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Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
dated as of February 7, 2001
by and among
FREEMARKETS, INC.
AXE ACQUISITION CORPORATION
AND
ADEXA, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I -- THE MERGER ..........................................................................................2
Section 1.01 The Merger.............................................................................2
Section 1.02 Closing; Effective Time................................................................2
Section 1.03 Effects of the Merger..................................................................2
ARTICLE II -- CONVERSION OF SECURITIES............................................................................3
Section 2.01 Definitions............................................................................3
Section 2.02 Effect on Company Capital Stock........................................................6
Section 2.03 Exchange of Certificates...............................................................7
Section 2.04 Distributions with Respect to Unexchanged Company Shares...............................9
Section 2.05 No Further Ownership Rights in Company Shares.........................................10
Section 2.06 Lost Certificates.....................................................................10
Section 2.07 Effect on Capital Stock of Sub........................................................10
Section 2.08 Company Stock Options.................................................................10
Section 2.09 Company Series A Warrant..............................................................11
Section 2.10 Dissenters' Rights....................................................................11
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................................11
Section 3.01 Organization..........................................................................12
Section 3.02 Capital Structure.....................................................................13
Section 3.03 Authority; No Conflict; Required Filings and Consents.................................15
Section 3.04 Financial Statements..................................................................16
Section 3.05 Accounts Receivable...................................................................16
Section 3.06 Taxes.................................................................................16
Section 3.07 No Undisclosed Liabilities............................................................18
Section 3.08 Title to Properties...................................................................18
Section 3.09 Condition of Tangible Assets..........................................................18
Section 3.10 Compliance with Law; Authorizations...................................................19
Section 3.11 Absence of Certain Changes or Events..................................................19
Section 3.12 Real Property.........................................................................21
Section 3.13 Intellectual Property.................................................................22
Section 3.14 Agreements, Contracts and Commitments.................................................26
Section 3.15 Litigation............................................................................28
Section 3.16 Employees.............................................................................29
Section 3.17 Benefits Plans........................................................................30
Section 3.18 Related Party Transactions............................................................33
Section 3.19 Environmental Matters.................................................................34
Section 3.20 Insurance.............................................................................37
Section 3.21 Books and Records.....................................................................37
Section 3.22 Warranties............................................................................37
Section 3.23 Opinion of Financial Advisor..........................................................37
Section 3.24 Conditions Affecting the Company and its Subsidiaries.................................37
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Section 3.25 Brokers...............................................................................37
Section 3.26 No Illegal Payments...................................................................38
Section 3.27 Suppliers and Customers...............................................................38
Section 3.28 Board Approval; Voting Requirements...................................................38
Section 3.29 Registration Statement; Proxy Statement; Prospectus...................................39
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...................................................39
Section 4.01 Organization..........................................................................40
Section 4.02 Capital Structure.....................................................................40
Section 4.03 Authority; No Conflict; Required Filings and Consents.................................40
Section 4.04 SEC Filings; Financial Statements.....................................................41
Section 4.05 Litigation............................................................................42
Section 4.06 Registration Statement................................................................42
Section 4.07 Interim Operations of Sub.............................................................42
Section 4.08 Opinion of Financial Advisor..........................................................43
Section 4.09 Board Approval; Voting Requirements...................................................43
Section 4.10 Compliance with Law...................................................................43
Section 4.11 No Undisclosed Liabilities............................................................43
ARTICLE V -- CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME.....................................................43
Section 5.01 Conduct of the Company's Business.....................................................43
Section 5.02 Negative Covenants....................................................................44
ARTICLE VI -- ADDITIONAL AGREEMENTS..............................................................................48
Section 6.01 Exclusivity...........................................................................48
Section 6.02 Registration Statement; Proxy Statement; Prospectus...................................49
Section 6.03 Stockholders' Meetings................................................................49
Section 6.04 Access................................................................................50
Section 6.05 Confidentiality.......................................................................50
Section 6.06 Public Announcement...................................................................50
Section 6.07 Consents..............................................................................51
Section 6.08 Regulatory Approvals..................................................................51
Section 6.09 Notification of Certain Matters.......................................................52
Section 6.10 Tax-Free Reorganization...............................................................52
Section 6.11 Form S-8..............................................................................52
Section 6.12 Benefit Plans.........................................................................52
Section 6.13 Allocation Certificate................................................................53
Section 6.14 FIRPTA Certificate....................................................................53
Section 6.15 Rule 145 Affiliate Agreements.........................................................53
Section 6.16 Listing of Additional Shares..........................................................54
Section 6.17 Retention Program.....................................................................54
Section 6.18 Company Transaction Expenses..........................................................54
Section 6.19 Further Assurances....................................................................54
Section 6.20 Non-Solicitation......................................................................54
Section 6.21 Indemnification of Officers and Directors.............................................55
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Section 6.22 Employment and Noncompetition Agreements..............................................56
Section 6.23 Stock Restriction Agreements..........................................................56
ARTICLE VII -- CONDITIONS TO MERGER..............................................................................56
Section 7.01 Conditions to Each Party's Obligation to Effect the Merger............................56
Section 7.02 Conditions to Obligation of Parent and Sub to Effect the Merger.......................57
Section 7.03 Conditions to Obligation of the Company to Effect the Merger..........................59
ARTICLE VIII -- TERMINATION AND AMENDMENT........................................................................60
Section 8.01 Termination...........................................................................60
Section 8.02 Effect of Termination.................................................................61
Section 8.03 Remedies..............................................................................61
Section 8.04 Amendment.............................................................................61
Section 8.05 Waiver................................................................................61
ARTICLE IX -- INDEMNIFICATION....................................................................................61
Section 9.01 Survival..............................................................................61
Section 9.02 Indemnification by the Company Shareholders...........................................61
Section 9.03 Limitations...........................................................................63
Section 9.04 Notice of Claims......................................................................64
Section 9.05 Third Party Claims....................................................................64
Section 9.06 Effect of Investigation; Waiver.......................................................66
Section 9.07 Company Shareholders' Representative..................................................66
ARTICLE X -- GENERAL PROVISIONS..................................................................................67
Section 10.01 Contents of Agreement; Parties in Interest; etc.......................................67
Section 10.02 Assignment and Binding Effect.........................................................67
Section 10.03 Expenses..............................................................................67
Section 10.04 Notices...............................................................................68
Section 10.05 Delaware Law to Govern................................................................69
Section 10.06 No Benefit to Others..................................................................69
Section 10.07 Headings, Gender and "Person".........................................................70
Section 10.08 Schedules and Exhibits................................................................70
Section 10.09 Severability..........................................................................70
Section 10.10 Counterparts..........................................................................70
Section 10.11 Specific Performance..................................................................70
ARTICLE XI -- DEFINITIONS 70
Section 11.01 Definitions...........................................................................70
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EXHIBITS
Form of Company Shareholder Agreement.......................................Exhibit A
Form of Parent Stockholder Agreement........................................Exhibit B
Form of Employment Agreement................................................Exhibit C
Form of Noncompetition Agreement............................................Exhibit D
Form of Stock Restriction Agreement.........................................Exhibit E
Form of Transmittal Letter..................................................Exhibit F
Form of FIRPTA Certificate..................................................Exhibit G
Form of Rule 145 Affiliate Agreement........................................Exhibit H
Form of Indemnity Escrow Agreement..........................................Exhibit I
Form of Legal Opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP..........................................Exhibit J
Form of Tax Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP..........................Exhibit K
Form of Legal Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP........................Exhibit L
Form of Tax Opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP..........................................Exhibit M
ANNEXES
List of Key Company Employees...............................................Annex A
List of Management Shareholders.............................................Annex B
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
February 7, 2001, is by and among FREEMARKETS, INC., a Delaware corporation
("Parent"), AXE ACQUISITION CORPORATION, a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and ADEXA, INC., a California corporation
(the "Company"). Capitalized terms used in this Agreement have the definitions
referenced in Article XI hereof.
RECITALS:
WHEREAS, the Board of Directors of Parent, the Board of Directors and
the sole stockholder of Sub and the Board of Directors of the Company have
approved the acquisition of the Company by Parent by means of a merger of Sub
with and into the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, for federal income tax purposes, it is intended that the
acquisition of the Company by Parent pursuant hereto shall qualify as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code");
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, certain shareholders of the
Company (the "Shareholder Parties") each have entered into a Shareholder
Agreement in substantially the form attached hereto as Exhibit A (collectively,
the "Company Shareholder Agreements");
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to the Company to enter into this Agreement, certain stockholders of
Parent (the "Parent Stockholder Parties") each have entered into a Stockholder
Agreement in substantially the form attached hereto as Exhibit B (collectively,
the "Parent Stockholder Agreements");
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, the employees of the Company
listed on Annex A hereto (the "Key Company Employees") each have entered into
Employment and Noncompetition Agreements in substantially the forms attached
hereto as Exhibits C and D, respectively, and the management shareholders of the
Company listed on Annex B hereto (the "Management Shareholders") each have
entered into a Stock Restriction Agreement in substantially the form attached
hereto as Exhibit E;
NOW, THEREFORE, in consideration of the promises and the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, Parent, Sub and the Company agree as
follows:
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ARTICLE I
THE MERGER
Section 1.01 The Merger. Subject to the terms and conditions of this
Agreement and the Agreement of Merger and the Certificate of Merger in such
forms as are required by the relevant provisions of the General Corporation Law
of the State of California (the "CGCL") and the Delaware General Corporation Law
(the "DGCL"), respectively, at the Effective Time (as defined in Section 1.02),
Sub shall be merged with and into the Company and the separate corporate
existence of Sub shall thereupon cease (the "Merger"). As a result of the
Merger, the outstanding shares of capital stock of Sub and the Company shall be
converted or canceled in the manner provided in Article II of this Agreement,
the separate corporate existence of Sub shall cease and the Company shall be the
surviving corporation following the Merger. After the Effective Time, the Merger
shall have the effects specified in the CGCL and the DGCL.
Section 1.02 Closing; Effective Time. The closing of the Merger (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ at a time and date to be
specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VII, or
at such other place and time and/or on such other date as Parent and the Company
may agree. The date upon which the Closing occurs is herein referred to as the
"Closing Date." Simultaneously with, or as soon as practicable following, the
Closing, the Company as the surviving corporation shall file the Agreement of
Merger together with an officers' certificate of each constituent corporation
with the Secretary of State of the State of California as provided in Section
1103 of the CGCL and concurrently therewith shall file the Certificate of Merger
with the Secretary of State of the State of Delaware as provided in Section
252(c) of the DGCL. The Merger shall become effective at the later of such time
as such documents are so filed or at such time as is set forth in the Agreement
of Merger and the Certificate of Merger, if different, which time is hereinafter
referred to as the "Effective Time."
Section 1.03 Effects of the Merger.
(a) The Surviving Corporation. At the Effective Time, (i) the
separate existence of Sub shall cease and Sub shall be merged with and into the
Company (Sub and the Company are sometimes referred to below as the "Constituent
Corporations" and the Company as the surviving corporation following the Merger
is sometimes referred to below as the "Surviving Corporation"), (ii) the
Articles of Incorporation of the Company in effect immediately prior to the
Effective Time shall be amended and restated in the form of Annex A attached to
the Agreement of Merger, and, as so amended and restated, such Articles of
Incorporation shall be the Articles of Incorporation of the Surviving
Corporation until amended thereafter in accordance with applicable law, and
(iii) the Bylaws of the Company as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until amended thereafter
in accordance with applicable law.
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(b) Rights and Obligations of Surviving Corporation. At and
after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as of a private
nature, and be subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations; and all and singular rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well as for stock subscriptions and all other things in
action or belonging to each of the Constituent Corporations, shall be vested in
the Surviving Corporation, and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise, in
either of the Constituent Corporations, shall not revert or be in any way
impaired; but all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thereafter attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if such debts and liabilities had been incurred by it.
(c) Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title and interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either Constituent Corporation, all such deeds, bills
of sale, assignments and assurances and to do, in the name and on behalf of
either Constituent Corporation, all such other acts and things as may be
necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title and interest in, to and under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
(d) Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
until their resignation or removal or until their respective successors have
been elected and qualified. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until their
resignation or removal or until their respective successors have been elected
and qualified.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.01 Definitions. As used in this Agreement, the following
terms shall have the meanings ascribed to such terms below:
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(a) "Allocation Certificate" shall mean the certificate in the
form required by, and delivered to Parent by the Company at the Closing pursuant
to, Section 6.13.
(b) "Common Stock Exchange Ratio" shall mean the quotient
obtained by dividing (i) the Common Stock Consideration by (ii) the sum of (A)
the number of Company Common Shares issued and outstanding immediately prior to
the Effective Time, and (B) the number of Company Stock Options issued and
outstanding immediately prior to the Effective Time.
(c) "Common Stock Consideration" shall mean the number of
shares of Parent Common Stock that is equal to (i) the Total Parent Shares, less
(ii) the Preferred Stock Consideration.
(d) "Company Common Shares" shall mean shares of the Company's
Common Stock.
(e) "Company Preferred Shares" shall mean, collectively,
Company Series A Preferred Shares, Company Series B Preferred Shares and Company
Series C Preferred Shares.
(f) "Company Series A Preferred Shares" shall mean shares of
the Company's Series A Preferred Stock.
(g) "Company Series A Warrant" shall mean the warrant to
purchase 228,012 Company Series A Preferred Shares registered to Sutro & Co.
Incorporated, a copy of which is attached to Section 3.02(b) of the Company
Disclosure Schedule.
(h) "Company Series B Preferred Shares" shall mean shares of
the Company's Series B Preferred Stock.
(i) "Company Series C Preferred Shares" shall mean shares of
the Company's Series C Preferred Stock.
(j) "Company Shareholder Transaction Expenses" shall mean the
amount by which the Company Transaction Expenses exceed $4,000,000.
(k) "Company Shareholder Transaction Expense Shares" shall
mean the number of shares of Parent Common Stock, rounded to the nearest whole
share, equal to the quotient obtained by dividing (i) the Company Shareholder
Transaction Expenses, by (ii) the average of the closing prices of Parent Common
Stock on the Nasdaq National Market as reported in The Wall Street Journal over
the trading days during the 30 days ending three days prior to the Closing.
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(l) "Company Shareholders" shall mean, collectively, the
holders of Company Shares.
(m) "Company Shares" shall mean, collectively, Company Common
Shares and Company Preferred Shares.
(n) "Company Stock Options" shall mean options to purchase
Company Common Shares.
(o) "Company Transaction Expenses" shall mean the sum of all
expenses, including, without limitation, all financial advisory and investment
banking fees, printing, legal, accounting and other professional fees and
expenses, incurred by the Company in connection with the Company's initial
public offering (other than expenses paid as of December 31, 2000 or accrued on
the Balance Sheet), the termination of such initial public offering, the
negotiation of this Agreement or the consummation of the Merger.
(p) "Merger Consideration" shall mean, collectively, the
Common Stock Consideration and the Preferred Stock Consideration.
(q) "Parent Common Stock" shall mean shares of Parent Common
Stock, par value $.01 per share.
(r) "Per Share Merger Consideration" shall mean, with respect
to each Company Share, the Merger Consideration payable with respect to such
Company Share in accordance with the provisions of this Article II.
(s) "Preferred Stock Consideration" shall mean the number of
shares of Parent Common Stock that is equal to the sum of (i) the Series A
Preferred Stock Consideration, (ii) the Series B Preferred Stock Consideration,
and (iii) the Series C Preferred Stock Consideration.
(t) "Series A Preferred Stock Exchange Ratio" shall mean the
quotient obtained by dividing (i) the Series A Preferred Stock Consideration, by
(ii) the number of Company Series A Preferred Shares issued and outstanding
immediately prior to the Effective Time.
(u) "Series A Preferred Stock Consideration" shall mean a
number of shares of Parent Common Stock equal to the number of the Total Parent
Shares allocable to the holders of Company Series A Preferred Shares (including
Company Series A Preferred Shares issuable upon exercise of the Company Series A
Warrant) in accordance with the Company's Amended and Restated Articles of
Incorporation as set forth in the Allocation Certificate.
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(v) "Series B Preferred Stock Exchange Ratio" shall mean the
quotient obtained by dividing (i) the Series B Preferred Stock Consideration, by
(ii) the number of Company Series B Preferred Shares issued and outstanding
immediately prior to the Effective Time.
(w) "Series B Preferred Stock Consideration" shall mean a
number of shares of Parent Common Stock equal to the number of the Total Parent
Shares allocable to the holders of Company Series B Preferred Shares in
accordance with the Company's Amended and Restated Articles of Incorporation as
set forth in the Allocation Certificate.
(x) "Series C Preferred Stock Exchange Ratio" shall mean the
quotient obtained by dividing (i) the Series C Preferred Stock Consideration, by
(ii) the number of Company Series C Preferred Shares issued and outstanding
immediately prior to the Effective Time.
(y) "Series C Preferred Stock Consideration" shall mean a
number of shares of Parent Common Stock equal to the number of Total Parent
Shares allocable to the holders of Series C Preferred Stock in accordance with
the Company's Amended and Restated Articles of Incorporation as set forth in the
Allocation Certificate.
(z) "Total Parent Shares" shall mean the number of shares of
Parent Common Stock that is equal to (i) SEVENTEEN MILLION TWO HUNDRED FIFTY
THOUSAND (17,250,000), less (ii) the Company Shareholder Transaction Expense
Shares.
Section 2.02 Effect on Company Capital Stock.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of capital stock of the Company:
(i) each Company Series C Preferred Share issued and
outstanding immediately prior to the Effective Time shall be canceled and
retired and shall cease to exist and shall thereafter represent the right to
receive the number of shares of Parent Common Stock, or that fraction of a share
of Parent Common Stock, equal to the Series C Preferred Stock Exchange Ratio.
(ii) each Company Series B Preferred Share issued and
outstanding immediately prior to the Effective Time shall be canceled and
retired and shall cease to exist and shall thereafter represent the right to
receive that fraction of a share of Parent Common Stock equal to the Series B
Preferred Stock Exchange Ratio.
(iii) each Company Series A Preferred Share issued and
outstanding immediately prior to the Effective Time shall be canceled and
retired and shall cease to exist and shall thereafter represent the right to
receive that fraction of a share of Parent Common Stock equal to the Series A
Preferred Stock Exchange Ratio.
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(iv) each Company Common Share issued and outstanding
immediately prior to the Effective Time shall be canceled and retired and shall
cease to exist and shall thereafter represent the right to that fraction of a
share of Parent Common Stock equal to the Common Stock Exchange Ratio.
(b) Notwithstanding anything to the contrary contained herein,
no shares of Parent Common Stock shall be delivered in the Merger to any Company
Shareholder who has not voted in favor of, or consented to, the adoption of this
Agreement until the surrender by such Company Shareholder of a Certificate (as
defined in Section 2.03) with respect to the Company Shares owned by such
Company Shareholder together with a Transmittal Letter (as defined in Section
2.03) with respect thereto and the abandonment by such Company Shareholder of
any and all appraisal rights to which such Company Shareholder may be entitled
under applicable laws.
(c) At and as of the Effective Time, Company Shares held by
the Company in its treasury ("Treasury Shares") shall not represent the right to
receive Merger Consideration. At and as of the Effective Time, all such Treasury
Shares shall be canceled and retired and shall cease to exist, and no cash,
securities or other property shall be payable in respect thereof.
