything herein to the contrary, such
Holder may sell, transfer and dispose of Registrable Securities only during
those trading windows during which such Acquirer Access Personnel are permitted
to effect trades in Acquirer stock under the Acquirer Trading Policy and only
after pre-clearing such trades with Acquirer's ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Compliance
Officer as provided in the Acquirer Trading Policy.
12.3 Limitations. Notwithstanding the provisions of Section 12.2 above,
Acquirer shall not be obligated to effect any registration, qualification or
compliance of Registrable Securities pursuant to Section 12.2 of this Agreement,
and the Holders shall not be entitled to sell Registrable Securities pursuant to
any registration statement filed under Section 12.2 of this Agreement, as
applicable:
(a) if Form S-3 is not then available for such offering by the
Holders;
(b) if Acquirer shall furnish to the Holders a certificate signed by
an officer of Acquirer stating that, in the good faith judgment of such officer,
it would be detrimental to Acquirer and its stockholders for such registration
statement to be in effect or such sales to be made at such time, due, for
example, to the existence of a material development or potential material
development involving Acquirer which Acquirer would be obligated to disclose in
the prospectus contained in the Shelf Registration (or Subsequent Registration),
which disclosure would, in the good faith judgment of such officer, be premature
or otherwise inadvisable at such time or would have a material adverse affect
upon Acquirer and its stockholders, in which event Acquirer will have the right
to defer the filing of any such Shelf Registration (or Subsequent Registration)
or such sales for a period or periods of not more than forty days in the
aggregate for all such delays pursuant to this Section 12.3(b) after delivery of
such certificate to the Holders;
(c) if Acquirer is acquired and Acquirer Common Stock ceases to be
publicly traded;
(d) if the SEC refuses to declare such registration effective due to
the participation of any particular Holder in such registration (unless such
Holder withdraws all such Holder's Registrable Securities from such registration
statement); or if the manner in which any Registrable Securities are disposed of
pursuant to the Shelf Registration (or Subsequent Registration, as applicable)
is not included within the plan of distribution set forth in the prospectus for
the Shelf Registration (or Subsequent Registration, as applicable); or
(e) in any particular jurisdiction in which Acquirer would be
required to qualify to do business or to file a general consent to service of
process in effecting such registration, qualification or compliance, unless
Acquirer is already subject to service of process in such jurisdiction.
12.4 Shares Otherwise Eligible for Resale. Notwithstanding anything
herein to the contrary, Acquirer shall not be obligated to effect or continue to
keep effective any such registration, registration statement, qualification or
compliance with respect to the Registrable Securities held by any particular
Holder:
(a) if Acquirer or its legal counsel shall have received a
"no-action" letter or similar written confirmation from the SEC that all the
Registrable Securities then held by such Holder may be resold by such Holder
within a three month period without registration under the Securities Act
pursuant to the provisions of Rule 144 promulgated under the Securities Act (or
successor provisions), or otherwise;
(b) if legal counsel to Acquirer shall deliver a written opinion to
Acquirer, its transfer agent and the Holders, in form and substance reasonably
acceptable to Acquirer to the effect that all the Registrable Securities then
held by such Holder may be resold by such Holder within a three month period
without registration under the Securities Act pursuant to the provisions of Rule
144 promulgated under the Securities Act, or otherwise;
(c) after expiration or termination of the Registration Period; or
(d) if all Registrable Securities have been registered and sold
pursuant to a registration effected pursuant to this Agreement and/or have been
transferred in transactions in which registration rights hereunder have not been
assigned in accordance with this Agreement.
12.5 Expenses. Acquirer shall pay all expenses incurred in connection
with any registration effected by Acquirer pursuant to this Agreement (excluding
brokers' discounts and commissions), including all filing, registration and
qualification, printers', legal (including, the reasonable fees and expenses of
one counsel for the Holders as a group) and accounting fees.