(d) All shares of Parent Common Stock issued in exchange for
Company Common Shares that are subject to vesting and a repurchase option in
favor of the Company immediately prior to the Effective Time ("Company
Restricted Stock") shall be subject to the same vesting schedule and repurchase
option as are applicable to such Company Restricted Stock, as set forth in the
Company agreements containing such vesting schedule and repurchase option (the
"Restricted Stock Agreements"). Such repurchase option shall be assigned to
Parent in the Merger and shall thereafter be exercisable by Parent upon the same
terms and conditions in effect immediately prior to the Effective Time, except
that the purchase price per share of such Company Restricted Stock shall be
adjusted to reflect the Common Stock Exchange Ratio.
Section 2.03 Exchange of Certificates.
(a) Parent shall select American Stock Transfer & Trust Co. or
such other nationally recognized bank or trust company chosen by Parent to act
as the Exchange Agent (the "Exchange Agent") in the Merger.
(b) Promptly after the Effective Time, but in no event more
than five business days after the Effective Time, Parent shall make available to
the Exchange Agent, for exchange in accordance with this Article II, the shares
of Parent Common Stock issuable pursuant to Section 2.02(a) in exchange for
outstanding Company Shares less the number of shares of Parent Common Stock to
be deposited into escrow pursuant to Section 9.02(b), and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 2.03(e).
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(c) No later than five business days prior to the Closing, the
Company shall furnish to Parent mailing labels or a computer file containing the
names and addresses of the record holders of certificates representing Company
Shares. As soon as practicable after the Effective Time, but in any event within
ten business days thereafter, Parent shall cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding Company Shares (the "Certificates"), whose shares
were converted into the right to receive shares of Parent Common Stock pursuant
to Section 2.02(a), (i) a transmittal letter in the form attached as Exhibit F
hereto (the "Transmittal Letter") and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for a certificate representing shares
of Parent Common Stock. Upon surrender to Parent of a Certificate or
Certificates together with a duly executed Transmittal Letter, each Company
Shareholder shall, subject to (A) Section 9.02(b), (B) the vesting terms and
repurchase option of any Company Restricted Stock, and (C) the terms of any
pledge and security agreement with the Company to which any Company Shareholder
is a party, be entitled to receive, in exchange therefor, a certificate
representing that number of whole shares of Parent Common Stock which such
Company Shareholder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article II, and each Certificate
so surrendered shall forthwith be canceled. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of Section
9.02(b) hereof, Parent shall cause to be delivered (A) to Chase Manhattan Trust
Company, N.A, or such other nationally recognized trust company chosen by
Parent, as indemnity escrow agent (the "Indemnity Escrow Agent"), a certificate
or certificates representing the Escrow Shares (as defined in Section 9.02(b)
hereof); (B) to the Secretary of Parent a certificate or certificates
representing (I) the number of whole shares of Parent Common Stock that are
subject to repurchase by Parent or the Company immediately following the
Effective Time in accordance with the terms of the Restricted Stock Agreements
("Unvested Shares") and (II) the number of whole shares of Parent Common Stock
subject to any pledge and security agreement ("Pledged Shares"), less in each
case such number of Unvested Shares or Pledged Shares which are also Escrow
Shares; and (C) to such Company Shareholder a certificate representing those
shares of Parent Common Stock issuable to such Company Shareholder which are not
Escrow Shares, Unvested Shares or Pledged Shares. The Escrow Shares shall be
held in escrow by the Indemnity Escrow Agent and shall be available to
compensate Parent for certain damages as provided in Article IX and the
Indemnity Escrow Agreement referred to in Section 9.02(b). To the extent not
used for such purposes, the Escrow Shares shall be released, all as provided in
the Indemnity Escrow Agreement. The Unvested Shares shall be held in escrow by
the Secretary of Parent and released in accordance with the applicable
Restricted Stock Agreement.
(d) If any certificate for shares of Parent Common Stock is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Certificate(s) so surrendered shall be properly endorsed for transfer (or
accompanied by an appropriate instrument of transfer) and shall otherwise be in
proper form for transfer, and that the Person requesting such exchange shall pay
any transfer or other taxes required by reason of the issuance of certificates
for such shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate
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surrendered, or shall establish to the satisfaction of Parent that any such
taxes have been paid or are not applicable.
(e) Notwithstanding any other provision of this Article II, no
fractional shares of Parent Common Stock will be issued and any holder of
Company Shares entitled hereunder to receive a fractional share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock to be
received by such holder) but for this Section 2.03(e) will be entitled hereunder
to receive no such fractional share but a cash payment in lieu thereof in an
amount equal to such fraction multiplied by the average of the closing prices of
Parent Common Stock on the Nasdaq National Market as reported in The Wall Street
Journal over the trading days during the 30 days ending three days prior to the
Closing.
(f) None of Parent, Sub or the Company shall be liable to any
Person in respect of any cash or other property delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any payment
pursuant to this Article II would otherwise escheat to or become the property of
any Governmental Entity (as defined in Section 3.03(b))), the shares of Parent
Common Stock issuable, or cash payment determined in accordance with Section
2.02(e), in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of Parent free and clear of all claims or
interests of any Person previously entitled thereto.
Section 2.04 Distributions with Respect to Unexchanged Company Shares.
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions on shares of Parent Common Stock shall be paid with respect to any
Company Shares or other securities represented by a Certificate until such
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate there
shall be paid to the holder of certificates representing shares of Parent Common
Stock issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such shares of
Parent Common Stock and not paid, less the amount of any withholding taxes which
may be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender thereof and a payment date subsequent to surrender thereof
payable with respect to such shares of Parent Common Stock, less the amount of
any withholding taxes which may be required thereon. No holder of unsurrendered
Certificates shall be entitled, until the surrender of such Certificate, to vote
the shares of Parent Common Stock into which such holder's Company Shares shall
have been converted.
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Section 2.05 No Further Ownership Rights in Company Shares. The payment
of the Per Share Merger Consideration in respect of each Company Share owned by
the Company Shareholders shall be deemed to have been paid in full satisfaction
of all rights pertaining to each such Company Share, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Company Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented for
transfer to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing shares of Parent Common Stock in accordance with the
procedures set forth in this Article II.
Section 2.06 Lost Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the disbursement of the Per Share Merger Consideration in respect
of Company Shares represented by such Certificate, require the owner of such
lost, stolen or destroyed Certificate to make an affidavit of that fact
containing such indemnification provisions as Parent may reasonably deem
appropriate, including, without limitation, the posting of a standard bond
required by Parent's transfer agent as indemnity against any claim that may be
made against it or the Surviving Corporation with respect to such Certificate.
Section 2.07 Effect on Capital Stock of Sub. Each issued and
outstanding share of Common Stock of Sub shall be converted into and become one
fully paid and nonassessable share of Common Stock, $.01 par value per share, of
the Surviving Corporation.
Section 2.08 Company Stock Options. At the Effective Time, each
outstanding Company Stock Option granted under the Company's 1998 Stock Option
Plan ("Company Stock Option Plan") shall, by virtue of the Merger and without
any further action on the part of the Company or the holder thereof, be assumed
by Parent ("Replacement Option"). To the extent that they replace options which
qualify as "incentive stock options," each Replacement Option will be intended
to qualify as an "incentive stock option" under the Code (although Parent makes
no representation and warranty whatsoever that such options will so qualify).
Each Replacement Option shall be subject to the same terms and conditions as the
applicable Company Stock Option it replaced, except that (A) each such
Replacement Option shall be exercisable for, and represent the right to acquire,
that whole number of shares of Parent Common Stock (rounded down to the nearest
whole share) equal to the number of Company Common Shares subject to such
Company Stock Option multiplied by the Common Stock Exchange Ratio, and (B) the
option price per share of Parent Common Stock shall be an amount equal to the
option price per share of Company Common Shares subject to such Company Stock
Option in effect immediately prior to the Effective Time divided by the Common
Stock Exchange Ratio (the option price per share, as so determined, being
rounded up to the nearest full cent). Parent shall reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
the Replacement Options granted in accordance with this Section 2.08.
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Section 2.09 Company Series A Warrant. At the Effective Time, the
Company Series A Warrant shall, to the extent that such Company Series A Warrant
does not expire in accordance with its terms upon consummation of the Merger, be
converted into a warrant to acquire, on the same terms and conditions as were
applicable under such Company Series A Warrant, that number of shares of Parent
Common Stock equal to (a) the number of Company Common Shares issuable to a
holder of that number of Company Series A Preferred Shares subject to the
Company Series A Warrant, multiplied by (b) the Common Stock Exchange Ratio
(such product rounded down to the nearest whole number) (such new warrant, the
"Replacement Warrant"), at an exercise price per share (rounded up to the
nearest whole cent) equal to (y) the aggregate exercise price for the Company
Series A Preferred Shares which were purchasable pursuant to such Company Series
A Warrant divided by (z) the number of full shares of Parent Common Stock
subject to such Replacement Warrant in accordance with the foregoing. At or
prior to the Effective Time, the Company shall take all reasonable action, if
any, necessary with respect to the Company Series A Warrant to permit the
replacement of such Company Series A Warrant by Parent pursuant to this Section
2.09.
Section 2.10 Dissenters' Rights. Notwithstanding anything in this
Agreement to the contrary, any Company Shares owned by a Company Shareholder who
shall have demanded and not lost or withdrawn, or who shall be eligible to
demand, appraisal rights with respect to such Company Shares in the manner
provided in the CGCL shall not represent the right to receive Merger
Consideration. If such Company Shareholder shall fail to perfect or shall
effectively withdraw or lose his right to appraisal and payment under the CGCL,
as the case may be, each Company Share held by such Company Shareholder shall
thereupon, subject to and in accordance with the procedures set forth in this
Article II, represent the right to receive the Per Share Merger Consideration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedule dated and delivered as of the date hereof by
the Company to Parent (the "Company Disclosure Schedule"), which relates to this
Agreement and is designated therein as being the Company Disclosure Schedule.
The Company Disclosure Schedule shall be arranged in paragraphs corresponding
to, and each exception to a representation and warranty set forth therein shall
be deemed to qualify, the specific numbered paragraph(s) of this Article III
which is referenced or cross-referenced in the applicable exception set forth on
the Company Disclosure Schedule and any other section hereof where it is clear,
upon a reading of such disclosure without any independent knowledge on the part
of the reader regarding the matter disclosed, that the disclosure is intended to
apply to such other section.
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Section 3.01 Organization.
(a) Each of the Company and its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
it owns or leases property or conducts any business so as to require such
qualification, except where the failure to be so qualified would not have a
Company Material Adverse Effect. "Company Material Adverse Effect" shall mean
any effect on the business, financial condition, results of operations,
properties, assets or liabilities of the Company that is materially adverse to
the Company and its Subsidiaries taken as a whole; provided that "Company
Material Adverse Effect" shall not include any effect on the Company resulting
from (i) the announcement, pendency or consummation of the transactions
contemplated by this Agreement, (ii) conditions affecting generally the industry
in which the Company operates or the U.S. economy as a whole, or (iii) acts of
Parent or any of its Subsidiaries other than acts permitted by this Agreement.
(b) Except as set forth in the Company Disclosure Schedule,
neither the Company nor any Subsidiary directly or indirectly owns any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or other business
association or entity.
(c) The Company is not in violation of its Amended and
Restated Articles of Incorporation or Bylaws, in each case as amended to date
(together, the "Company Charter Documents"). The Company Charter Documents in
the forms attached to the Company Disclosure Schedule are the Articles of
Incorporation and the Bylaws of the Company as in effect on the date of this
Agreement. No Subsidiary is in violation of its charter documents. The amendment
of Article III, Division (B), Section 4(b) of the Company's Amended and Restated
Articles in the form attached to Section 3.01(c) of the Company's Disclosure
Schedule (the "Articles Amendment") has been duly approved by the Board of
Directors of the Company and the requisite vote of the Company Shareholders in
accordance with the Company Charter Documents and applicable laws. Following the
filing of a certificate of amendment with respect to the Articles Amendment (the
"Certificate of Amendment"), immediately prior to the Closing of the Merger, if
prior to June 30, 2001, all Company Series A Preferred Shares and Company Series
B Preferred Shares will automatically be converted into Company Common Shares
based on a ratio of 1:1 and all Company Series C Preferred Shares will
automatically be converted into Company Common Shares based on a ratio of
1.67:1.
(d) "Subsidiary" or "Subsidiaries" means, with respect to any
party, any corporation or other organization, of which (i) such party or any
other Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar
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functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party and/or by any one or more of its
Subsidiaries.
Section 3.02 Capital Structure
(a) The authorized capital stock of the Company consists of
(i) 30,000,000 shares of Common Stock, of which 10,976,411 Company Common Shares
are issued and outstanding as of the date hereof, (ii) 4,358,186 shares of
Series A Preferred Stock, of which 4,127,170 Company Series A Preferred Shares
are issued and outstanding as of the date hereof, (iii) 2,900,000 shares of
Series B Preferred Stock, of which 2,492,424 Company Series B Preferred Shares
are issued and outstanding as of the date hereof, and (iv) 2,100,000 shares of
Series C Preferred Stock, of which 1,574,801 Company Series C Preferred Shares
are issued and outstanding as of the date hereof. All issued and outstanding
Company Shares are duly authorized, validly issued, fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws. Any repurchase by the Company of any shares of its
capital stock was duly approved and authorized by the Board of Directors and
complied in all respects with applicable law, and the Company has no liability,
contingent or otherwise, to make any payments with respect to any such
repurchased shares. There are no obligations, contingent or otherwise, of the
Company to repurchase, redeem or otherwise acquire any shares of its capital
stock or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any entity. The Company Disclosure
Schedule contains a true and complete list of the record holders of the Company
Shares and sets forth the full name and number, class and series, of Company
Shares owned by each and, with respect to Company Preferred Shares, describes
(i) the number of Company Common Shares into which such Company Preferred Shares
are convertible as of the date hereof and (ii) if the Certificate of Amendment
is filed with the Secretary of State of California, the number of Company Common
Shares into which such Company Preferred Shares are convertible upon
consummation of the Merger if the Merger is consummated prior to June 30, 2001.
The Company Disclosure Schedule contains a complete list of the Restricted Stock
Agreements and sets forth the name of each Company Shareholder who is a party
thereto, and the purchase dates, purchase prices and vesting schedules
applicable thereto. The Company has delivered true and complete copies of the
Restricted Stock Agreements to Parent or its counsel.
(b) Other than (i) the Company Stock Options under the Company
Stock Option Plan, a complete list of which, including the names of the option
holders, grant dates, exercise prices and vesting schedules, is included in the
Company Disclosure Schedule, (ii) the Company Preferred Shares, (iii) the
Company Series A Warrant, a copy of which is attached to Section 3.02(b) of the
Company Disclosure Schedule, (iv) the rights of first offer set forth in Section
2.6 of the Company's Amended and Restated Investors' Rights Agreement dated
August 24, 2000 (the "Company Rights of First Offer"), and (v) any securities,
subscriptions, warrants or other rights disclosed in Section 3.02(b)(v) of the
Company Disclosure Schedule (the "Other Purchase Rights"), the Company does not
have outstanding (A) any other securities convertible into, or exchangeable or
exercisable for, any of its capital stock, or (B) any other subscription,
option, put, call, warrant or other right or commitment of any nature to issue,
sell or deliver any
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of its capital stock, or securities or other instruments convertible into, or
exchangeable or exercisable for, its capital stock. Except as set forth in the
preceding sentence, the Company is not a party to any other agreement obligating
the Company to issue additional shares of its capital stock. All outstanding
Company Stock Options were duly authorized and were validly issued in compliance
with all applicable federal and state securities laws. There are no shares of
capital stock of the Company that have been issued or transferred in violation
of, or are subject to, any preemptive rights, rights of first offer or
subscription agreements. The Company is not a party to any stockholder
agreements, voting agreements, voting trusts or any such other similar
arrangements which have the effect of restricting or limiting the transfer,
voting or other rights associated with the capital stock of the Company, and, to
the Company's knowledge, there are no such agreements to which the Company is
not a party. As used herein the term "to the Company's knowledge" or any similar
expression means the actual knowledge of each officer and member of the board of
directors of the Company and its Subsidiaries after reasonable inquiry of the
Company's and its Subsidiaries' employees with the title of director or above
including, without limitation, vice presidents and country managers. Except as
described in the Company Disclosure Schedule, none of the Company Stock Options
or Company Restricted Stock is or will be subject to any acceleration of vesting
or other change as a result of the Merger or any of the transactions
contemplated hereby.
(c) The exercise or conversion of any Company Stock Options,
any Company Preferred Shares, the Company Series A Warrant and any Other
Purchase Rights prior to the Closing shall be in compliance with the terms of
the agreement pursuant to which such securities and rights were issued, and the
issuance of Company Shares upon exercise or conversion thereof shall have been
duly authorized by all requisite corporate action on the part of the Company.
Any such issuance of Company Shares upon exercise or conversion of such
securities and rights shall be in accordance with the Company Charter Documents
and shall not violate the rights of any Company Shareholder.
(d) All of the outstanding shares of capital stock of the
Company's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws. All outstanding shares and/or other equity interests of
the Company's Subsidiaries are owned by the Company or by another Subsidiary
free and clear of all liens, claims, charges, security interests, mortgages,
pledges, easements, conditional sale or other title retention agreements,
defects in title, covenants or other restrictions of any kind, including, any
restrictions on the use, voting, transfer or other attributes of ownership
(collectively, "Liens"). There are no obligations, contingent or otherwise, of
any Subsidiary to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any entity. The Company Disclosure
Schedule contains a true and complete list of the Company's Subsidiaries and
sets forth with respect to each Subsidiary the jurisdiction of incorporation or
organization and the authorized and outstanding capital stock of such
Subsidiary. None of the Company's Subsidiaries has outstanding any subscription,
option, put, call, warrant or other right or commitment of any nature to issue,
sell or deliver any of its capital stock, or securities or other instruments
convertible into, or exchangeable or exercisable
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for, its capital stock. Neither the Company nor any of its Subsidiaries is party
to an agreement obligating any such Subsidiary to issue additional shares of its
capital stock.
Section 3.03 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only, in
the case of the Merger, to the affirmative vote of the holders of a majority of
the then outstanding Company Common Shares and the affirmative vote of the
holders of a majority (on an as-converted-to-Common-Stock-basis) of the then
outstanding Company Preferred Shares (voting together as a single class and not
as separate series) as contemplated by Section 6.03 hereof. This Agreement has
been duly executed and delivered by the Company and, assuming due authorization,
execution and delivery by the other parties hereto, constitutes the valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors rights generally, and (ii) the availability of injunctive
relief and other equitable remedies.
(b) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, by the Company (in
each case, with or without the passage of time or the giving of notice) will (i)
violate or conflict with any of the provisions of any of the Company Charter
Documents, (ii) violate or constitute a default, an event of default or an event
creating rights of acceleration, termination, cancellation or other additional
material rights, or loss of rights under, any Material Contract (as defined in
Section 3.14) to which the Company or any of its Subsidiaries is a party or by
which they or any of their assets or property is bound, (iii) violate or
conflict with any Authorization (as defined in Section 3.10(a)) or any statute,
rule, regulation, injunction, decree, order, judgment or ruling of any foreign,
federal, provincial, state, local or other governmental authority or regulatory
or judicial body ("Governmental Entity") applicable to the Company or any of its
Subsidiaries, or (iv) result in the creation of any Liens upon any of the assets
or property of the Company or any of its Subsidiaries.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or other
Person, is required by or with respect to the Company or any Subsidiary in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Agreement of Merger with the Secretary of State of the State of
California, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (iii) such filings as may be required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended ("HSR Act") and
the competition laws of any foreign country, (iv) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the laws of any
foreign country, and (v) such consents,
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approvals, orders, authorizations, registrations, declarations and filings
which, if not obtained or made, would not have a Company Material Adverse Effect
and would not prevent, materially alter or delay the Merger or any of the other
transactions contemplated by this Agreement.
Section 3.04 Financial Statements. True and complete copies of the
Company's audited consolidated financial statements consisting of the balance
sheet of the Company and its Subsidiaries and the related statements of income
and retained earnings, stockholders' equity and cash flow, for the years ended
December 31, 1998, December 31, 1999 and December 31, 2000 (collectively, the
"Financial Statements"), are included in the Company Disclosure Schedule. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements). The Financial Statements are based on the books and records of the
Company and its Subsidiaries, and fairly present the financial condition of the
Company and its Subsidiaries as of the respective dates they were prepared and
the results of the operations of the Company and its Subsidiaries for the
periods indicated. The consolidated balance sheet of the Company as of December
31, 2000 is referred to herein as the "Balance Sheet" and the date thereof as
the "Balance Sheet Date." Each of the Company and its Subsidiaries maintains a
standard system of accounting established and administered in accordance with
GAAP.
Section 3.05 Accounts Receivable. The accounts receivable of the
Company and its Subsidiaries as set forth on the Balance Sheet or arising since
the date thereof are valid and genuine; have arisen solely out of bona fide
sales and deliveries of goods, performance of services and other business
transactions in the ordinary course of business consistent with past practice;
and are not subject to any material claim of offset or recoupment or
counterclaim. The Company has no knowledge of any specific facts that would
reasonably be likely to give rise to any such claim. No material amount of
accounts receivable of the Company or any of its Subsidiaries is contingent upon
performance by the Company or any such Subsidiary of any obligation. No material
agreement for deduction or discount has been made with respect to any accounts
receivable of the Company or any of its Subsidiaries. The allowance for
collection losses on the Balance Sheet has been determined in accordance with
GAAP consistent with past practice.
Section 3.06 Taxes.
(a) All federal, state, provincial, local, foreign and other
tax returns (including information returns), reports, statements and other
similar filings required to be filed by the Company or any of its Subsidiaries
(the "Tax Returns") with respect to any federal, state, provincial, local,
foreign and other taxes, assessments, interest, penalties, deficiencies, fees,
additions to tax and other similar charges or impositions (including without
limitation all income, unemployment compensation, social security, payroll,
sales and use, excise, privilege, property, ad valorem, franchise, license,
school and any other tax or similar charge or imposition under the laws of the
United States or any state or municipal or political subdivision thereof or any
foreign country or political subdivision thereof) ("Taxes") have been timely
filed with the appropriate
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governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed and all such Tax Returns are true, complete and correct.
(b) All Taxes, including without limitation those which are
called for by the Tax Returns, required to be paid, withheld or accrued by the
Company and any of its Subsidiaries, and any deficiency assessments, penalties,
interest and similar or related charges, have been timely paid, withheld or
accrued. The accruals for Taxes contained in the Balance Sheet are adequate to
cover the Tax liabilities of the Company and all of its Subsidiaries as of that
date and include adequate provision for all deferred taxes, and nothing has
occurred subsequent to that date to make any of such accruals inadequate to
cover the Tax liabilities of the Company as of such date. The Company and its
Subsidiaries shall adequately accrue in accordance with GAAP to cover all
liabilities for Taxes with respect to periods after the Balance Sheet Date.
(c) Neither the Company nor any of its Subsidiaries has
received any notice of assessment, adjustment or deficiency or proposed
assessment, adjustment or deficiency with respect to Taxes and there are not
pending any tax audits or examinations of, and there are no tax claims pending,
asserted or threatened against, the Company or any of its Subsidiaries or any of
their assets or properties. There are no tax liens (other than any lien for
current taxes not yet due and payable) on any of the stock, assets or properties
of the Company nor are any such liens threatened or pending on such stock,
assets or properties.
(d) Neither the Company nor any of its Subsidiaries (i) has
requested, nor has been granted, an extension of time within which to file a Tax
Return, (ii) has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency, or
(iii) is a party to a closing agreement, or the subject of a private ruling,
concerning Taxes. With respect to the Company and each of its Subsidiaries, no
claim for Taxes (or request for Tax Returns) has ever been made in a
jurisdiction where the Company or any of its Subsidiaries, as the case may be,
does not file Tax Returns.
(e) All tax payments related to employees, including income
tax withholding, FICA, FUTA, unemployment and worker's compensation, required to
be made by the Company and each of its Subsidiaries have been fully and properly
paid, withheld, accrued or recorded.
(f) Neither the Company nor any of its Subsidiaries (i) has
ever been a party to any Tax allocation or sharing agreement or Tax
indemnification agreement, (ii) has ever been a member of an affiliated,
consolidated, condensed or unitary group, or (iii) has any liability for or
obligation to pay Taxes of any other Person under Treas. Reg. 1.1502-6 (or any
similar provision of Tax law), or as transferee or successor, by contract or
otherwise.
(g) The Company was properly taxed as an S corporation for
federal, state and local Tax purposes for the period from January 1, 1996 to
August 4, 1997. The Company has no liability for any Taxes relating to such
period or arising out of the termination of S corporation status.
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(h) Neither the Company nor any of its Subsidiaries (i) is a
party to any joint venture, partnership, or other arrangement that is treated as
a partnership for federal income tax purposes, (ii) has filed a consent under
Section 341(f) of the Code, concerning collapsible corporations, or (iii) is
required to make any adjustment under Section 481 of the Code (or any similar
provision of Tax law) by reason of a change in accounting method.
Section 3.07 No Undisclosed Liabilities. The Company and its
Subsidiaries have no liabilities, obligations or commitments of any nature
whatsoever, absolute, accrued, contingent or otherwise, matured or unmatured
("Liabilities"), except (i) those which are adequately reflected or reserved
against in the Balance Sheet as of the Balance Sheet Date, (ii) those which have
been incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date and which as of the date hereof are not,
and, with respect to those which are incurred after the date hereof, except as
permitted by Section 5.02, will not be, individually or in the aggregate,
material in amount, (iii) those which have been incurred in the ordinary course
of business that are not required to be reflected in accordance with GAAP in
financial statements or the footnotes thereto, and (iv) the Company Transaction
Expenses. The Company Disclosure Schedule contains a true and complete list of
all Company Transaction Expenses incurred as of the date of this Agreement and a
reasonable estimate of all Company Transaction Expenses that will be incurred
following the date of this Agreement.
Section 3.08 Title to Properties. The Company and its Subsidiaries have
(i) good and marketable title to all of their respective properties and assets
(other than Company Intellectual Property which is covered by Section 3.13),
including, without limitation, all of the properties and assets reflected on the
Balance Sheet or acquired after the Balance Sheet Date (other than properties
and assets sold or otherwise disposed of in the ordinary course of business
since the Balance Sheet Date), (ii) with respect to leased properties and
assets, valid leasehold interests therein, in each case free and clear of all
Liens, except for (A) Liens for current personal property taxes not yet due and
payable, (B) worker's, carrier's and materialman's Liens which in the aggregate
are not material in amount, or (C) Liens that are immaterial in character and
which do not materially detract from the value or materially interfere with the
present or proposed use of the properties they affect ("Permitted Liens").
Section 3.09 Condition of Tangible Assets. All buildings, plants,
leasehold improvements, structures, facilities, equipment and other items of
tangible property and assets which are owned, leased or used by the Company or
any of its Subsidiaries are structurally sound, are in good operating condition
and repair, subject to normal wear and maintenance, are usable in the regular
and ordinary course of business and conform in all material respects to all
applicable Regulations (as defined in Section 3.10(a)) and Authorizations
relating to their construction, use and operation. No Person other than the
Company, its Subsidiaries and holders of Permitted Liens, but solely to the
extent of such Permitted Liens, owns, or has any interest in, any equipment or
other tangible assets or properties necessary to the operation of the business
of the Company or its Subsidiaries.
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Section 3.10 Compliance with Law; Authorizations.
(a) The Company and its Subsidiaries have complied in all
material respects with each, and are not in material violation of any, statute,
law, ordinance, code, rule or regulation, whether federal, state, provincial,
local or foreign, to which the Company's and its Subsidiaries' business,
operations, assets or properties are subject ("Regulations"). The Company and
its Subsidiaries own, hold, possess or lawfully use in the operation of their
business all government franchises, licenses, permits, easements, rights,
applications, filings, registrations, approvals and other authorizations
("Authorizations") which are necessary for them to conduct their business as now
or previously or, to the knowledge of the Company, proposed to be conducted or
for the ownership and use of the assets owned or used by the Company or its
Subsidiaries in the conduct of their business, free and clear of all Liens and
in material compliance with all Regulations. Such Authorizations are valid and
in full force and effect and none of such Authorizations will be terminated or
impaired or become terminable as a result of the transactions contemplated by
this Agreement. All material Authorizations are listed in the Company Disclosure
Schedule.
(b) Neither the Company nor any Subsidiary is in default, nor
has the Company or any Subsidiary received any notice of any claim of default,
with respect to any Authorization. No Person other than the Company or a
Subsidiary owns or has any proprietary, financial or other interest (direct or
indirect) in any Authorization which the Company or such Subsidiary owns,
possesses or uses in the operation of its business as now or previously
conducted or proposed to be conducted.
Section 3.11 Absence of Certain Changes or Events. Except as permitted
under Section 5.02 for changes occurring after the date hereof, since December
31, 2000, the Company and its Subsidiaries have operated their business only in
the ordinary course and there has not been:
(a) any event, act, occurrence or omission to act or occur
which has had a Company Material Adverse Effect or any event, fact or condition
of which the Company or any Subsidiary is aware that would reasonably be
expected to have a Company Material Adverse Effect and that has not been
disclosed in the Company Disclosure Schedule;
(b) any amendment of or change to the Company Charter
Documents or the Company Stock Option Plan;
(c) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to the
Company's capital stock;
(d) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for, shares of
capital stock;
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(e) (i) any increase in or modification of the compensation or
benefits payable or to become payable by the Company or any of its Subsidiaries
to any director or employee with the title of vice president or above, (ii) any
increase in or modification of the compensation or benefits payable or to become
payable by the Company or any of its Subsidiaries to any employee with a title
below vice president that involved an increase of more than 10% for any such
employee; (iii) any grant by the Company or any of its Subsidiaries to any
employee of any increase in severance or termination pay, (iv) any entry by the
Company or any Subsidiary into any employment, severance or termination
agreement with any employee, or (v) other than the grant of options to employees
of the Company and its Subsidiaries in the ordinary course consistent with past
practice, any grant, whether or not to an employee of the Company or any of its
Subsidiaries, of any option, warrant or right to purchase or otherwise acquire
any shares of capital stock of the Company or any of its Subsidiaries;
(f) any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement made to, for or
with any employees of the Company or any of its Subsidiaries;
(g) other than the sale of the Company's and its Subsidiaries'
products in the ordinary course of business, any sale of the property or assets
of the Company or any of its Subsidiaries;
(h) any alteration in any term of any outstanding security of
the Company;
(i) any (i) incurrence, assumption or guarantee by the Company
or any of its Subsidiaries of any debt for borrowed money; (ii) issuance or sale
of any securities convertible into or exchangeable or exercisable for debt
securities of the Company or any of its Subsidiaries; or (iii) issuance or sale
of options or other rights to acquire from the Company or any of its
Subsidiaries, directly or indirectly, debt securities of the Company or any of
its Subsidiaries or any securities convertible into or exchangeable or
exercisable for any such debt securities;
(j) any creation or assumption by the Company or any of its
Subsidiaries of any Lien on any asset (other than Liens arising under existing
lease financing arrangements, Liens arising in the ordinary course of the
Company's or any of its Subsidiaries' business which in the aggregate are not
material and Liens for taxes not yet due and payable);
(k) any making of any loan, advance or capital contribution
to, or investment in, any Person other than travel loans or advances in the
ordinary course of business consistent with past practice;
(l) any entry into, amendment of, relinquishment, termination
or non-renewal by the Company or any of its Subsidiaries of any right or
obligation material to the Company or any of its Subsidiaries;
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(m) any transfer, grant or loss by the Company or any of its
Subsidiaries or a material reduction in the value of any Company Intellectual
Property (as defined in Section 3.13(a)(i)) other than those transferred or
granted in the ordinary course of business consistent with past practice;
(n) any labor dispute, other than individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any of its Subsidiaries;
(o) any violation of or conflict with any applicable
Regulations promulgated or judgment entered by any Governmental Entity which,
individually or in the aggregate, has had (or, insofar as the Company is aware,
would reasonably be expected to have) a Company Material Adverse Effect;
(p) any agreement or arrangement made by the Company or any of
its Subsidiaries to take any action which, if taken prior to the date hereof,
would have made any representation or warranty set forth in this Article III
untrue or incorrect as of the date when made;
(q) any damage, destruction or loss, whether or not covered by
insurance, that has had or would reasonably be expected to have a Company
Material Adverse Effect;
(r) any change in accounting practices by the Company or any
of its Subsidiaries, or any election, arrangement or settlement for Tax purposes
with respect to the Company or any of its Subsidiaries; or
(s) any agreement, whether or not in writing, to do any of the
foregoing.
Section 3.12 Real Property. The Company Disclosure Schedule contains a
complete and accurate description of all real property owned or leased by the
Company or any of its Subsidiaries (the "Real Property"). The Real Property
listed on the Company Disclosure Schedule includes all interests in real
property necessary to conduct the business and operations of the Company and its
Subsidiaries as presently conducted. Except as set forth in the Company
Disclosure Schedule:
(a) Owned Real Property. Neither the Company nor any
Subsidiary owns any Real Property.
(b) Leased Real Property. Real Property that is leased by the
Company or any Subsidiary is identified on the Company Disclosure Schedule and,
in connection therewith: (i) the Company has delivered to Parent or its counsel
a true and complete copy of every lease and sublease pursuant to which the
Company or any of its Subsidiaries is a tenant or subtenant (the "Leases"); and
(ii) each Lease is, and at Closing shall be, in full force and effect and has
not been assigned, modified, supplemented or amended, and neither the Company
nor any Subsidiary nor,
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to the knowledge of the Company, the landlord or sublandlord under any Lease is
in default under any of the Leases, and no circumstances or state of facts
presently exists which, with the giving of notice or passage of time, or both,
would permit the landlord or sublandlord under any Lease to terminate any Lease.
(c) Zoning. The uses for which the buildings, facilities and
other improvements comprising the Real Property are zoned do not materially
restrict, or in any manner materially impair, the use of the Real Property for
purposes of the business. Neither the Company nor any Subsidiary has received
any notice from any landlord or Governmental Entity that the Real Property does
not comply with all applicable building and zoning codes, deed restrictions,
ordinances and rules.
(d) Eminent Domain. No Governmental Entity having the power of
eminent domain over the Real Property has commenced or, to the knowledge of the
Company, intends to exercise the power of eminent domain or a similar power with
respect to all or any part of the Real Property.
(e) No Violations. The Real Property and the present uses
thereof materially comply with all Regulations of all Governmental Entities, and
neither the Company nor any Subsidiary has received any notices, oral or
written, from any landlord or Governmental Entity, that the Real Property, or
the conduct of the Company's or any Subsidiary's business thereon, violates any
Regulations of any Governmental Entity.
(f) Condition. The Real Property is in suitable condition for
the Company's business as currently conducted and, to the Company's knowledge,
is structurally sound, and all mechanical and other systems located therein are
in good operating condition, subject to normal wear, and no condition exists
requiring material repairs, alterations or corrections for which the Company or
any Subsidiary is liable.
Section 3.13 Intellectual Property.
(a) As used in this Agreement, the following words and terms
have the following definitions:
(i) "Company Intellectual Property" means Intellectual
Property that is owned by the Company or any of its Subsidiaries.
(ii) "Company License" means any license, sublicense or
other agreement to which the Company or any of its Subsidiaries is a party and
pursuant to which any third party is authorized to use any Company Intellectual
Property.
(iii) "Company Proprietary Information" means Proprietary
Information owned by the Company or any of its Subsidiaries.
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(iv) "Company Registrations" means all Patents and
applications for Patents, all registered Marks, all registered copyrights and
mask works, in each such case, owned by or filed in the name of the Company or
any of its Subsidiaries, and any other applications, certifications,
registrations or other issuances or filings that relate to the Company
Intellectual Property.
(v) "Intellectual Property" means (A) Proprietary
Information; (B) Marks; (C) documentation, advertising copy, marketing
materials, specifications, mask works, drawings, graphics, databases, recordings
and other works of authorship, whether or not protected by copyright; (D)
Software; (E) domain names, e-mail addresses, telephone numbers and other
addresses; and (F) all Intellectual Property Rights related to the foregoing.
(vi) "Intellectual Property Rights" means all forms of
legal rights and protections that may be obtained for, or may pertain to, the
Intellectual Property set forth in Section 3.13(a)(v)(A)-(E), in any country of
the world, including, without limitation, all right, title and interest arising
under common and statutory law to all: (A) Patents; (B) trade secret and
equivalent rights in confidential or proprietary information; (C) copyrights,
mask works, moral rights or other literary property or authors rights; (D)
rights regarding trademarks and other proprietary indicia; (E) any similar,
corresponding or equivalent rights relating to intangible intellectual property;
and (F) all applications, registrations, issuances, divisions, continuations,
renewals, reissuances and extensions of the foregoing.
(vii) "Marks" means trade marks, service marks, trade
names, logos, trade dress and other proprietary indicia and all goodwill
associated therewith.
(viii) "Patents" means letters patents, provisional
patents, design patents, PCT filings and other rights to inventions or designs.
(ix) "Proprietary Information" means inventions (whether
or not patentable), trade secrets, technical data, databases, customer lists,
designs, tools, methods, processes, technology, ideas, know how and other
confidential or proprietary information and materials.
(x) "Software" means source code, object code, data and
operating files, user manuals, documentation, flow charts, algorithms,
compilers, development tools, maintenance records and other materials related to
computer programs.
(xi) "Third Party Intellectual Property" means
Intellectual Property owned by a third party.
(xii) "Third Party Intellectual Property Rights" means
Intellectual Property Rights related to Third Party Intellectual Property.
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(xiii) "Third Party License" shall mean any license,
sublicense or other agreement to which the Company or any Subsidiary is a party
and pursuant to which the Company or any of its Subsidiaries is authorized to
use any Third Party Intellectual Property.
(xiv) "Third Party Proprietary Information" means
Proprietary Information owned by a third party.
(b) Section 3.13(b) of the Company Disclosure Schedule lists
(by name, number, jurisdictions and owner) all Company Registrations and, if
material, all unregistered Marks and products or published materials protected
by copyright owned by the Company or any of its Subsidiaries. Section 3.13(b) of
the Company Disclosure Schedule lists the status of any proceedings or actions
before the United States Patent and Trademark Office or any other Governmental
Entity anywhere in the world related to any of the Company Registrations,
including the due date for any outstanding response by the Company or any of its
Subsidiaries in such proceedings.
(c) Section 3.13(c)(i) of the Company Disclosure Schedule
lists all Third Party Licenses other than Third Party Licenses that consist
solely of "shrink-wrap" and similar commercially available end-user licenses.
Section 3.14(c)(ii) separately identifies any Third Party Intellectual Property
which is incorporated in, is, or forms a part of any product or service
currently offered by the Company or any of its Subsidiaries or listed on
Schedule 3.13(c)(iii). True and complete copies of the Third Party Licenses, and
any amendments thereto, have been provided to Parent or its counsel
(d) Section 3.13(d) of the Company Disclosure Schedule lists
all Company Licenses. True and complete copies of the Company Licenses, and any
amendments thereto, have been provided to Parent or its counsel.