12.6 Obligations of Acquirer. Subject to Sections 12.2, 12.3 and 12.4
above, when required to effect the registration of any Registrable Securities
under the terms of this Agreement, Acquirer will, as expeditiously as reasonably
possible:
(a) furnish to the Holders such number of copies of the prospectus
for the Shelf Registration (or Subsequent Registration, as applicable),
including a preliminary prospectus (and amendments or supplements thereto), in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by them;
(b) notify each Holder of Registrable Securities promptly and, if
requested by such Holder, confirm such nofication in writing promptly (i) when a
registration statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for post-effective amendments and
supplements to a registration statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a registration statement or the initiation of
any proceedings for that purpose, (iv) of the receipt by Acquirer of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (v) of any determination by
Acquirer that a post-effective amendment to a registration statement would be
appropriate;
(c) use commercially reasonable efforts to (i) register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as will
be reasonably requested by the Holders; and (ii) cause such Registrable
Securities to be registered with or approved by such other governmental agencies
or authorities, including the National Association of Securities Dealers as may
be necessary by virtue of the business and operations of Acquirer; provided,
however, that Acquirer will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (c), (B) subject itself to taxation in any jurisdiction,
or (C) consent to general service of process in any such jurisdiction except as
may be required by the Securities Act;
(d) promptly notify each Holder of Registrable Securities covered by
such registration statement, when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and, subject to the provisions of this Agreement, at the request of any
Holder, prepare and furnish to each Holder of Registrable Securities then
outstanding a reasonable number of copies of a supplement to or an amendment of
the prospectus as may be necessary to correct the untrue statement or omission;
(e) make available for inspection by any Holder of Registrable
Securities and any attorney, accountant or other professional retained by any
such Holder (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of Acquirer (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause Acquirer's officers, directors and employees
to supply all information reasonably requested by any Inspectors in connection
with such registration statement; provided, that prior to any such disclosure,
such Inspector executes a non-disclosure agreement in form and substance
reasonably acceptable to Acquirer. Records which Acquirer reasonably determines
to be confidential and which it notifies the Inspectors in writing are
confidential shall not be disclosed to the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction.
Each Holder of Registrable Securities agrees that information obtained by it as
a result of such inspections shall be deemed confidential and shall not be used
by it as the basis for any market transactions in the securities of Acquirer or
its affiliates or otherwise disclosed by it unless and until such is made
generally available to the public. Each Holder of such Registrable Securities
further agrees that it will, upon leaning that disclosure of such Records is
sought in a court of competent jurisdiction, give written notice to Acquirer and
allow Acquirer, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(f) use commercially reasonable efforts to cause all such Registrable
Securities to be listed on the Nasdaq National Market and each securities
exchange on which similar securities issued by Acquirer are then listed; and
(g) upon the request of any Holder, promptly provide the name,
address and other contract information regarding Acquirer's transfer agent for
the Registrable Securities and the CUSIP number for the Registrable Securities.
12.7 Furnish Information. It shall be a condition precedent to the
obligations of Acquirer to take any action pursuant to this Article 12 that the
selling Holders will furnish to Acquirer such information regarding themselves,
the Registrable Securities held by them, and the intended method of disposition
and plan of distribution of such Registrable Securities as shall be required to
timely effect the registration of their Registrable Securities.
12.8 Delay of Registration. No Holder will have any right to obtain or
seek an injunction restraining or otherwise delaying any registration that is
the subject of this Agreement as the result of any controversy that might arise
with respect to the interpretation or implementation of this Agreement.
12.9 Indemnification.
---------------
(a) By Acquirer. To the extent permitted by law, Acquirer will
indemnify, defend and hold harmless each Holder against any losses, claims,
damages, or liabilities (joint or several) to which such Holder may become
subject under the Securities Act, the Exchange Act or other U.S. federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in a registration statement filed by Acquirer pursuant
to this Agreement pursuant to which Registrable Securities are sold, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the omission or alleged omission to state in such
registration statement, preliminary prospectus or final prospectus or any
amendments or supplements thereto, a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by Acquirer of the
Securities Act, the Exchange Act, any U.S. federal or state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any U.S. federal or state securities law in connection with the offering of
Registrable Securities covered by such registration statement;
provided however, that the indemnity agreement contained in this Section 12.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the written consent
of Acquirer (which consent shall not be unreasonably withheld), nor shall
Acquirer be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder.