(e) The Company and its Subsidiaries own, or are licensed or
otherwise possess enforceable rights to use, all Intellectual Property that is
used in, and/or necessary to, the Company's and its Subsidiaries' business as it
is currently conducted, including, without limitation, the development,
marketing, sale and distribution of the products listed on Schedule
3.13(c)(iii). The Company and its Subsidiaries are the exclusive owners of all
Company Intellectual Property and have the right to use and transfer all Company
Intellectual Property without restriction or royalty of any kind. The Third
Party Licenses provide the Company and its Subsidiaries with all necessary
rights to use and transfer any Third Party Intellectual Property that is used
in, and/or necessary to, the Company's and its Subsidiaries' business as it is
currently conducted, including, without limitation, the development, marketing,
sale and distribution of the products listed on Schedule 3.13(c)(iii). All
Company Intellectual Property and all Third Party Licenses are free and clear of
any Liens.
(f) All Company Registrations are valid and subsisting. All
registration, maintenance and renewal fees related to the Company Registrations
that are currently due have been paid and all documents and certificates related
to such Company Registrations have been
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filed with the relevant Governmental Entity or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registrations. There are no actions that must be taken
by the Company or any of its Subsidiaries within 60 days of the Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Company Registrations.
Neither the Company nor any Subsidiary is aware of any challenges (or any
specific basis therefor) with respect to the validity of any Company
Registrations.
(g) Neither the Company nor any of its Subsidiaries has
infringed, does infringe or, by conducting it business as currently conducted
or, to the knowledge of the Company, proposed to be conducted, will infringe
upon or unlawfully or wrongfully use any Third Party Intellectual Property
Rights. Neither the Company nor any Subsidiary has received any communication
alleging that the Company or any such Subsidiary has violated or, by conducting
its business as now conducted or as currently proposed to be conducted, would
violate, any Third Party Intellectual Property Rights. No action, suit,
proceeding or investigation has been instituted, or, to the knowledge of the
Company, threatened, relating to any Intellectual Property formerly or currently
used by the Company or any of its Subsidiaries and none of the Company
Intellectual Property is subject to any outstanding order, decree or judgment.
To the knowledge of the Company, no Person is infringing any Company
Intellectual Property Rights or otherwise misappropriating any Company
Intellectual Property.
(h) Each of the Company Licenses and Third Party Licenses is
in full force and effect in accordance with its terms and the Company and each
Subsidiary is, and to the knowledge of the Company, all other parties thereto
are, in compliance with the provisions of such licenses. Neither the Company nor
any of its Subsidiaries will be, as a result of the execution and delivery of
this Agreement or the performance by the Company of its obligations under this
Agreement, in breach of any Company License or Third Party License and the
consummation of the transactions contemplated by this Agreement shall not impair
or otherwise affect the rights and obligations of the Company or any of its
Subsidiaries under the terms of such licenses.
(i) The Company and its Subsidiaries have taken commercially
reasonable steps to protect and preserve the confidentiality of all Company
Proprietary Information and Third Party Proprietary Information received under
an obligation of confidentiality. Any receipt or use by a third party of Company
Proprietary Information, and all disclosure by the Company or any of its
Subsidiaries of Company Proprietary Information to a third party, has been
pursuant to the terms of binding written confidentiality and non-use agreements
between the Company or such Subsidiaries and such third party ("Confidentiality
Agreements"). True and complete copies of the Confidentiality Agreements, and
any amendments thereto, have been provided to Parent or its counsel. The Company
and each Subsidiary is, and to the knowledge of the Company, all other parties
thereto are, in compliance with the provisions of the Confidentiality
Agreements.
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(j) All current and former employees, consultants and
contractors of the Company and its Subsidiaries have executed and delivered, and
are in compliance with, enforceable agreements regarding the protection of
proprietary information and providing valid written assignments of all
Intellectual Property conceived or developed by such employees, consultants or
contractors in connection with their services for the Company and its
Subsidiaries ("Work Product Agreements"). True and complete copies of the Work
Product Agreements, and any amendments thereto, have been provided to Parent or
its counsel. No current or former employee, consultant or contractor or any
other Person has any right, claim or interest to any of the Company Intellectual
Property.
(k) Neither the Company nor any of its Subsidiaries nor any
employee of the Company nor any of its Subsidiaries is obligated under any duty
or agreement (including any license, confidentiality agreement, covenant or
commitment of any nature), or subject to any judgment, decree or order of any
court or administrative agency, that would interfere in any manner with the use
of their best efforts to promote the interests of the Company and its
Subsidiaries or that would conflict with the Company's and its Subsidiaries'
business as now conducted or proposed to be conducted.
(l) All Intellectual Property that has been distributed, sold
or licensed to a third party by the Company or any of its Subsidiaries that is
covered by a currently effective warranty (i) conforms to and performs in
accordance with the representations and warranties provided with respect to such
Intellectual Property by or on behalf of the Company or any of its Subsidiaries
for the time period during which such representations and warranties apply, or
(ii) is subject to a maintenance agreement under which the Company's obligation
is limited to the obligation to repair any such non-conformities without further
liability.
(m) Except when provided with incorrect data, corrupted data,
or non-standard date data and except for use of the Products (defined below) by
customers with products or software that are not properly configured with
respect to date data, the occurrence of the date January 1, 2000, or any dates
thereafter, including leap year dates, will not and has not, by itself, cause(d)
any of the products distributed, sold or licensed or otherwise provided by the
Company or any of its Subsidiaries to third parties ("Products") to fail to
operate in accordance with the published specifications for such Products.
Section 3.14 Agreements, Contracts and Commitments. The Company
Disclosure Schedule sets forth, as of the date of this Agreement, an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto that are material to the conduct of the Company's business
(collectively, the "Material Contracts"), to which the Company or any of its
Subsidiaries is a party or is bound, or by which any of their assets are bound,
and which involve:
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(a) any present or former employee or consultant or the
employment of any Person, including any consultant, which is not terminable
at-will by the Company or any of its Subsidiaries without liability to the
Company or such Subsidiary, other than liability for compensation or benefits
earned or accrued prior to termination of employment or service;
(b) the future purchase of, or payment for, supplies or
products, or the future performance of services by a third party requiring (as
of the date hereof) the Company or any of its Subsidiaries to pay in any one
case a fixed or known dollar amount of $150,000 or more over the life of the
contract;
(c) the sale or supply of products or performance of services
by the Company or any Subsidiary involving the future payment to the Company or
any Subsidiary in any one case of $350,000 or more over the life of the
contract;
(d) any agreement that requires the Company or any Subsidiary
to purchase its total requirements of any product or service from a third party;
(e) any arrangement continuing over a period of more than six
months from the date hereof and exceeding $150,000 in value, other than
arrangements disclosed pursuant to the preceding subsections (b) and (c);
(f) any distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) any lease under which the Company or any of its
Subsidiaries is either lessor or lessee involving in any one case $150,000 or
more over the life of the contract;
(h) the indemnification of any Person (except as set forth in
the Company Licenses and Third Party Licenses listed in Section 3.14(h) of the
Company Disclosure Schedule) or the assumption of any Tax, environmental or
other Liability;
(i) any federal, state, local, regulatory or other
governmental entities;
(j) any note, debenture, bond, equipment trust agreement,
letter of credit agreement, loan agreement or other contract or commitment for
the borrowing or lending of money (other than to employees for travel expenses
in the ordinary course of business) or agreement or arrangement for a line of
credit or guarantee, pledge or undertaking of the indebtedness of any other
Person;
(k) any charitable or political contribution in any one case
in excess of $10,000 or in the aggregate greater than $50,000;
(l) any capital expenditure or leasehold improvement in excess
of $200,000 in the aggregate;
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(m) any explicit restraint on the ability of the Company or
any of its Subsidiaries to engage or compete in any manner or in any business;
(n) any license, sublicense, franchise, distributorship,
escrow or other agreement which relates in whole or in part to any Company
Intellectual Property or Third Party Intellectual Property; and
(o) any agreement, contract, commitment, arrangement or
understanding that is otherwise material to the Company and its Subsidiaries as
a whole and not previously disclosed pursuant to this Section 3.14.
Each of the Material Contracts is valid and enforceable in accordance with its
terms; the Company or its Subsidiary, as applicable, is, and to the Company's
knowledge, all other parties thereto are, in compliance in all material respects
with the provisions thereof. Neither the Company nor any of its Subsidiaries is,
and to the Company's knowledge, no other party thereto is, in default in the
performance, observance or fulfillment of any material obligation, covenant or
condition contained therein; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a material default
thereunder by the Company or any of its Subsidiaries or, to the knowledge of the
Company, by the other party thereto. Other than Material Contracts that require
the consent of any third party to the Merger and, in the case of such Material
Contracts, if such required consents of third parties are obtained, none of the
rights of the Company or any of its Subsidiaries under any Material Contract
will be impaired pursuant to the terms of such Material Contract by the
consummation of the transactions contemplated hereby, and all such rights
contained in such Material Contracts will be enforceable by the Surviving
Corporation and/or Parent after the Merger without the consent or agreement of
any other party and without payment of any kind. The Company Disclosure Schedule
sets forth an accurate and complete list of all Material Contracts that require
the consent of any third party to the Merger or a consent to assignment in
connection with the Merger. The Company has delivered accurate and complete
copies of each Material Contract to Parent or its counsel.
Section 3.15 Litigation. There is no action, suit or proceeding, claim,
arbitration, litigation or investigation (each, an "Action") pending or, to the
knowledge of the Company, threatened, against the Company or any of its
Subsidiaries. There is no such Action against any current or, to the knowledge
of the Company, former officer or director or employee of the Company or any of
its Subsidiaries with respect to which the Company or any of its Subsidiaries
has or is reasonably likely to have an indemnification obligation. There is no
unsatisfied judgment, penalty or award against or affecting the Company or any
of its Subsidiaries or any of their respective properties or assets. There is no
award, injunction, judgment, order, ruling, subpoena or verdict of other
decision entered, issued or rendered by any Governmental Entity to which the
Company or any of its Subsidiaries or any of their respective properties or
assets are subject.
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Section 3.16 Employees.
(a) The Company Disclosure Schedule sets forth (i) a list of
all employees of the Company and its Subsidiaries (including name, title and
position) as of the date hereof, and (ii) the base compensation and bonus
opportunity of each employee. The Company Disclosure Schedule sets forth a list
of any written, and a written summary of any oral, employment, consulting,
termination or severance agreements to which the Company or any of its
Subsidiaries is a party or by which any of them is bound ("Employment
Agreements"). This Agreement, the consummation of the Merger and the other
transactions contemplated hereby do not and will not violate the terms of any
such Employment Agreement.
(b) The consummation of the Merger will not result in any
amounts becoming payable to any director, employee, consultant or independent
contractor of the Company or any of its Subsidiaries, any accelerated vesting of
options, lapse of restrictions or the payment of any other benefits to any
Person or the forgiveness of any indebtedness of any Person.
(c) Neither the Company nor any of its Subsidiaries is a party
or subject to any labor union or collective bargaining agreement. There have not
been since inception and, to the Company's knowledge, there are not pending, any
labor disputes, work stoppages, requests for representation, pickets, work
slow-downs due to labor disagreements or any actions or arbitrations which
involve the labor or employment relations of the Company or any of its
Subsidiaries. There is no unfair labor practice, charge or complaint pending,
unresolved or, to the knowledge of the Company, threatened before the National
Labor Relations Board.
(d) The Company and its Subsidiaries have complied with each,
and are not in violation of any, Regulation of any Governmental Entity relating
to antidiscrimination and equal employment opportunities and there are, and have
been, no violations of any other Regulation of any Governmental Entity
respecting the hiring, hours, wages, occupational safety and health, employment,
promotion, termination or benefits of any employee or other Person. The Company
and its Subsidiaries have filed all reports, information and notices, and will
timely file prior to Closing all reports, information and notices required by
any Regulation to be given prior to Closing, or required under any Regulation of
any Governmental Entity respecting the hiring, hours, wages, occupational safety
and health, employment, promotion, termination or benefits of any employee or
other Person.
(e) The Company and its Subsidiaries have paid or properly
accrued in the ordinary course of business all wages and compensation due to
employees, including all vacations or vacation pay, holidays or holiday pay,
sick days or sick pay, and bonuses.
(f) Neither the Company nor any of its Subsidiaries is a party
to any agreement which restricts the Company or any Subsidiary from relocating,
closing or terminating any of its operations or facilities or any portion
thereof. The consummation of the Merger will not create liability for any act by
the Company prior to the Effective Time under any Regulations
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of any Governmental Entity respecting reductions in force or the impact on
employees on plant closings or sales of businesses.
(g) The Company and its Subsidiaries have complied and are in
material compliance with the requirements of the Immigration Reform and Control
Act of 1986. The Company Disclosure Schedule sets forth a true and complete list
of all employees working in the United States who are not U.S. citizens and a
description of the legal status under which each such employee is permitted to
work in the United States. All employees of the Company or any of its
Subsidiaries who are performing services for the Company or any of its
Subsidiaries in the United States or Canada are legally able to work in the
United States or Canada, as applicable, and will be able to continue to work in
the United States or Canada, as the case may be, following the Merger.
(h) To the knowledge of the Company, no employee, consultant
or independent contractor is or will be, by performing services for the Company
or any of its Subsidiaries, in violation of any term of any employment,
invention disclosure or assignment, confidentiality or noncompetition agreement
or other restrictive covenant to any other Person as a result of such
employee's, consultant's or contractor's employment by the Company or any of its
Subsidiaries or any services rendered by such employee, consultant or
independent contractor.
Section 3.17 Benefits Plans. Except as set forth in the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is, or has
previously been, a party to (i) any "employee benefit plan" as defined in
Section 3(3) of ERISA ("Plan"), or (ii) any formal or informal deferred
compensation, bonus, performance compensation, stock purchase, stock option,
stock appreciation, severance, vacation, sick leave, holiday pay, fringe
benefits, personnel policy, reimbursement program, incentive, insurance, welfare
or similar plan, program, policy or arrangement ("Benefit Plan"). Neither the
Company nor any of its Subsidiaries has any intent or commitment to create any
additional Plan or Benefit Plan or amend any Plan or Benefit Plan so as to
increase benefits thereunder. A current, accurate and complete copy of each such
Plan and each Benefit Plan has been made available to Parent or its counsel.
(a) Each Plan and Benefit Plan is in compliance with all
reporting, disclosure and other requirements of ERISA and the Code and any other
law applicable to such Plan or Benefit Plan.
(b) Each Plan which is an employee pension benefit plan (a
"Pension Plan"), as defined in Section 3(2) of ERISA, and which is intended to
be qualified under Section 401(a) of the Code, has been determined by the
Internal Revenue Service to be so qualified or still has time to qualify under
applicable Treasury regulations or IRS pronouncements and no condition exists
that would adversely affect any such determination. No such Pension Plan is a
"defined benefit plan" as defined in Section 3(35) of ERISA.
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(c) Neither any Plan nor the Company nor any of its
Subsidiaries, nor, to the Company's knowledge, any trustee or agent has been or
is presently engaged in any prohibited transactions as defined by Section 406 of
ERISA or Section 4975 of the Code for which an exemption is not applicable which
could subject the Company or any of its Subsidiaries to any tax or penalty
imposed by Section 4975 of the Code or Section 502 of ERISA.
(d) Neither the Company nor any of its Subsidiaries nor any
member of its "controlled group" (as defined in Section 4001(a)(14) of ERISA)
has ever maintained, established, sponsored, participated in, contributed to, or
is otherwise obligated to contribute to, or incurred any liability with respect
to, any "multi-employer plan," as defined in Section 3(37) of ERISA.
(e) True and correct copies of Form 5500 and any attached
schedules since inception of the Company for each Plan and a true and correct
copy of the most recent determination letter, if applicable, issued by the
Internal Revenue Service for each Pension Plan have been made available to
Parent or its counsel.
(f) With respect to each Plan and Benefit Plan, there are no
actions, suits or claims (other than routine claims for benefits in the ordinary
course) pending or, to the best of the Company's knowledge, threatened against
any Plan or Benefit Plan, the Company, any of its Subsidiaries or any trustee or
agent of any Plan or Benefit Plan.
(g) With respect to each welfare benefit plan to which the
Company or any of its Subsidiaries is a party which constitutes a group health
plan subject to Section 4980B of the Code or Section 601 of ERISA, each such
Plan substantially complies, and in each case has substantially complied, with
all applicable requirements of Section 4980B of the Code and Section 601 of
ERISA.
(h) (i) Full payment has been made, within the time limits
prescribed by law for a current deduction thereof, of all amounts which the
Company or any of its Subsidiaries was required to have paid as a contribution
to any Plan, and all other such contributions have been properly accrued on the
Financial Statements, and none of the Plans has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal year
of each such Plan ended prior to the date of this Agreement;
(ii) Neither the Company nor any of its Subsidiaries has
received any claim or notice that any of the Plans or Benefit Plans is not in
compliance with all applicable laws and orders and prohibited transaction
exemptions, including, without limitation, to the extent applicable, the
requirements of ERISA and the Code;
(iii) Neither the Company nor any of its Subsidiaries is
in default in performing any of its contractual obligations under any of the
Plans or Benefit Plans or any related trust agreement or insurance contract;
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(iv) There are no outstanding liabilities of any Plan or
Benefit Plan other than liabilities for benefits to be paid to participants in
such Plan or Benefit Plan and their beneficiaries in accordance with the terms
of such Plan or Benefit Plan;
(v) Each Plan or Benefit Plan may be amended, modified,
terminated or otherwise discontinued by the Company at any time without
liability other than ordinary administration expenses typically incurred in a
termination;
(vi) No Plan or Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan or as required by (COBRA) Section 4980B
of the Code, any applicable statute or any benefits provided by life insurance,
or at the employee's own expense, provides benefits to any individual after
termination of employment;
(vii) The consummation of the transactions contemplated by
this Agreement will not (in and of itself) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
(viii) With respect to each Plan or Benefit Plan that is
funded wholly or partially through an insurance policy, all premiums required to
have been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Closing will have
been paid on or before the Closing and, as of the Closing, there will be no
liability of the Company or any of its Subsidiaries under any insurance policy
or ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing; and
(ix) Each Plan that constitutes a "welfare benefit plan"
within the meaning of Section 3(1) of ERISA, and for which contributions are
claimed by the Company or any its Subsidiaries as deductions under any provision
of the Code, is in material compliance with all applicable requirements
pertaining to such deduction. With respect to any welfare benefit fund (within
the meaning of Section 419 of the Code) related to a welfare benefit plan, there
is no disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the Code.
All welfare benefit funds intended to be exempt from tax under Section 501(a) of
the Code have been determined by the Internal Revenue Service to be so exempt
and no event or condition exists which would adversely affect any such
determination.
(i) The Company Disclosure Schedule separately lists all
employee benefit plans covering employees of the Company or any of its
Subsidiaries outside of the United States (the "Foreign Plans"). The Foreign
Plans have been operated in accordance, and are in compliance, with all
applicable laws and regulations in all material respects and have been operated
in accordance, and are in compliance, with the plans' respective terms. There
are no unfunded liabilities under or in respect of the Foreign Plans, and all
contributions or other
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payments required to be made to or in respect of the Foreign Plans prior to the
Closing Date have been made or will be made prior to the Closing Date. Each
Foreign Plan may be amended, modified, terminated or otherwise discontinued by
the Company at any time without liability other than ordinary administration
expenses typically incurred in a termination. Neither the Company nor any of its
Subsidiaries is in default in performing any of its material contractual
obligations under any of the Foreign Plans or any related trust agreement or
insurance contract. There are no material outstanding liabilities of any Foreign
Plan other than liabilities for benefits to be paid to participants in such
Foreign Plan and their beneficiaries in accordance with the terms of such
Foreign Benefit Plan.
(j) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any Person who is a "disqualified individual"
(as such term is defined in Proposed Treasury Regulation Section 1.280G-1) under
any employment, severance or termination or other compensation arrangement
currently in effect would not be characterized as an "excess parachute payment"
(as such term is defined in Section 280G of the Code). The Company covenants
that it will use its reasonable best efforts to obtain shareholder approval
meeting the requirements of Section 280G prior to the Closing for any amounts
that would otherwise be so characterized.
Section 3.18 Related Party Transactions. There is no lease, sublease,
indebtedness, contract, agreement, commitment, understanding, or other
arrangement of any kind entered into by the Company or any of its Subsidiaries
with, or for the benefit of, any officer or director of the Company or any of
its Subsidiaries or member of his or her immediate family, any employee of the
Company or any of its Subsidiaries or greater than five percent shareholder of
the Company or, to the knowledge of the Company, any member of an employee's
immediate family, or any Affiliate (as defined below) of any such officer,
director, employee or greater than five percent shareholder, except in each
case, for (i) employment agreements, fringe benefits and other compensation paid
to directors, officers and employees consistent with previously established
policies (including normal merit increases in such compensation in the ordinary
course of business) and copies of which have been provided to Parent or its
counsel and are listed on the Company Disclosure Schedule; (ii) reimbursements
of ordinary and necessary expenses incurred in connection with their employment
or service; and (iii) amounts paid pursuant to employee benefit plans of which
copies have been provided to Parent or its counsel. To the knowledge of the
Company, none of such Persons has any material direct or indirect ownership
interest in any firm or corporation with which the Company or any of its
Subsidiaries has a business relationship, or with any firm or corporation that
competes with the Company or any of its Subsidiaries (except for ownership of
securities in a publicly traded company representing less than one percent of
the outstanding stock of such company). No officer or director of the Company or
any of its Subsidiaries or member of his or her immediate family or greater than
5% shareholder of the Company or, to the knowledge of the Company, any Affiliate
of any of them or any employee of the Company or any of its Subsidiaries is
directly or indirectly interested in any Material Contract. The term "Affiliate"
shall mean, with respect to any Person, any individual, corporation, partnership
or other entity which directly or indirectly controls, is controlled by or is
under common control with, such Person.
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Section 3.19 Environmental Matters.
(a) The Company and its Subsidiaries have secured, and are in
compliance in all material respects with, all Environmental Permits, with
respect to its operations and the Real Property. All such Environmental Permits
are valid and in full force and effect and none of such Environmental Permits
will be terminated or impaired or become terminable as a result of the
transactions contemplated by this Agreement. The Company and its Subsidiaries
have always been, and are currently, in compliance in all material respects with
all Environmental Laws.
(b) There are no past, pending, or, to the knowledge of the
Company, threatened Environmental Claims against the Company or any of its
Subsidiaries, and the Company and its Subsidiaries are not aware of any facts or
circumstances which would reasonably be expected to form the basis for any
Environmental Claim against them.
(c) No Lien has been attached, asserted, or to the knowledge
of the Company, threatened, to or against the assets or any property of the
Company or any of its Subsidiaries pursuant to any Environmental Law, and, to
the Company's knowledge, there are no facts, circumstances, or conditions that
would reasonably be expected materially to restrict, encumber, or result in the
imposition of special conditions under any Environmental Law that materially
affect the ownership, occupancy, development, use, or transferability of any
real property currently operated, owned or leased by the Company or any of its
Subsidiaries.
(d) To the Company's knowledge, there has been no treatment,
storage, disposal or Release of any Hazardous Substance at, from, into, on or
under any Real Property or any other property owned, operated or leased by the
Company or any of its Subsidiaries, and, to the Company's knowledge, no
Hazardous Substances are present in, on, about or migrating to or from any Real
Property that would reasonably be expected to give rise to an Environmental
Claim against the Company or any of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has
received a CERCLA 104(e) information request nor has the Company or any of its
Subsidiaries been named a potentially responsible party for any National
Priorities List site under CERCLA or any site under analogous state law nor has
the Company or any of its Subsidiaries received an analogous notice or request
from any non-U.S. Governmental Entity, which notice, request or any resulting
inquiry or litigation has not been fully and finally resolved without
possibility of reopening.
(f) To the Company's knowledge, there are no aboveground tanks
or underground storage tanks on, under or about the Real Property and any former
aboveground or underground tanks on the Real Property have been removed in
accordance with all Environmental Laws and no residual contamination, if any,
remains at such sites in excess of applicable standards.
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(g) To the Company's knowledge, there are no polychlorinated
biphenyls ("PCBs") leaking from any article, container or equipment on, under or
about the Real Property and there are no such articles, containers or equipment
containing PCBs, and there is no asbestos containing material or lead based
paint containing materials in at, on, under or within the Real Property.
(h) Neither the Company nor any of its Subsidiaries has
transported or arranged for the treatment, storage, handling, disposal, or
transportation of any Hazardous Material to any off-site location which is an
Environmental Clean-up Site.
(i) None of the Real Property is an Environmental Clean-up
Site.
(j) The Company has provided to Parent or its counsel true and
complete copies of, or access to, all written environmental assessment materials
and reports that have been prepared by or on behalf of the Company or any of its
Subsidiaries.
(k) As used in this Agreement:
(i) The term "Environment" shall mean all air, surface
water, groundwater, or land, including land surface or subsurface, including all
fish, wildlife, biota and all other natural resources.
(ii) The term "Environmental Action" shall mean any claim,
proceeding or action which may be brought or threatened, or which Parent
reasonably believes may be brought or threatened, under any Environmental Law or
otherwise asserting any claim that the Company, at any time on or prior to the
Closing Date, has (i) incurred liability with respect to an environmental
condition, whether on the Real Property or elsewhere, or (ii) otherwise failed
to comply with any Environmental Law.
(iii) The term "Environmental Claim" shall mean any and
all pending and/or threatened administrative or judicial actions, suits, orders,
claims, liens, notices, notices of violations, investigations, complaints,
requests for information, proceedings, or other communication (written or oral),
whether criminal or civil, pursuant to or relating to any Environmental Law.
(iv) The term "Environmental Clean-up Site" shall mean any
location which is listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state or foreign list of sites requiring investigation or cleanup, or
which is the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any alleged violation of any
Environmental Law, or at which there has been a threatened or actual Release of
a Hazardous Substance.
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(v) The term "Environmental Laws" shall mean any and all
applicable treaties, laws, regulations, ordinances, common law, enforceable
requirements, binding determinations, orders, decrees, judgments, injunctions,
permits, approvals, authorizations, licenses or binding agreements issued,
promulgated or entered into by any Governmental Entity, relating to the
Environment, worker health and safety, preservation or reclamation of natural
resources, or to the management, handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation, packaging,
labeling, Release or threatened Release of or exposure to Hazardous Substances,
whether now existing or subsequently amended or enacted, including but not
limited to: the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA"); the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. Section
136 et seq.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42
U.S.C. Section 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; and
any similar or implementing state or local law, and any non-U.S. laws and
regulations of similar import, and all amendments or regulations promulgated
thereunder; and any common law doctrine, including but not limited to,
negligence, nuisance, trespass, personal injury, or property damage related to
or arising out of the presence, Release, or exposure to Hazardous Substances.
(vi) The term "Environmental Permits" shall mean all
permits, licenses, approvals or authorizations from any Governmental Entity
required under Environmental Laws to conduct the operations of the Company, and
includes any and all orders, consent orders or binding agreements issued or
entered into by a Governmental or Regulatory Authority under any applicable
Environmental Law.
(vii) The term "Hazardous Substances" shall mean all
explosive or regulated radioactive materials or substances, hazardous or toxic
materials, wastes or chemicals, petroleum and petroleum products (including
crude oil or any fraction thereof), asbestos or asbestos containing materials,
and all other materials, chemicals or substances which are regulated by, form
the basis of liability or are defined as hazardous, extremely hazardous, toxic
or words of similar import, under any Environmental Law, including materials
listed in 49 C.F.R. Section 172.101 and materials defined as hazardous pursuant
to Section 101(14) of CERCLA (as defined above in the definition of
"Environmental Laws").
(viii) The term "Release" shall mean any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing of Hazardous Substances into the Environment.
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Section 3.20 Insurance. The assets, properties and operations of the
Company and its Subsidiaries are insured under various policies of general
liability and other forms of insurance, all of which are listed in the Company
Disclosure Schedule, including for each policy all outstanding claims
thereunder. All such policies are in full force and effect in accordance with
their terms and will continue in full force and effect following the Effective
Time, no notice of cancellation has been received, and there is no existing
default or event which, with the giving of notice or lapse of time or both,
would constitute a default thereunder. Such policies are in amounts which are
adequate in relation to the business and assets of the Company and its
Subsidiaries, are sufficient for compliance with all laws and contracts to which
the Company or any of its Subsidiaries is a party or by which it is bound, and
all premiums to date have been paid in full. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies and none of such policies provides for retroactive premium
adjustments.
Section 3.21 Books and Records. The books, records and accounts of the
Company and its Subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of the Company and its
Subsidiaries. Neither the Company nor any of its Subsidiaries has engaged in any
transaction, maintained any bank account or used any of the funds of the Company
or its Subsidiaries except for transactions, bank accounts and funds which have
been and are reflected in the normally maintained books and records of the
business. The minutes of the meetings of the Board of Directors and shareholders
of the Company and its Subsidiaries and any and all consents in lieu of meetings
contain a complete and accurate summary in all material respects of all actions
approved at such meetings and in such consents since the incorporation of the
Company and its Subsidiaries.
Section 3.22 Warranties. Neither the Company nor any of its
Subsidiaries has modified or expanded its warranty obligation to any customer
beyond that set forth in the warranties set forth in the Company Licenses listed
in the Company Disclosure Schedule.
Section 3.23 Opinion of Financial Advisor. The financial advisor to the
Company, Broadview International LLC, has delivered to the Company an opinion
dated the date of this Agreement to the effect that the Merger Consideration (as
defined in the opinion) is fair from a financial point of view to the
shareholders of the Company.
Section 3.24 Conditions Affecting the Company and its Subsidiaries.
Neither the Company nor any of its Subsidiaries is aware that any loss of any
specific employee, agent, customer or supplier or other specific advantageous
arrangement will result because of the consummation of the transactions
contemplated hereby.
Section 3.25 Brokers. There is no investment banker, broker, finder,
financial advisor or other intermediary which has been retained by or is
authorized to act on behalf of the Company or Company Shareholders who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement. No claim exists or will exist against the
Company or the Surviving Corporation or, based on any action by the Company,
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against Parent for payment of any "topping," "break-up" or "bust-up" fee or any
similar compensation or payment arrangement as a result of the transactions
contemplated hereby.
Section 3.26 No Illegal Payments. Neither the Company nor, to the
knowledge of the Company, any Affiliate, officer, agent or employee thereof,
directly or indirectly, has, since inception, on behalf of or with respect to
the Company or any of its Subsidiaries, (i) made any unlawful domestic or
foreign political contributions, (ii) made any payment or provided services
which were not legal to make or provide or which the Company or any Affiliate
thereof or any such officer, employee or other Person should reasonably have
known were not legal for the payee or the recipient of such services to receive,
(iii) received any payment or any services which were not legal for the payer or
the provider of such services to make or provide, (iv) had any material
transactions or payments which are not recorded in its accounting books and
records or (v) had any off-book bank or cash accounts or "slush funds."
Section 3.27 Suppliers and Customers. No supplier or customer material
to the business of the Company or any of its Subsidiaries has terminated its
relationship with the Company or any of its Subsidiaries, has decreased or
delayed materially, or, to the Company's knowledge, threatened to decrease or
delay materially (except in a manner that has been resolved favorably to the
Company and its Subsidiaries), its services or supplies to the Company or any of
its Subsidiaries or decrease its usage of the Company's or any of its
Subsidiary's products or services. The Company Disclosure Schedule sets forth
with respect to the Company and its Subsidiaries (i) each supplier from whom
purchases exceeded $100,000 in the year ended December 31, 1999 or December 31,
2000; (ii) each supplier who constitutes a sole source of supply to the Company
or any of its Subsidiaries; and (iii) each customer who, in the year ended
December 31, 1999 or December 31, 2000, has contributed in excess of 10% percent
of the Company's revenues on a consolidated basis for such year.
Section 3.28 Board Approval; Voting Requirements. The Board of
Directors of the Company has unanimously (i) approved this Agreement and the
Merger, (ii) determined that the Merger is advisable and in the best interests
of the Company Shareholders, and (iii) recommended that the Company Shareholders
approve this Agreement and the Merger. The affirmative vote of the holders of a
majority of the then outstanding Company Common Shares and the affirmative vote
of the holders of a majority (on an as-converted-to-Common-Stock-basis) of the
then outstanding Company Preferred Shares (voting together as a single class and
not as separate series), in each case outstanding on the record date set for the
determination of shareholders entitled to vote to approve and adopt this
Agreement and the Merger are the only votes of the holders of any capital stock
of the Company necessary to approve this Agreement and the Merger and the
transactions contemplated hereby. The Shareholder Parties listed on the Company
Disclosure Schedule represent as of the date hereof and will represent as of the
record date of the Company Shareholders' Meeting (as defined in Section 3.29)
and the date of the Company Shareholders' Meeting at least a majority of each of
the outstanding Company Common Shares and the outstanding Company Preferred
Shares and have agreed in writing to vote for approval of this Agreement and the
Merger pursuant to the Company Shareholder Agreements.
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Section 3.29 Registration Statement; Proxy Statement; Prospectus. The
information supplied by the Company for inclusion in the registration statement
on Form S-4 (the "Registration Statement") pursuant to which shares of Parent
Common Stock issued in the Merger will be registered with the Securities and
Exchange Commission (the "SEC"), shall not at the time the Registration
Statement is declared effective by the SEC contain any untrue statement of a
material fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading. The information supplied by the Company for inclusion in
the proxy statement/prospectus ("Proxy Statement/Prospectus") to be sent to the
stockholders of Parent (the "Parent Stockholders") in connection with the
meeting of the Parent Stockholders to consider the issuance of shares of Parent
Common Stock pursuant to the Merger (the "Parent Stockholders' Meeting") and the
Company Shareholders in connection with the meeting of the Company Shareholders
to consider this Agreement and the Merger (the "Company Shareholders' Meeting")
shall not, on the date the Proxy Statement/Prospectus is first mailed to the
Parent Stockholders and the Company Shareholders, at the time of the Parent
Stockholders' Meeting and the Company Shareholders' Meeting and at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement/Prospectus not false or
misleading; or omit to state any material fact necessary to correct any
statement with respect to the Company in any earlier communication with respect
to the solicitation of proxies for the Company Shareholders' Meeting and the
Parent Stockholders' Meeting which has become false or misleading. If at any
time prior to the Effective Time any event relating to the Company or any of its
Affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, the Company shall promptly inform
Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule dated and delivered as of the date hereof by Parent and Sub
to the Company (the "Parent Disclosure Schedule"), which relates to this
Agreement and is designated therein as being the Parent Disclosure Schedule. The
Parent Disclosure Schedule shall be arranged in paragraphs corresponding to, and
each exception to a representation and warranty set forth therein shall be
deemed to qualify, the specific numbered and lettered paragraph(s) of this
Article IV which is referenced or cross-referenced in the applicable exception
set forth on the Parent Disclosure Schedule and any other section hereof where
it is clear, upon a reading of such disclosure
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without any independent knowledge on the part of the reader regarding the matter
disclosed, that the disclosure is intended to apply to such other section.
Section 4.01 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which it owns or leases property or conducts any business
so as to require such qualification, except where failure to be so qualified
would not have a Parent Material Adverse Effect. "Parent Material Adverse
Effect" shall mean any effect on the business, financial condition, results of
operations, properties, assets or liabilities of Parent and its Subsidiaries
that is materially adverse to Parent and its Subsidiaries taken as a whole;
provided that "Parent Material Adverse Effect" shall not include any effect on
Parent and its Subsidiaries resulting from (i) the announcement, pendency or
consummation of the Merger, (ii) conditions affecting generally the industry in
which Parent operates or the U.S. economy as a whole, (iii) acts of the Company
or any of its Subsidiaries other than acts permitted by this Agreement, or (iv)
any change in the market price or trading volume of Parent Common Stock or the
failure of Parent to meet or exceed analysts' expectations. Neither Parent nor
Sub is in violation of its Certificate of Incorporation or Bylaws, in each case
as amended to date.
Section 4.02 Capital Structure. The authorized capital stock of Parent
consists of 500,000,000 shares of Parent Common Stock, and 5,000,000 shares of
Preferred Stock, $.01 par value ("Parent Preferred Stock"). As of January 31,
2001, (i) 39,021,894 shares of Parent Common Stock were issued and outstanding,
all of which are duly authorized, validly issued, fully paid and nonassessable,
(ii) 10,877,193 shares of Parent Common Stock were reserved for future issuance
pursuant to stock options granted and outstanding under Parent's stock option
plans and (iii) 500,000 shares of Parent Common Stock were reserved for future
issuance pursuant to Parent's Employee Stock Purchase Plan ("Parent ESPP"). As
of the date of this Agreement, none of the shares of Parent Preferred Stock is
issued and outstanding. The shares of Parent Common Stock issuable in connection
with the Merger have been duly authorized and reserved for issuance and, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid, nonassessable and not subject to any preemptive rights created by
statute, the Certificate of Incorporation of Parent, or any agreement to which
Parent is a party or by which it is bound. The authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $.01 per share, 100 of which
are issued and outstanding, and all of which shares are validly issued, fully
paid and nonassessable, free of preemptive rights and owned by Parent.
Section 4.03 Authority; No Conflict; Required Filings and Consents.
(a) Each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Sub except, in the
case of Parent, for the vote of the holders of Parent Common Stock
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to approve the issuance of the shares of Parent Common Stock pursuant to the
Merger as contemplated by Section 6.03 hereof. This Agreement has been duly
executed and delivered by Parent and Sub and, assuming due authorization,
execution and delivery by the Company, constitutes the valid and binding
obligation of Parent and Sub, enforceable in accordance with its terms, except
as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors rights generally and (ii) the availability of injunctive relief and
other equitable remedies.
(b) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, by Parent or Sub (in
each case, with or without the passage of time or the giving of notice) will (i)
violate or conflict with any provision of any of the charters or Bylaws of
Parent or Sub, (ii) violate or constitute a default, an event of default or any
event creating rights of acceleration, termination or cancellation, or other
additional rights, or loss of rights under any material mortgage, indenture,
deed of trust, lease, contract, agreement, license or other instrument to which
Parent or Sub is a party or by which they or any of their assets or property are
bound, (iii) violate or conflict with any Authorization or any statute, rule,
regulation, injunction, decree, order, judgment or ruling of any Governmental
Entity applicable to Parent or its Subsidiaries, or (iv) result in the creation
of any Liens upon any of the assets or property of Parent or any of its
Subsidiaries.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Parent or Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Agreement of Merger with the Secretary
of State of the State of California, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (iii) such filings
as may be required under the HSR Act and the competition laws of any foreign
country, (iv) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country, and (v) such consents,
approvals, orders, authorizations, registrations, declarations and filings
which, if not obtained or made, would not have a Parent Material Adverse Effect
and would not prevent, materially alter or delay the Merger or any of the other
transactions contemplated by this Agreement.
Section 4.04 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required
to be filed by Parent with the SEC (collectively, the "Parent SEC Reports"). The
Parent SEC Reports (i) at the time they were filed complied as to form in all
material respects with the applicable requirements of the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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(b) The consolidated financial statements (including, in each
case, any related notes) contained in the Parent SEC Reports complied as to form
in all material respects with the applicable rules and regulations of the SEC
with respect thereto, were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by the SEC) and fairly presented the consolidated financial
position of Parent and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated
(subject, in the case of the unaudited financial statements, to normal year-end
recurring adjustments).