(b) By Selling Holders. To the extent permitted by law, (i) each
selling Holder will indemnify and hold harmless Acquirer, each of its directors,
each of its officers who have signed the registration statement, each Person, if
any, who controls Acquirer within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement, against any losses, claims, damages or liabilities (joint or several)
to which Acquirer or any such director, officer, controlling person, underwriter
or other such Holder may become subject under the Securities, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
(ii) and each such Holder will indemnify and reimburse Acquirer or any such
director, officer, controlling person, underwriter or other Holder for any
reasonable attorneys' fees and other expenses reasonably incurred by Acquirer or
any such director, officer, controlling person, underwriter or other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action, as incurred. Each selling Holder's liability pursuant to
this Section 12.9(b) shall be limited to an amount equal to the net proceeds
received by such selling Holder pursuant to sales under the registration
statement.
(c) Notice. Promptly after receipt by an indemnified party under
this Section 12.9 of notice of the commencement of any action (including any
governmental action) against such indemnified party, such indemnified party
will, if a claim for indemnification or contribution in respect thereof is to be
made against any indemnifying party under this Section 12.9, deliver to the
indemnifying party a written notice of the commencement thereof and, if the
indemnifying party is Acquirer, Acquirer shall have the right and obligation to
control the defense of such action, and if Acquirer fails to defend such action
it shall indemnify and reimburse the selling Holders for any reasonable
attorneys' fees and other expenses reasonably incurred by them in connection
with investigating or defending such action; provided, however, that: (i)
Acquirer shall also have the right, at its option, to assume and control the
defense of any action with respect to which Acquirer or any person entitled to
be indemnified by the selling Holders under Section 12.9(b) is entitled to
indemnification from the selling Holders; (ii) the indemnified party or parties
shall have the right to participate at its own expense in the defense of such
action and (but only to the extent agreed in writing with Acquirer and any other
indemnifying party similarly noticed) to assume the defense thereof with counsel
mutually satisfactory to the parties; and (iii) an indemnified party shall have
the right to retain its own counsel, with the fees and expenses of such counsel
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to an actual or potential conflict of interests between such indemnified
party and any other party represented by such counsel in such proceeding. The
failure of an indemnified party to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 12.9, but the omission so to deliver written notice to the
indemnifying party will not relieve the indemnifying party of any liability that
it may have to any indemnified party otherwise than under this Section 12.9.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of Acquirer and the Holders are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended or supplemented prospectus on file with
the SEC and effective at the time the sale of Registrable Securities under such
registration statement occurs (the "Amended Prospectus"), such indemnity
agreement shall not inure to the benefit of any person if a copy of the Amended
Prospectus was furnished to the indemnified party and was not furnished to the
person asserting the loss, liability, claim or damage in the action giving rise
to indemnity claims under this Section 12.9, at or prior to the time such action
is required by the Securities Act.
(e) Survival. The obligations of Acquirer and Holders under this
Section 12.9 shall survive the completion of any offering of Registrable
Securities in a registration statement pursuant to this Agreement, and
otherwise.
12.10 Acknowledgment of Other Agreements. The Holders acknowledge that
they have been informed by Acquirer that other stockholders of Acquirer
currently hold certain Form S-3 and other registration rights that may enable
such other stockholders to sell shares of Acquirer during the Registration
Period or at other times (thus potentially adversely affecting the receptivity
of the market to the sale of the Registrable Securities pursuant to a
registration effected pursuant to this Agreement).