Section 4.05 Litigation. There is no Action pending or, to the
knowledge of Parent, threatened against Parent that is required to be disclosed
pursuant to Item 103 Regulation S-K under the Securities Act that is not so
disclosed.
Section 4.06 Registration Statement. The information supplied by Parent
for inclusion in the Registration Statement shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated in the Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading. The information supplied by the Parent for
inclusion in the Proxy Statement/Prospectus to be sent to the Parent
Stockholders in connection with the Parent Stockholders' Meeting and the Company
Shareholders in connection with the meeting of the Company Shareholders' Meeting
shall not, on the date the Proxy Statement/Prospectus is first mailed to the
Parent Stockholders and the Company Shareholders, at the time of the Parent
Stockholders' Meeting and the Company Shareholders' Meeting and at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement/Prospectus not false or
misleading; or omit to state any material fact necessary to correct any
statement with respect to the Company in any earlier communication with respect
to the solicitation of proxies for the Company Shareholders' Meeting and the
Parent Stockholders' Meeting which has become false or misleading. If at any
time prior to the Effective Time any event relating to Parent or any of its
Affiliates, officers or directors should be discovered by Parent which should be
set forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement/Prospectus, Parent shall promptly inform the Company.
Section 4.07 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
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Section 4.08 Opinion of Financial Advisor. The financial advisor to
Parent, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., has delivered to Parent an opinion, dated as of
the date of this Agreement, to the effect that the Consideration (as defined in
the opinion) to be paid by Parent in the Merger is fair from a financial point
of view to Parent.
Section 4.09 Board Approval; Voting Requirements. The Board of
Directors of Parent has unanimously (i) approved this Agreement and the Merger,
(ii) determined that the Merger is advisable and in the best interests of the
Parent Stockholders, and (iii) recommended that the Parent Stockholders approve
the issuance of the shares of Parent Common Stock pursuant to the Merger. The
affirmative vote of the holders of a majority of the shares of Parent Common
Stock represented and entitled to vote at the Parent Stockholders' Meeting to
approve the issuance of shares of Parent Common Stock pursuant to the Merger is
the only vote of the holders of any capital stock of Parent required in
connection with the Merger. The Parent Stockholder Parties listed on the Parent
Disclosure Schedule represent as of the date hereof all executive officers and
directors of Parent and stockholders who are affiliates of Parent.
Section 4.10 Compliance with Laws. Parent has complied in all material
respects with each, and is not in material violation of any, statute, law,
ordinance, code, rule or regulation, whether federal, state, provincial, local
or foreign, to which Parent's and its Subsidiaries' business, operations, assets
or properties are subject.
Section 4.11 No Undisclosed Liabilities. Parent and its Subsidiaries
have no material Liabilities, except (i) those which are adequately reflected or
reserved against in the audited consolidated balance sheet of Parent as of
December 31, 2000, (ii) those which have been incurred in the ordinary course of
business since December 31, 2000, (iii) those which are not required to be
reflected in accordance with GAAP in financial statements or the footnotes
thereto, (iv) those which are disclosed in the Parent SEC Reports, and (v) those
which have been incurred in connection with this Agreement.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Section 5.01 Conduct of the Company's Business. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, except with the prior written consent
of Parent, the Company agrees, as to itself and each of its Subsidiaries, to:
(a) maintain its corporate existence, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other obligations when due, and carry on its business in all material respects
in the usual, regular and ordinary course in a manner
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consistent with past practice and in accordance with the provisions of this
Agreement and in compliance with all applicable Regulations, Authorizations and
Material Contracts;
(b) use its reasonable efforts consistent with past practices
and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, to the end that its goodwill and
ongoing businesses be substantially unimpaired at the Effective Time;
(c) maintain its facilities and assets in the same state of
repair, order and conditions as they are on the date hereof, reasonable wear and
tear excepted;
(d) maintain its books and records in accordance with past
practice, and to use reasonable efforts to maintain in full force and effect all
Authorizations and insurance policies;
(e) promptly notify Parent of any event or occurrence not in
the ordinary course of business; and
(f) use its reasonable efforts to conduct its business in such
a manner that on the Closing Date the representations and warranties of the
Company contained in this Agreement shall be true, as though such
representations and warranties were made on and as of such date, and the Company
shall use its reasonable efforts to cause all of the conditions to the
obligations of Parent under this Agreement to be satisfied on or prior to the
Closing Date.
Section 5.02 Negative Covenants. Except as expressly provided in this
Agreement or pursuant to agreements, contracts, commitments, arrangements or
understandings entered into in the ordinary course of business and that are
described in Schedule 5.02 of the Company Disclosure Schedule, the Company shall
not, and shall not permit any of its Subsidiaries to, without the prior written
consent of Parent:
(a) sell, assign, transfer, lease, consume or otherwise
dispose of any property or assets of the Company or any of its Subsidiaries
except in the ordinary course of business consistent with past practice, or,
other than the Merger pursuant to this Agreement, be party to any merger,
acquisition, consolidation, recapitalization, liquidation, dissolution or
similar transaction involving, or any purchase of, all or any substantial
portion of the assets or any equity securities of, the Company or any of its
Subsidiaries;
(b) amend, modify, violate, cancel or waive any material
rights under any Material Contract listed or incorporated by reference in
Schedule 3.14;
(c) enter into any agreement, contract, commitment,
arrangement or understanding for the future purchase of, or payment for,
supplies, or the future performance of services by a third party (other than
employees of the Company) unless all of the following conditions are satisfied:
(A) such agreement, contract, commitment, arrangement or
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understanding is entered into the ordinary course of business; (B) such
agreement, contract, commitment, arrangement or understanding does not require
payments by the Company or any Subsidiary of more than $150,000 (excluding
payments of commissions consistent with the Company's sales commission plan to
partners and resellers of the Company's products and subcontracting expenses
paid to third parties in the ordinary course of business consistent with past
practice in connection with the implementation of services for the Company's
products); (C) the term of such contract does not exceed three months; and (D)
the entering into of such contract is not otherwise prohibited by this Section
5.02;
(d) make expenditures or otherwise incur liabilities to third
party service providers (other than employees of the Company) in excess of
$500,000 in the aggregate in any month (excluding payments of commissions
consistent with the Company's sales commission plan to partners and resellers of
the Company's products and subcontracting expenses paid to third parties in the
ordinary course of business consistent with past practice in connection with the
implementation of services for the Company's products and excluding payments for
services described in Section 5.02 of the Company Disclosure Schedule); provided
that any such expenditures or expenses that are made or incurred must not
otherwise be prohibited by this Section 5.02;
(e) enter into any agreement, contract, commitment,
arrangement or understanding for the sale of products or performance of services
or grant any Company License or enter into any Third Party License unless both
of the following conditions are satisfied: (A) each such agreement, contract,
commitment, arrangement or understanding, Company License or Third Party License
is entered into the ordinary course of business consistent with past practice;
and (B) the entering into of such agreement, contract, commitment, arrangement
or understanding is not otherwise prohibited by this Section 5.02;
(f) enter into any agreement, contract, commitment,
arrangement or understanding to indemnify any Person or to assume any Tax
Liability other than in the ordinary course of business consistent with past
practice;
(g) enter into any agreement, contract, commitment,
arrangement or understanding with any federal, state, local, regulatory or other
governmental entity other than a Company License in the ordinary course of
business;
(h) enter into any agreement, contract, commitment,
arrangement or understanding for any charitable or political contribution;
(i) make any capital expenditures or leasehold improvements or
commit to make any capital expenditures or leasehold improvements which,
individually or in the aggregate, exceed $200,000, or acquire by merging or
consolidating with, or by purchasing any assets of or any equity interest in, or
by any other manner, any business or any corporation or other entity, or enter
into any joint venture, strategic partnership or alliance that creates a
financial obligation on the Company or any Subsidiary;
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(j) transfer or license to any Person or otherwise extend,
amend or modify any rights to Company Intellectual Property, except in
connection with customer contracts consistent with past practice in the ordinary
course of business, or grant any exclusive rights with respect to Company
Intellectual Property or disclose or otherwise grant any rights with respect to
the source code of any Software that is Company Intellectual Property other than
pursuant to source code escrow agreements entered into in the ordinary course of
business;
(k) enter into any agreement, contract, commitment,
arrangement or understanding containing any explicit restraint on the ability of
the Company or any of its Subsidiaries to engage or compete in any manner in any
business;
(l) mortgage, pledge or subject to Liens (other than purchase
money liens) any properties or assets of the Company or any of its Subsidiaries,
or enter into any lease with respect to Real Property;
(m) assume, incur or guarantee any obligation or liability for
borrowed money, except for endorsements for collection in the ordinary course of
business, or issue or sell any debt securities or options, warrants, calls or
other rights to acquire any debt securities of the Company or any of its
Subsidiaries;
(n) cancel, compromise or waive any debts owed to the Company
or any of its Subsidiaries, except for compromises of trade debt in the ordinary
course of business consistent with past practice;
(o) pay, discharge, settle or satisfy any Liabilities arising
other than in the ordinary course of business or accrued on the Balance Sheet or
Company Transaction Expenses set forth on Section 3.07 of the Company Disclosure
Schedule;
(p) make any changes in its accounting methods, principles or
practices;
(q) knowingly do any act or omit to do any act within its
reasonable control which will cause it to breach of any representation, warranty
or obligation contained in this Agreement;
(r) amend the Company Charter Documents or the charter
documents of any of its Subsidiaries other than as set forth on Section 3.01(c)
of the Company Disclosure Schedule;
(s) except (i) upon conversion of Company Preferred Shares
outstanding on the date hereof, (ii) upon the exercise of any Company Stock
Options or the Company Series A Warrant, in each case outstanding on the date
hereof, or (iii) the grant of up to an aggregate of that number of Company Stock
Options that remain available for grant as of the date hereof pursuant to the
Company Stock Option Plan to new hires in the ordinary course of business
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consistent with past practice for the applicable hire (provided that (A) none of
such Company Stock Options shall provide for acceleration of vesting or
accelerated lapse of forfeiture restrictions upon a change of control or
termination or resignation of employment or any other event and (B) the Company
Stock Option Plan shall not be amended to increase the number of options
available for grant thereunder), issue or sell any capital stock of the Company
or any of its Subsidiaries or make any change in their issued and outstanding
capital stock, issue or sell any option or any security or other instrument
convertible into, or exchangeable or exercisable for, their capital stock or
redeem, purchase or otherwise acquire any shares of their capital stock other
than repurchases of unvested shares at cost in connection with the termination
of the employment or service relationship with any employee, consultant or
director pursuant to stock option or purchase agreements in effect in the date
hereof;
(t) accelerate, amend or change the period of exercisability
of any Company Stock Options, the Company Series A Warrant or Other Purchase
Rights or authorize cash payments in exchange for any such Company Stock
Options, the Company Series A Warrant or Other Purchase Rights;
(u) declare, set aside or pay any dividend or make any other
payment or distribution with respect to its capital stock;
(v) (i) increase the wages, salaries, compensation, pension or
other benefits payable to any former director, employee or consultant or any
current director, employee or consultant except for increases in salary or wages
pursuant to annual salary adjustments in the ordinary course of business
consistent with past practice of employees who (A) are below the level of vice
president and (B) have not previously received an increase in wages, salary,
compensation, pension or other benefits since December 31, 2000 (but not to
exceed 10% of such employees' salary prior to such increase), (ii) pay any bonus
or other amount to any former or current director, employee or consultant other
than pursuant to a written agreement or benefit plan disclosed in the Company
Disclosure Schedule in the amount required thereunder and other than quarterly
bonuses payable in the ordinary course of business consistent with past practice
as set forth in Section 5.02(v) of the Company Disclosure Schedule, (iii) grant
any additional severance or termination pay to, or enter into any employment or
severance agreement with, any director, employee or contractor, (iv) establish,
adopt, amend or enter into any Plan or Benefit Plan, or (v) hire employees other
than in the ordinary course of business consistent with past practice;
(w) make any filings or registrations, with any Governmental
Entity, except routine filings and registrations made in the ordinary course of
business or as contemplated by this Agreement;
(x) take any actions outside the ordinary course of business;
(y) make any Tax election, change its method of Tax accounting
or settle any claim relating to Taxes;
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(z) request the effectiveness of a registration statement to
effect an initial public offering of Company Common Stock;
(aa) pay, or enter into any agreement, contract, commitment,
arrangement or understanding with respect to the payment, whether in cash,
securities or other property, of (i) any termination fee to any underwriter or
other Person in connection with the termination of the Company's initial public
offering, or (ii) any consultant, vendor or other fee to any underwriter of the
Company's initial public offering; or
(bb) agree to do any of the foregoing, except as contemplated
by this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 Exclusivity. Except with respect to this Agreement and
the transactions contemplated hereby, the Company shall not, and it shall ensure
that its and its Subsidiaries' directors, officers, affiliates and employees
shall not, and it shall expressly forbid its agents and other representatives
(including, without limitation, any investment banking, financial advisor, legal
or accounting firm retained by any of them and any individual member or employee
of the foregoing) (each, an "Agent") to:
(a) initiate, solicit or seek, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders or any of them)
with respect to a merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase of,
all or any material portion of the assets or any equity securities of, the
Company (any such transaction being hereinafter referred to as an "Acquisition"
and any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal");
(b) engage in any negotiations concerning an Acquisition
Proposal, or provide any confidential information or data to, or have any
substantive discussions with, any Person relating to an Acquisition Proposal;
(c) otherwise cooperate in any effort or attempt to make,
implement or accept an Acquisition Proposal; or
(d) enter into or consummate any agreement or understanding
with any Person relating to an Acquisition Proposal. If the Company or its
Agents have provided any Person (other than Parent or the Company's Agents) with
any confidential information or data relating to an Acquisition Proposal, they
shall request the immediate return thereof. The Company shall
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notify Parent immediately if any inquiries, proposals or offers related to an
Acquisition Proposal are received by, any confidential information or data is
requested from, or any negotiations or discussions related to an Acquisition
Proposal are sought to be initiated or continued with, it or any of its
directors, officers, affiliates and employees or, to its knowledge, any Agent.
Section 6.02 Registration Statement; Proxy Statement; Prospectus. As
promptly as practicable after the execution of this Agreement, Parent shall
prepare, with the cooperation of the Company, and file with the SEC the Proxy
Statement/Prospectus and the Registration Statement in which the Proxy
Statement/Prospectus will be included as a prospectus. Parent shall use its
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as soon as practicable after such filing. The Company
shall provide promptly such information concerning its business and financial
statements and affairs as in the reasonable judgment of Parent and its counsel
may be required or appropriate for inclusion in the Proxy Statement/Prospectus
and the Registration Statement, or in any amendments or supplements thereto, and
use its reasonable efforts to cause its counsel, accountants and financial
advisor to cooperate in the preparation of the Proxy Statement/Prospectus and
the Registration Statement. Parent shall take reasonable steps to comply with
the securities and blue sky laws of all jurisdictions which are applicable to
the issuance of the Parent Common Stock in connection with the Merger. The
Company shall use reasonable efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock in connection
with the Merger. The Proxy Statement/Prospectus shall be the Information
Statement of the Company with respect to the approval of this Agreement and the
Merger and the transactions contemplated hereby. Parent and the Company shall
cause the Proxy Statement/Prospectus to be mailed to their respective
stockholders at the earliest practicable time after the Registration Statement
is declared effective by the SEC. Subject to the review and approval of Parent,
the Company shall prepare such other materials conforming to the requirements of
applicable law as may be necessary to solicit the Company Shareholder Approval
(as defined in Section 6.03(a)).
Section 6.03 Stockholders' Meetings.
(a) As soon as reasonably practicable based on Section 6.02
above, the Company shall promptly take all action necessary under the CGCL and
its Charter Documents, to call the Company Shareholders' Meeting, to be held as
promptly as practicable, and in any event within 45 days after the declaration
of effectiveness of the Registration Statement, for the purpose of voting upon
this Agreement and the Merger (the "Company Shareholder Approval"). The Board of
Directors of the Company will unanimously recommend that the Company Shareholder
Approval be given and will use its reasonable best efforts to solicit from the
Company Shareholders the Company Shareholder Approval. Neither the Board of
Directors of the Company nor any committee thereof shall withdraw, amend or
modify, or propose to withdraw, amend or modify in a manner adverse to Parent,
the unanimous recommendation of the Board of Directors of the Company that the
Company Shareholders vote in favor of and adopt and approve this Agreement and
the Merger.
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(b) As soon as reasonably practicable based on Section 6.02
above, Parent shall promptly take all action necessary under the DGCL and its
Certificate of Incorporation and Bylaws, to call the Parent Stockholders'
Meeting, to be held as promptly as practicable, and in any event within 45 days
after the declaration of effectiveness of the Registration Statement, for the
purpose of voting upon the issuance of shares of Parent Common Stock pursuant to
the Merger (the "Parent Stockholder Approval"). Parent will, through its Board
of Directors, recommend that the Parent Stockholder Approval be given and will
use its reasonable best efforts to solicit from its stockholders the Parent
Stockholder Approval. Neither the Board of Directors of Parent nor any committee
thereof shall withdraw, amend or modify, or propose to withdraw, amend or modify
in a manner adverse to the Company, the unanimous recommendation of the Board of
Directors of Parent that the Parent Stockholders vote in favor of and approve
the issuance of the shares of Parent Common Stock pursuant to the Merger.
Section 6.04 Access. The Company shall give to Parent's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents of the Company and
shall reasonably permit them to consult with the officers, employees,
accountants, counsel and agents of the Company for the purpose of making such
investigation of the Company as Parent shall desire to make, provided that such
investigation shall not unreasonably interfere with the Company's business and
operations. Furthermore, the Company shall furnish to Parent all such documents
and copies of documents and records and information with respect to the affairs
of the Company and copies of any working papers relating thereto as Parent shall
from time to time reasonably request and shall permit Parent and its agents to
conduct technical diligence and make such inspections of the Company as Parent
may request from time to time, subject to the terms of the Nondisclosure
Agreement. Parent agrees that it shall provide the Company with reasonable
opportunities to ask questions of Parent's Chief Executive Officer and Chief
Financial Officer regarding the business, financial condition, results of
operations, properties, assets and liabilities of Parent and its Subsidiaries.
Section 6.05 Confidentiality. Each party acknowledges that the Company
and Parent have previously entered into a Confidentiality Agreement dated
November 1, 2000 (the "Nondisclosure Agreement"), which will continue in full
force and effect in accordance with its terms.
Section 6.06 Public Announcement. Neither Parent, Sub nor the Company
shall make any press release or other public statement or any statement to any
analyst or member of the press concerning the transactions contemplated by this
Agreement without the approval of the other party hereto; provided, however,
that Parent may, without such approval, but with prior notice to the Company,
make such press releases or other public statements as it reasonably believes
are required under the rules of The Nasdaq Stock Market or applicable securities
laws.
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Section 6.07 Consents. The Company shall use its reasonable efforts to
obtain the consents, waivers, assignments and approvals under any of the
Material Contracts as may be required in connection with the Merger (all of such
consents, waivers and approvals are set forth in the Company Disclosure
Schedule) so as to preserve all rights of, and benefits to, the Surviving
Corporation thereunder.
Section 6.08 Regulatory Approvals.
(a) Each of Parent and the Company shall promptly apply for or
otherwise seek, and use all reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the transactions
contemplated by this Agreement. Each party will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
Person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement. Without limiting the generality of the
foregoing, as soon as reasonably practicable following the date hereof, Parent
and the Company each shall make such filings and furnish such information
relating to the Merger as are required of Parent and the Company by the HSR Act,
as well as any other filings required by the competition laws and regulations of
any applicable jurisdiction. Parent will pay the applicable HSR filing fee; fees
payable with respect to filings required under the HSR Act of any other
acquiring person (within the meaning of the regulations promulgated under the
HSR Act) shall be the responsibility of such acquiring person. Parent and the
Company each shall promptly (i) supply the other with any information which may
be required in order to effectuate such filings and (ii) supply any additional
information which reasonably may be required by the Federal Trade Commission,
the Department of Justice or the competition or merger control authorities of
any other jurisdiction and which the parties may reasonably deem appropriate.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement to take any
of the following actions if such action would be reasonably likely to result in
a material adverse effect on the business, financial condition, results of
operations, properties, assets or liabilities of Parent and the Company as the
Surviving Corporation taken as a whole: (i) to dispose or cause any of its
Subsidiaries to dispose of any assets, or to commit to cause the Company or any
of its Subsidiaries or the Surviving Corporation to dispose of any assets; (ii)
to discontinue or cause any of its Subsidiaries to discontinue offering any
product or service, or to commit to cause the Company or any of its Subsidiaries
or the Surviving Corporation to discontinue offering any product or service;
(iii) to license or otherwise make available, or cause any of its Subsidiaries
to license or otherwise make available, to any Person any Intellectual Property,
or to commit to cause the Company or any of its Subsidiaries or the Surviving
Corporation to license or otherwise make available to any Person any
Intellectual Property; (iv) to hold separate or cause any of its Subsidiaries to
hold separate any assets or operations (either before or after the Closing
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Date), or to commit to cause the Company or any of its Subsidiaries or the
Surviving Corporation to hold separate any assets or operations; or (v) to make
or cause any of its Subsidiaries to make any commitment (to any Governmental
Entity or otherwise) regarding its future operations or the future operations of
Parent, the Company or any of their respective Subsidiaries or the Surviving
Corporation.
Section 6.09 Notification of Certain Matters. Each party shall give
prompt notice to the other parties of any fact, event or circumstance known to
it that (a) individually or taken together with all other facts, events and
circumstances known to it, has had or is reasonably likely to have a Company
Material Adverse Effect or Parent Material Adverse Effect, as applicable, or (b)
would cause or constitute a material breach of any of its representations,
warranties, covenants or agreements contained herein; provided, however, that
(i) the delivery of any notice pursuant to this Section 6.09 shall not limit or
otherwise affect any remedies available to such other parties, and (ii)
disclosure by any party shall not be deemed to amend or supplement the Company
Disclosure Schedule or Parent Disclosure Schedule, as applicable, or prevent or
cure any misrepresentations, breach of warranty or breach of covenant.
Section 6.10 Tax-Free Reorganization. Parent and the Company shall (and
following the Effective Time, Parent shall cause the Surviving Corporation to)
take no action that would reasonably be expected to cause the Merger to fail to
qualify as a "reorganization" within the meaning of Section 368(a) of the Code.
Parent and the Company agree to make reasonable and customary representations to
counsel for purposes of rendering the opinions described in Sections 7.02(k) and
7.03(e). This Agreement is intended to constitute a "plan of reorganization"
within the meaning of Section 1.368-2(g) of the income tax regulations
promulgated under the Code.
Section 6.11 Form S-8. Within 10 days following the Closing Date,
Parent shall file a registration statement on Form S-8 to register shares of
Parent Common Stock issuable upon exercise of the Replacement Options assumed by
Parent to the extent the shares of Parent Common Stock issuable upon exercise of
such Replacement Options may be registered on Form S-8.
Section 6.12 Benefit Plans. The Company agrees to terminate its 401(k)
plan immediately prior to the Closing, unless Parent, in its sole and absolute
discretion, agrees to sponsor and maintain such plan by providing the Company
with notice of such election at least five days before the Effective Time.
Parent shall take all reasonable actions necessary to allow eligible employees
of the Company that will be employees of the Surviving Corporation
("Transitioned Employees"), to participate on substantially similar terms in
benefit programs which are substantially comparable to those maintained for the
benefit of, or offered to, similarly situated employees of Parent, as soon as
practicable after the Effective Time, to the extent permitted by the terms of
such Parent benefit plan or any insurance contract or agreement applicable
thereto; provided, however, that in the case of plans for which the Company
maintains a plan offering the same type of benefit, such participation need not
be offered by Parent until the corresponding plan of the Company ceases to be
available or is terminated after the Effective
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Time. Parent will recognize employment services of each Transitioned Employee
with the Company for purposes of eligibility and vesting (but not benefit
accrual) under any Parent Benefit Plan. Each Transitioned Employee's year of
service with the Company shall be otherwise recognized for all general
employment purposes, including, without limitation, seniority, vacation,
personal time and similar general employment purposes; provided, that any
vacation time offered by Parent in the calendar year of the Effective Time to
any Transitioned Employee shall be offset by any vacation time used by or paid
to a Transitioned Employee by the Company in the calendar year of the Effective
Time. In addition, Parent will (i) waive all limitations as to preexisting
conditions, exclusions, waiting periods and service requirements with respect to
participation and coverage requirements applicable to Transitioned Employees
under any group health plan sponsored by Parent, except to the extent such
preexisting conditions, exclusion, waiting period or service requirement had not
been satisfied by any such Transitioned Employee as of the Effective Time under
a group health plan sponsored by the Company; and (ii) provide each Transitioned
Employee with credit for any deductible, copayment and out-of-pocket limits
applicable to such employees under any such group medical plan sponsored by the
Company and paid by the Transitioned Employee prior to the Effective Time during
the calendar year of the Effective Time. Transitioned Employees of the Company
as of the Effective Time shall be permitted to participate in the Parent ESPP
commencing on the first enrollment date following the Effective Time, subject to
compliance with the eligibility provisions of such plan (with employees
receiving credit, for purposes of such eligibility provisions, for service with
the Company).
Section 6.13 Allocation Certificate. The Company shall prepare and
deliver to Parent at the Closing a certificate signed by the Chief Financial
Officer and Secretary of the Company in a form reasonably acceptable to Parent
as to the capitalization of the Company immediately prior to the Effective Time
and the allocation of the Total Parent Shares among the holders of Company
Common Shares, Company Preferred Shares, Company Stock Options, the Company
Series A Warrant and any Other Purchase Rights (collectively, the "Company
Equity Holders") pursuant to the Merger (the "Allocation Certificate"). The
Allocation Certificate shall set forth (i) a true and complete list of the
Company Equity Holders immediately prior to the Effective Time and the number
and type and/or class of securities owned by each such Company Equity Holder,
and (ii) the allocation of the Total Parent Shares among the Company Equity
Holders pursuant to the Merger. The Allocation Certificate shall certify that
the allocation of the Total Parent Shares among the Company Equity Holders is in
accordance with the Company's Charter Documents.
Section 6.14 FIRPTA Certificate. The Company shall, prior to the
Closing Date, provide Parent with a properly executed statement in a form
attached hereto as Exhibit G, for purposes of satisfying Parent's obligations
under Treasury Regulation Section 1.1445-2(c)(3) (the "FIRPTA Certificate").
Section 6.15 Rule 145 Affiliate Agreements. Schedule 6.15 sets forth
those Persons who, in the Company's reasonable judgment, are or may be
"affiliates" of the Company within the meaning of Rule 145 (each such Person a
"Rule 145 Affiliate") promulgated under the Securities Act ("Rule 145"). The
Company shall provide Parent such information and documents
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as Parent shall reasonably request for purposes of reviewing such list. The
Company shall deliver or cause to be delivered to Parent, concurrently with the
execution of this Agreement from each of the Rule 145 Affiliates of the Company,
an executed agreement ("Rule 145 Affiliate Agreement") in the form attached
hereto as Exhibit H. Parent and Sub shall be entitled to place appropriate
legends on the certificates evidencing any Parent Common Stock to be received by
such Rule 145 Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Parent Common
Stock, consistent with the terms of such Rule 145 Affiliate Agreements.
Section 6.16 Listing of Additional Shares. Parent shall file with
Nasdaq a Notification Form for Listing of Additional Shares covering the shares
of Parent Common Stock issuable pursuant to the Merger (including Parent Common
Stock issued in payment of Company Shareholder Transaction Expenses) and upon
exercise of Replacement Options and the Replacement Warrant.
Section 6.17 Retention Program. At the Closing, Parent shall grant
options to purchase an aggregate of 500,000 shares of Parent Common Stock to
employees of the Company and its Subsidiaries designated by the Chief Executive
Officer of Parent after consultation with the Chief Executive Officer of the
Company, with the exercise price of such options equal to the closing price of
Parent Common Stock on the Nasdaq National Market on the Closing Date and with
such options vesting on Parent's standard vesting schedule following the Closing
as described in Section 6.17 of the Parent Disclosure Schedule.
Section 6.18 Company Transaction Expenses. The Company shall not incur
any Company Transaction Expenses following the date hereof except as set forth
in Section 3.07 of the Company Disclosure Schedule. At the Closing the Company
shall present to Parent final invoices for any and all Company Transaction
Expenses, whether paid or unpaid as of the Closing Date. At the Closing, Parent
shall pay all unpaid invoices for Company Transaction Expenses against
presentation to Parent of satisfactory invoices; provided that Parent shall have
the option to pay up to 50% of any fee owed by the Company to Broadview
International LLC in shares of Parent Common Stock.
Section 6.19 Further Assurances. Each of the parties hereto shall
execute such documents and other instruments and take such further actions as
may be reasonably required or desirable to carry out the provisions hereof and
consummate the transactions contemplated hereby. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use its respective
reasonable best efforts to (i) take or cause to be taken all actions and to do
or cause to be done all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and (ii) obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings.
Section 6.20 Non-Solicitation. For one year from the date of this
Agreement: (a) Parent shall not, and shall ensure that its representatives
soliciting employees or consultants for
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Parent shall not, directly or indirectly, solicit, encourage, induce or attempt
to induce any employee or consultant of the Company that has been contacted,
introduced or made known to Parent in connection with activities relating to the
transactions contemplated by this Agreement, to terminate his or her employment
with the Company; and (b) the Company shall not, and shall ensure that its
representatives soliciting employees or consultants for the Company shall not,
directly or indirectly, solicit, encourage, induce or attempt to induce any
employee or consultant of Parent that has been contacted, introduced or made
known to the Company in connection with activities relating to the transactions
contemplated by this Agreement, to terminate his or her employment with Parent.
Notwithstanding the foregoing, the restrictions set forth in this Section 6.20
shall not apply to (i) the unsolicited inquiries made by an employee of one
party to the other party; (ii) the inquiries received from an employee of one
party as the result of a general notice or advertisement placed by the other
party; or (iii) the inquiries resulting from an employee's utilization of an
employment search.
Section 6.21 Indemnification of Officers and Directors.
(a) For a period of five years following the Effective Time,
Parent will fulfill, honor and perform or cause the Surviving Corporation to
fulfill, honor and perform all of the Indemnification Obligations of (i) the
Company arising under the Company's Articles of Incorporation or Bylaws as in
effect in the date hereof, (ii) Subsidiaries arising under the Subsidiary's
charter documents as in effect on the date hereof, and (iii) under any
indemnification or similar agreement in effect on the date hereof between the
Company or a Subsidiary on the one hand, and any Company Covered Person on the
other hand, that was approved by the Board of Directors of the Company and
copies of which have been provided to Parent or its counsel prior to the date
hereof; provided, that such indemnification shall be subject to any limitation
from time to time under applicable law. This indemnification shall not apply to
any claim by a Parent Indemnified Party pursuant to the terms of this Agreement
or any other agreement contemplated by this Agreement. A "Company Covered
Person" means any individual who, at any time prior to the Effective Time, was a
director or officer of the Company or a Subsidiary or was a trustee or other
fiduciary of a plan administered for the benefit of employees of the Company
and/or a Subsidiary. "Indemnification Obligations" means any obligation of the
Company or a Subsidiary to provide indemnification, defense of claims or
advancement of expenses to a Person.
(b) This Section 6.21 shall survive the consummation of the
Merger, is intended to benefit the Company and each Company Covered Person,
shall be binding, jointly and severally, on all successors and assigns of the
Surviving Corporation and Parent, and shall be enforceable by each of the
Company Covered Persons, their heirs and their representatives.
(c) If Parent, the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or, (ii) transfers or conveys all or substantially all
of its properties and assets to any Person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation, as the case may be, shall assume
the obligations set forth in this Section 6.21.
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(d) The Company represents and warrants to Parent that no
claim for indemnification has been made by any Company Covered Person and, to
the knowledge of the Company, no basis exists for any such claim for
indemnification.
Section 6.22 Employment and Noncompetition Agreements. As of the date
hereof, each of the Key Company Employees shall have entered into Employment and
Noncompetition Agreements in substantially the forms attached hereto as Exhibits
C and D, respectively.
Section 6.23 Stock Restriction Agreements. As of the date hereof, each
of the Management Shareholders shall have entered into a Stock Restriction
Agreement in substantially the form attached hereto as Exhibit E.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction on or prior to the Effective Time of
the following conditions:
(a) Corporate Approvals. This Agreement and the Merger shall
have been approved and adopted by the requisite votes of the Company
Shareholders under California law and the Company Charter Documents, and the
issuance of the shares of Parent Common Stock pursuant to the Merger shall have
been approved by the requisite vote of the Parent Stockholders under Delaware
law and the rules of the Nasdaq Stock Market promulgated by the National
Association of Securities Dealers.
(b) HSR Act. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated.
(c) Approvals. Other than the filings contemplated by Section
1.02, all authorizations, consents, orders or approvals of, or declarations or
filings with, or waiting periods imposed by, any Governmental Entity the failure
to obtain which would have a Company Material Adverse Effect or Parent Material
Adverse Effect shall have been filed, occurred or been obtained or shall have
expired.
(d) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
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(e) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by any Governmental Entity, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
Section 7.02 Conditions to Obligation of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to consummate the transactions
contemplated by this Agreement will be subject to the satisfaction, on or prior
to the Effective Time, of each of the following conditions, unless waived in
writing by Parent:
(a) Representations and Warranties of the Company. Each of the
representations and warranties of the Company set forth in this Agreement (i)
shall have been true and correct as of the date of this Agreement and (ii) shall
be true and correct at and as of the Closing Date as if made at and as of the
Closing Date except (A) where such failure to be true and correct does not,
individually or in the aggregate, have a Company Material Adverse Effect, and
(B) to the extent that such representations and warranties refer specifically to
an earlier date, in which case such representations and warranties shall have
been true and correct as of such earlier date except where such failure to be
true and correct as of such earlier date does not, individually or in the
aggregate, have a Company Material Adverse Effect. For purposes of determining
the accuracy of such representations and warranties, all "Company Material
Adverse Effect" qualifications or other qualifications based on materiality
contained in such representations and warranties shall be disregarded. Parent
shall have received a certificate with respect to the foregoing signed on behalf
of the Company by the President of the Company.
(b) Performance of Obligations. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, provided that, with
respect to obligations that are qualified by materiality, the Company shall have
performed such obligations, as so qualified, in all respects; and Parent shall
have received a certificate signed on behalf of the Company by the President of
the Company to such effect.
(c) Company Material Adverse Effect. There shall not have
occurred any event, occurrence or change that has had a Company Material Adverse
Effect.
(d) Dissenter's Rights. The holders of no more than five
percent (5%) of the Company Shares outstanding immediately prior to the
Effective Time shall have demanded and not lost or withdrawn, or shall be
eligible to demand, appraisal rights.
(e) [INTENTIONALLY OMITTED]
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(f) Allocation Certificate. The Company shall have executed
and delivered to Parent the Allocation Certificate.
(g) Termination of Certain Agreements. The Company shall have
delivered to Parent evidence reasonably satisfactory to Parent that the Investor
Rights Agreement dated as of August 24, 2000 by and among the Company, the
Investors and the Founders, has been terminated.
(h) Indemnity Escrow Agreement. The Indemnity Escrow Agreement
shall have been duly executed and delivered by the Company Shareholders'
Representative (as defined in Section 9.07(a)) in substantially the form
attached as Exhibit I hereto (the "Indemnity Escrow Agreement").
(i) Employment and Noncompetition Agreements. None of the Key
Company Employees listed on Schedule 7.02(i) shall have ceased employment with
the Company and the Employment and Noncompetition Agreements with such Key
Company Employees shall be effective and shall not have been breached.
(j) Opinion of Counsel. Parent and Sub shall have received a
written opinion from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
LLP, counsel to the Company, addressed to Parent and Sub, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit J.
(k) Tax Opinion. Parent shall have received the written
opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, counsel to Parent, in substantially the
form attached hereto as Exhibit K, to the effect that the Merger will be treated
for Federal income tax purposes as a tax-free reorganization within the meaning
of Section 368(a) of the Code; provided, however, that if ▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP does not render such opinion, this condition shall nonetheless be
deemed satisfied if counsel to the Company provides such opinion. In rendering
such opinion, counsel may rely upon the representations and certificates of
Parent, Sub and the Company.
(l) FIRPTA Certificate. Parent shall have received from the
Company a duly executed and certified FIRPTA Certificate.
(m) Other Purchase Rights. Any and all Other Purchase Rights
shall have been exercised or exchanged for, or converted into, Company Shares or
shall have been canceled and all rights with respect thereto released, and the
Company shall have delivered to Parent evidence reasonably satisfactory to
Parent of such exercise, exchange, conversion or cancellation and release, as
applicable.
(n) Resignations. The directors of the Company in office
immediately prior to the Effective Time shall have resigned as directors as of
the Effective Time.
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Section 7.03 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is subject to the
satisfaction of each of the following conditions, unless waived in writing by
the Company:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Sub set forth in this Agreement (i)
shall have been true and correct as of the date of this Agreement and (ii) shall
be true and correct at and as of the Closing Date as if made at and as of the
Closing Date except (A) where such failure to be true and correct does not,
individually or in the aggregate, have a Parent Material Adverse Effect, and (B)
to the extent that such representations and warranties refer specifically to an
earlier date, in which case such representations and warranties shall have been
true and correct as of such earlier date except where such failure to be true
and correct as of such earlier date does not, individually or in the aggregate,
have a Parent Material Adverse Effect, and the Company shall have received a
certificate signed on behalf of Parent and Sub by the President or Chief
Financial Officer of Parent and Sub to such effect. For purposes of determining
the accuracy of such representations and warranties, all "Parent Material
Adverse Effect" qualifications or other qualifications based on materiality
contained in such representations and warranties shall be disregarded.
(b) Performance of Obligations. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date and the Company shall
have received a certificate signed on behalf of Parent by the President or Chief
Financial Officer of Parent to such effect.
(c) Parent Material Adverse Effect. There shall not have
occurred any event, occurrence or change that has had a Parent Material Adverse
Effect.
(d) Legal Opinion. The Company shall have received a written
opinion from ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit L.
(e) Tax Opinion. The Company shall have received the written
opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, in
substantially the form attached hereto as Exhibit M, to the effect that the
Merger will be treated for Federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code; provided,
however, that if ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
does not render such opinion, this condition shall nonetheless be deemed
satisfied if counsel to the Parent provides such opinion. In rendering such
opinion, counsel may rely upon the representations and certificates of Parent,
Sub and the Company.
(f) Indemnity Escrow Agreement. The Indemnity Escrow Agreement
shall have been duly executed and delivered by Parent and the Indemnity Escrow
Agent.