12.11 Assignment. Notwithstanding anything herein to the contrary, the
rights of a Holder under Article 12 may be assigned only with Acquirer's express
prior written consent, which may be withheld in Acquirer's sole discretion;
provided, however, that the rights of a Holder under Article 12 may be assigned
without Acquirer's express prior written consent: (a) to a Permitted Assignee
(as defined below); or (b) (if applicable) by will or by the laws of intestacy,
descent or distribution, provided that the assignee first agrees in writing to
be bound by all the obligations of the Holders under this Article 12. Any
attempt to assign any rights of a Holder under Article 12 without Acquirer's
express prior written consent in a situation in which such consent is required
by this Section shall be null and void and without effect. Subject to the
foregoing restrictions, all rights, covenants and agreements in Article 12 by or
on behalf of the parties hereto will bind and inure to the benefit of the
respective permitted successors and assigns of the parties hereto. Each of the
following parties are "Permitted Assignees" for purposes of this Section 12.11:
(a) a trust whose beneficiaries consist solely of a Holder and such Holder's
immediate family; (b) the personal representative (such as an executor of a
Holder's will), custodian or conservator of a Holder, in the case of the death,
bankruptcy or adjudication of incompetency of that Holder; (c) immediate family
members of a Holder; (d) partners of a Holder that is a partnership; or (e)
members of a Holder that is a limited liability company.
ARTICLE 13
General Provisions
13.1 Governing Law. The internal laws of the State of California,
irrespective of its choice of law principles, will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto; provided, however, that issues
involving the consummation and effects of the Merger shall be governed by the
laws of the State of Delaware.
13.2 Assignment; Binding Upon Successors and Assigns. Except as set
forth in Section 12.11, neither party hereto may assign any of its rights or
obligations hereunder without the prior written consent of the other party
hereto. Any assignment in violation of this provision shall be void. This
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
13.3 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, then
the remainder of this Agreement and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision.
13.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
13.5 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party hereunder will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other. Acquirer and Company agree that the indemnification and
arbitration provisions set forth in Article 11 shall be each such person's sole
and exclusive remedy with respect to any inaccuracy, misrepresentation, breach
of, or default in, any of the representations, warranties, covenants or
agreements of any such party in this Agreement; provided, however, that the
foregoing shall not limit the parties' respective rights to seek specific
performance or other injunctive relief, or damages in connection with a claim of
fraudulent conduct or fraudulent misrepresentation. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction.
13.6 Amendment and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto as
provided in this Section at any time before or after approval of this Agreement
by the Company Stockholders, but, after such approval, no amendment will be made
which by applicable law requires the further approval of the Company
Stockholders without obtaining such further approval. At any time prior to the
Effective Time, each of Company and Acquirer, by action taken by its Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other; (ii) waive any
inaccuracies in the representations and warranties made to it contained herein
or in any document delivered pursuant hereto; and (iii) waive compliance with
any of the agreements or conditions for its benefit contained herein. No such
waiver or extension will be effective unless signed in writing by the party
against whom such waiver or extension is asserted. The failure of any party to
enforce any of the provisions hereof will not be construed to be a waiver of the
right of such party thereafter to enforce such provisions.
13.7 Expenses. Each party will bear its respective legal, auditors',
investment bankers' and financial advisors' fees and other expenses incurred
with respect to this Agreement, the Merger and the transactions contemplated
hereby ("Transaction Expenses"), except that the Company Stockholders shall pay
any Company Transaction Expenses in excess of $200,000. Notwithstanding the
foregoing, if the Merger is successfully consummated, then any Transaction
Expenses of Company not paid on or prior to the Closing may be paid by Acquirer
and Acquirer will thereafter be entitled to indemnification from the Escrow
Funds in accordance with Section 11.2 for an amount equal to the amount by which
such Transaction Expenses exceed $200,000 (such excess amount, "Excess
Transaction Expenses"), and such indemnification shall not be subject to the
Basket.
13.8 Notices. All notices and other communications required or permitted
under this Agreement will be in writing and will be either hand delivered in
person, sent by facsimile, sent by certified or registered first class mail,
postage pre-paid, or sent by nationally recognized express courier service.
Such notices and other communications will be effective upon receipt if hand
delivered or sent by facsimile, five days after mailing if sent by mail, and one
day after dispatch if sent by express courier, to the following addresses, or
such other addresses as any party may notify the other parties in accordance
with this Section:
If to Acquirer:
Interwoven, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
Fenwick & West LLP
Embarcadero Tower West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
If to Company:
Neonyoyo, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation
Spear Street Tower
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 13.9.
13.9 Interpretation; Rules of Construction. When a reference is made in
this Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise indicated. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. When a reference is made in this Agreement to an
Article, such reference shall be to an Article of this Agreement. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
When reference is made herein to "the business of" an entity, such reference
shall be deemed to include the business of all direct and indirect subsidiaries
of such entity. Reference to the subsidiaries of an entity shall be deemed to
include all direct and indirect subsidiaries of such entity. The parties hereto
agree that they have been represented by counsel during the negotiation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
13.10 No Joint Venture. Nothing contained in this Agreement will be deemed or
construed as creating a joint venture or partnership between any of the parties
hereto. No party is by virtue of this Agreement authorized as an agent, employee
or legal representative of any other party. No party will have the power to
control the activities and operations of any other and their status is, and at
all times will continue to be, that of independent contractors with respect to
each other. No party will have any power or authority to bind or commit any
other party. No party will hold itself out as having any authority or
relationship in contravention of this Section.
13.11 Further Assurances. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and agreements and to
give such further written assurances as may be reasonably requested by any other
party to evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement.
13.12 Third Party Beneficiary Rights. No provisions of this Agreement are
intended, nor will be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, stockholder, partner or any party hereto or any other
person or entity unless specifically provided otherwise herein and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement; except that (i) Section 6.7 is intended to benefit the officers
and directors of Company, (ii) Section 11 is intended to benefit the Indemnified
Parties, and (iii) Article 12 is intended to benefit the Company Stockholders.
13.13 Public Announcement. Upon execution of this Agreement, Acquirer and
Company will issue a press release approved by both parties announcing the
Merger. From the Agreement Date until the Closing, Acquirer may issue such
press releases, and make such other disclosures regarding the Merger, as it
determines are required under applicable securities laws or regulatory rules
after consultation, to the extent practicable, with Company, and may issue such
other press releases as may be mutually agreed with the Company. Prior to the
publication of such initial and mutually agreed press release, neither party
will make any public announcement relating to this Agreement or the transactions
contemplated hereby (except as may be required by law) and Company will use
commercially reasonable efforts to prevent any trading in Acquirer Common Stock
by its officers, directors, employees, stockholders and agents. Neither Acquirer
nor Company will make any disclosures regarding this Agreement or the Merger
that would jeopardize Acquirer's ability to timely and lawfully issue the shares
of Acquirer Common Stock in the Merger pursuant to the exemptions described in
Section 2.6.
13.14 Disclosure Letters. The Company Disclosure Letter and the Acquirer
Disclosure Letter each shall be arranged in separate parts corresponding to the
numbered and lettered sections contained in Articles 3, 4 and 5, and the
information disclosed in any numbered or lettered part shall be deemed to relate
to and to qualify only the particular provision set forth in the corresponding
numbered or lettered section in Articles 3, 4 and/or 5, as applicable, and any
other provision to which the relevance of such information is readily apparent
from the text of such disclosure and shall not be deemed to relate to or to
qualify any other provision.
13.15 Confidentiality. Company and Acquirer each confirm that they have
entered into the Confidentiality Agreement and that they are each bound by, and
will abide by, the provisions of such Confidentiality Agreement. If this
Agreement is terminated, the Confidentiality Agreement shall remain in full
force and effect and all copies of documents containing confidential information
of a disclosing party will be returned by the receiving party to the disclosing
party or be destroyed, as provided in the Confidentiality Agreement.
13.16 Entire Agreement. This Agreement and the Exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto other than the
Confidentiality Agreement. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.
In Witness Whereof, the parties hereto have executed this Agreement as of
the date first above written.
Interwoven, Inc. Neonyoyo, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: V.P. and CFO Title: President and CEO
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Representative of the Stockholders of
Neonyoyo, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇,
as Representative of the Stockholders of Neonyoyo, Inc.
[Signature Page to Agreement and Plan of Merger]
List of Exhibits
Exhibit A Form of Investment Representation Letter
Exhibit B List of Company Stockholders
Exhibit C Form of Certificate of Merger
Exhibit D Matters to be Covered in the Opinion of Fenwick & West LLP
Exhibit E Matters to be Covered in the Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Professional Corporation
Exhibit F Form of Continuation Agreement including form of Employee
Invention Assignment and Confidentiality Agreement