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(g) Listing of Shares. The shares of Parent Common Stock to be
issued in the Merger shall have been approved for listing (subject to notice of
issuance) on the Nasdaq National Market.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time by written notice by
the terminating party to the other party under the circumstances set forth
below:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not
have been consummated by June 30, 2001 (provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this Agreement;
or
(c) by Parent if a breach or failure of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement shall have occurred which would cause any condition set forth in
Sections 7.01 or 7.02 not to be satisfied and such breach is not cured within 15
business days following receipt by the Company of written notice thereof;
provided, however, that there shall be no cure period with respect to any breach
of Sections 6.01 and 6.06; or
(d) by the Company, if a breach or failure of any
representation, warranty, covenant or agreement on the part of Parent set forth
in this Agreement shall have occurred which would cause any condition set forth
in Sections 7.01 or 7.03 not to be satisfied and such breach is not cured within
15 business days following receipt by Parent of written notice thereof; or
(e) by either Parent or the Company if a Governmental Entity
shall have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is final and
non-appealable; or
(f) by Parent or the Company, if the issuance of the shares of
Parent Common Stock pursuant to the Merger is not approved by the Parent
Stockholders at the Parent Stockholders' Meeting.
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Section 8.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Parent, Sub,
the Company or their respective officers, directors, stockholders or Affiliates,
except as set forth in Section 8.03; provided, however, that the provisions of
Sections 6.05, 6.06, 6.20 and 8.03 of this Agreement shall remain in full force
and effect and survive any termination of this Agreement.
Section 8.03 Remedies. Any party terminating this Agreement pursuant to
Section 8.01 (b), (c) or (d) shall have the right to recover damages sustained
by such party if the basis for termination is a result of the other party's
willful breach of its representations, warranties, covenants or other
obligations hereunder, provided that the party seeking relief is not in breach
of its obligations hereunder under circumstances which would have permitted the
other party to terminate the Agreement under Section 8.01.
Section 8.04 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the shareholders of the Company or the issuance of the shares of
Parent Common Stock pursuant to the Merger by the Parent Stockholders, but,
after any such approval, no amendment shall be made which by law requires
further approval by such shareholders or stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 8.05 Waiver. At any time prior to the Effective Time, Parent
and Sub may waive compliance by the Company or any Company Shareholder, and the
Company, and following the Effective Time, the Company Shareholders
Representative, may waive compliance by Parent or Sub, by an instrument in
writing signed by or on behalf of the party waiving compliance, with any term or
provision of this Agreement that the other party was or is obligated to comply
with or perform.
ARTICLE IX
INDEMNIFICATION
Section 9.01 Survival. The representations and warranties of the
Company, Parent and Sub contained in this Agreement shall survive the Closing
for a period of 12 months following the Closing Date (the "Survival Period");
provided, however, there shall be no limitation period for matters involving
fraud.
Section 9.02 Indemnification by the Company Shareholders.
(a) Subject to the limitations set forth in this Article IX,
Parent, Sub, the Surviving Corporation, the officers, directors, agents
employees and Affiliates of Parent (each, a
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"Parent Indemnified Party" and collectively, the "Parent Indemnified Parties")
shall be indemnified, defended and held harmless by the Company Shareholders
(collectively, the "Company Indemnifying Parties") against any losses,
liabilities of every type and nature (whether known or unknown, fixed or
contingent), claims, including, without limitation, any third-party claims,
damages, deficiencies, charges, causes of action, suits, proceedings, assessed
interest, penalties, Taxes, costs and expenses (including reasonable legal and
other professional fees and expenses) (collectively, "Losses") resulting from,
arising out of, or incurred by any Parent Indemnified Party in connection with,
or otherwise with respect to:
(i) any inaccuracy or breach of a representation and
warranty or other statement by the Company contained in this Agreement, the
Company Disclosure Schedule, any exhibit attached hereto, or any certificate or
schedule furnished or to be furnished to Parent pursuant hereto; and
(ii) any breach of any covenant or agreement of the
Company contained in this Agreement or any exhibit attached hereto, or any
certificate or schedule furnished or to be furnished to Parent pursuant hereto.
As used herein, "Losses" is not limited to matters asserted by third parties,
but includes Losses incurred or sustained by the Parent Indemnified Parties in
the absence of claims by third parties.
(b) As soon as practicable following the Effective Time, the
Escrow Shares (as defined below) shall be delivered to the Indemnity Escrow
Agent. Such Escrow Shares, together with any and all income and proceeds
thereon, shall be referred to hereinafter as the "Indemnity Escrow Fund." The
Indemnity Escrow Fund shall be available to compensate the Parent Indemnified
Parties pursuant to the indemnification obligations of the Company Indemnifying
Parties. The Indemnity Escrow Fund shall be held and disbursed by the Indemnity
Escrow Agent in accordance with the Indemnity Escrow Agreement. The term "Escrow
Shares" means a number of shares of Parent Common Stock equal to 10% of the
shares of Parent Common Stock to be issued to the Company Shareholders in the
Merger, plus any shares as may be issued upon any stock split, stock dividend or
similar recapitalization with respect to such shares. The Escrow Shares
attributable to each Company Shareholder shall be equal to the aggregate number
of Escrow Shares multiplied by a fraction the numerator of which is the number
of shares of Parent Common Stock issuable to each such Company Shareholder
pursuant to the Merger and the denominator of which is the aggregate number of
shares of Parent Common Stock issuable to all Company Shareholders pursuant to
the Merger. Parent's sole and exclusive remedy for Losses shall be the release
of Escrow Shares from the Indemnity Escrow Fund to Parent subject to and in
accordance with the Indemnity Escrow Agreement; provided, however, this Article
IX and the rights and restrictions set forth herein do not limit any other
potential remedies of Parent with respect to any act of fraud by the Company.
The Company Shareholders, in their capacity as shareholders, shall not have any
right of indemnification or contribution from Parent or the Surviving
Corporation with respect to any Loss claimed by any Parent Indemnified Party
after the Effective Time.
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Section 9.03 Limitations.
(a) No Escrow Shares shall be released to the Parent
Indemnified Parties from the Indemnity Escrow Fund under the Indemnity Escrow
Agreement until the aggregate amount of all Losses as to which claims have been
asserted and determined pursuant to the terms hereof and the Indemnity Escrow
Agreement to be indemnifiable (aggregating all of the claims against the Company
Indemnifying Parties) exceeds $350,000 (the "Indemnification Floor"), in which
case the Parent Indemnified Parties shall be entitled to be reimbursed from the
Indemnity Escrow Fund for the full amount of such Losses in excess of the
Indemnification Floor. Notwithstanding the foregoing, in the event that Parent
or the Company pays any Company Transaction Expenses for which a final invoice
was not presented to Parent at the Closing, then to the extent that Company
Transaction Expenses exceed $4,000,000, the amount of such invoice shall
constitute Losses for which the Parent Indemnified Parties shall be reimbursed
out of the Indemnity Escrow Fund from the first dollar without regard to the
Indemnification Floor; provided, however, the amount of such invoice shall not
be included within Losses that are aggregated to determine if claims exceed the
Indemnification Floor. Subject to and in accordance with the Indemnity Escrow
Agreement, once the Indemnification Floor has been reached, the full amount of
such Losses (aggregating all of the claims against the Company Indemnifying
Parties) in excess of the Indemnification Floor shall be subject to
indemnification and a number of Escrow Shares shall be released to Parent from
the Indemnity Escrow Fund that have an aggregate value equal to the amount of
all Losses in excess of the Indemnification Floor, computed, with respect to
Losses attributable to each respective claim, on the basis of the last reported
sale prices per share of Parent Common Stock on the Nasdaq National Market as
reported in The Wall Street Journal for the 10 trading days ending on the date
which is three business days immediately preceding and not including (i) that
date on which such claim is made pursuant to the Indemnity Escrow Agreement, or
(ii) if such claim is contested in accordance with the provisions of the
Indemnity Escrow Agreement, the date on which such claim is finally resolved in
accordance therewith. The amount of Losses shall be reduced by the amount of any
insurance proceeds, if any (net of (i) any out-of-pocket expenses, (ii)
increases in premiums or (iii) any deductibles incurred in connection with
collecting such insurance proceeds), that are actually received by Parent or the
Company; provided, however, that neither Parent nor the Company shall have any
obligation to maintain insurance or pursue claims and Parent's or the Company's
failure to pursue claims or otherwise seek reimbursement shall not reduce the
amount of Losses indemnifiable hereunder.
(b) Except in the case of fraud, after the Closing, the
indemnification provided in this Article IX shall be the exclusive remedy for
Losses available to Parent, Sub and Parent Indemnified Parties for any breach of
any representation, warranty, covenant or agreement contained in this Agreement,
the Company Disclosure Schedule or any agreement attached as an exhibit hereto,
or any certificate or schedule furnished or to be furnished to Parent or Sub
pursuant hereto. In no event shall the liability of the Company Shareholders for
any such breach exceed the total number of Escrow Shares in the Indemnity Escrow
Fund. Any Escrow Shares that are disbursed from the Indemnity Escrow Fund in
satisfaction of any claim shall be drawn pro rata from the Escrow Shares
allocable to the Company Shareholders in accordance with their respective
interests therein as set forth in Exhibit A to the Indemnity Escrow Agreement.
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(c) Nothing in this Article IX shall limit the liability of
the Company or the remedies available to Parent and Sub for any willful breach
of any representation, warranty, covenant or agreement contained in this
Agreement if there is no Closing.
Section 9.04 Notice of Claims. Any Parent Indemnified Party entitled to
indemnification under this Article IX (the "Indemnitee") shall notify the
Company Shareholders' Representative on behalf of the Company Indemnifying
Parties (the "Indemnitor") in writing of any claim, which the Indemnitee shall
have determined has given rise to a claim for indemnification under this Article
IX ("Notice of Claim"). The Notice of Claim shall set forth the amount or an
estimate of the foreseeable maximum amount of claimed Losses and a description
of the basis for such claim. No claim for indemnification may be made by an
Indemnitee after the expiration of the Survival Period, provided that in the
event that a Notice of Claim shall have been delivered within the Survival
Period (whether or not formal legal action shall have been commenced based upon
such claim), the claim specified therein shall continue to be subject to
indemnification in accordance herewith.
Section 9.05 Third Party Claims.
(a) If the facts giving rise to any indemnification provided
for in this Agreement involve any actual or threatened claim or demand by any
third party ("Third Party Claim") against any Indemnitee, the Indemnitee shall
give prompt written notice of such Third Party Claim to the Indemnitor. Failure
or delay in notifying the Indemnitor will not relieve the Indemnitor of any
liability it may have to the Indemnitee, except to the extent that such failure
or delay causes actual harm to the Indemnitor with respect to such claim. The
Indemnitor will be entitled, upon its election, by written notice given to the
Indemnitee within 30 days after the date on which the Indemnitee has given
notice of such Third Party Claim to the Indemnitor (without prejudice to the
right of such Indemnitee to participate at its expense through counsel of its
own choosing), to assume the defense or prosecution of such claim and any
litigation resulting therefrom (a "Third Party Defense") at its expense and
through counsel of its own choosing reasonably acceptable to the Indemnitee;
provided, however, that the Indemnitor shall not have the right to assume the
Third Party Defense (i) to the extent that any such claim seeks, in addition to
or in lieu of monetary damages, any injunctive or other equitable relief, or
(ii) if the Indemnitor fails to provide reasonable assurance to the Indemnitee
of the adequacy of the Escrow Fund to provide indemnification in accordance with
the provisions of this Agreement with respect to such proceeding, or (iii) to
the extent that the Third Party Claim is an Intellectual Property Claim or
involves a claim by a customer of the Company, Parent or any of their respective
Subsidiaries, or (iv) if the Third Party Claim, when aggregated with all other
claims pending against the Indemnity Escrow Fund, exceeds the then current value
of the Escrow Shares remaining in the Indemnity Escrow Fund; and provided
further, that if, by reason of the claim of such third party a lien, attachment,
garnishment or execution is placed upon any of the property or assets of such
Indemnitee, the Indemnitor, if it desires to exercise its right to assume such
Third Party Defense, must furnish a satisfactory indemnity bond to obtain the
prompt release of such lien, attachment, garnishment or execution. As used
herein, "Intellectual
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Property Claim" shall mean any claim that (i) the Company or any of its
Subsidiaries has infringed or violated, does infringe or violate, or would
infringe or violate, the patent or intellectual property or proprietary rights
of any third party, or (ii) the carrying on of the Company's business by the
present or former employees or independent contractors of the Company conflicts
with or breaches the terms, conditions and provisions of, or constitutes a
default under, any employment, confidentiality, assignment of inventions or
noncompetition agreement under circumstances in which such conflict, breach or
default would limit the Company's ability to carry on its business or to use or
employ any employee or independent contractor in the Company's business as
conducted prior to the Closing, including, without limitation, the products
listed on Schedule 3.13(c)(iii). If the Indemnitor assumes a Third Party
Defense, it will conduct the Third Party Defense actively and diligently, and
will hold all Indemnitees harmless from and against all Losses caused by or
arising out of any settlement thereof (other than such Indemnitee's expenses of
participation in such defense, prosecution or settlement). Except with the
written consent of the Indemnitee (not to be unreasonably withheld) to which the
Indemnitor is obligated to furnish indemnification pursuant to this Agreement,
the Indemnitor will not, in a Third Party Defense, consent to the entry of any
judgment or enter into any settlement (i) which does not include as an
unconditional term thereof the giving to the Indemnitee by the third party of a
release from all liability in respect of such suit, claim, action, or
proceeding, (ii) unless there is no finding or admission of any violation of law
by the Indemnitee (or any affiliate thereof) or any violation of the rights of
any Person and no effect on any other claims of a similar nature that may be
made by the same third party against the Indemnitee, (iii) which imposes any
form of relief other than monetary damages, or (iv) which exceeds the then
current value of the Escrow Shares remaining in the Indemnity Escrow Fund.
Parent and its affiliates will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim as to which the
Indemnitor has elected to assume the defense without the prior written consent
of the Indemnitor (not to be unreasonably withheld). Parent will provide
reasonable cooperation in the defense of the Third Party Claim.
(b) In the event that the Indemnitor fails or elects not to
assume the defense of an Indemnitee against such Third Party Claim, which the
Indemnitor had the right to assume under this Section 9.05, the Indemnitee shall
have the right, at the expense of the Indemnitor, to defend or prosecute such
claim or litigation in such manner as it may reasonably deem appropriate and,
with the prior consent of the Indemnitor (not to be unreasonably withheld),
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim in any manner it may reasonably deem appropriate. The
Indemnitee shall be entitled to be reimbursed promptly from the Indemnity Escrow
Fund for any Losses incurred in connection with such settlement. If no
settlement of such claim or litigation is made, the Indemnitee shall be entitled
to be reimbursed promptly from the Indemnity Escrow Fund for any Losses arising
out of any judgment rendered with respect to such claim or litigation. Any
Losses for which an Indemnitee is entitled to indemnification hereunder shall be
promptly paid as incurred. If the Indemnitor does not elect to assume a Third
Party Defense which it has the right to assume hereunder, the Indemnitee shall
have no obligation to do so.
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(c) In the event that the Indemnitor is not entitled to assume
the defense of the Indemnitee against such Third Party Claim pursuant to this
Section 9.05, the Indemnitee shall have the right to undertake the defense and,
with the prior consent of the Indemnitor (not to be unreasonably withheld),
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim in any manner it may reasonably deem appropriate. In
each case, the Indemnitee shall conduct the defense of the Third Party Claim
actively and diligently, and the Indemnitor will provide reasonable cooperation
in the defense of the Third Party Claim.
Section 9.06 Effect of Investigation; Waiver.
(a) Parent's right to indemnification or other remedies based
upon the representations and warranties, covenants, agreements and undertakings
of the Company will not be affected by any investigation, knowledge or waiver of
any condition by Parent. Such representations and warranties shall not be
affected or deemed waived by reason of the fact that Parent knew or should have
known that any of the same is or might be inaccurate. Any investigation by such
party shall be for its own protection only and shall not affect or impair any
right or remedy hereunder.
(b) The waiver by Parent of any condition based on the
accuracy of any representation or warranty, or compliance with any covenant or
obligation, will not affect any right to indemnification or other remedy based
on such warranties, covenants and obligations unless otherwise expressly agreed
in writing by Parent.
Section 9.07 Company Shareholders' Representative.
(a) By virtue of and effective upon the Company Shareholder
Approval, each shareholder of the Company hereby irrevocably appoints K. ▇▇▇▇▇
▇▇▇▇▇▇ as his, he or its representative (the "Company Shareholders'
Representative"), to act as his, her or its agent and attorney-in-fact, with
authority to execute all instruments as if signed by each such shareholder, and
to take any action with respect to all matters arising under this Agreement and
the Indemnity Escrow Agreement and any and all other documents entered into in
connection therewith (the "Transaction Documents"), including, without
limitation, the following: (i) waiving any breaches by Parent under the
Agreement prior to and after the Closing; (ii) appointing and designating the
Indemnity Escrow Agent; (iii) instituting, prosecuting and/or defending
lawsuits; (iv) objecting, in the Company Shareholders' Representative's sole
discretion, to Notices of Claims by Parent Indemnified Parties and agreeing to,
negotiating, entering into settlements and compromises of such claims; (v)
authorizing disbursements from the Indemnity Escrow Fund and making any
investment decisions regarding the Indemnity Escrow Fund as required pursuant to
the Indemnity Escrow Agreement; and (vi) taking all other actions relating to
shareholders' rights and obligations under the Transaction Documents that the
Company Shareholders' Representative, in his sole discretion, deems appropriate.
(b) The Company Shareholders' Representative shall not be
responsible or liable to any shareholder of the Company for any act or omission
of any kind so long as he has
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acted in good faith (any such action or omission pursuant to an order, judgement
or decree of any court or administrative agency, or advice of counsel, shall be
conclusive evidence of such good faith), or for the expiration of rights under
any statute of limitations with respect to the Transaction Documents. The
shareholders of the Company shall severally indemnify the Company Shareholders'
Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Company
Shareholders' Representative and arising out of or in connection with the
acceptance or administration of his duties hereunder.
(c) A decision, act, consent or instruction of the Company
Shareholders' Representative shall constitute a decision of all shareholders of
the Company for whom shares of Parent Common Stock otherwise issuable to them
are deposited in the Indemnity Escrow Fund and shall be final, binding and
conclusive upon each such shareholder, and the Indemnity Escrow Agent and Parent
may rely upon any decision, act, consent or instruction of the Company
Shareholders' Representative as being the decision, act, consent or instruction
of each and every such shareholder. The Indemnity Escrow Agent and Parent are
hereby relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction of the Company
Shareholders' Representative.
ARTICLE X
GENERAL PROVISIONS
Section 10.01 Contents of Agreement; Parties in Interest; etc. This
Agreement, the other Transaction Documents and the documents, instruments and
other agreements specifically referred to herein or delivered pursuant hereto,
including the Exhibits and Company Disclosure Schedule, set forth the entire
understanding of the parties hereto with respect to the Merger. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement, except for the Nondisclosure Agreement which shall continue in full
force and effect in accordance with its terms.
Section 10.02 Assignment and Binding Effect. This Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties. Subject to the foregoing, all of the terms and provisions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective executors, heirs, personal representatives, successors and
assigns.
Section 10.03 Expenses.
(a) Subject to Section 10.03(b), each party shall bear its own
expenses incurred in connection with this Agreement in the event that the Merger
is not consummated.
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(b) In the event that the Company terminates this Agreement
pursuant to Section 8.01(f), Parent will pay the financial advisory, legal,
accounting and other expenses incurred by the Company in connection with the
proposed Merger, this Agreement and related documents up to a maximum of
$3,000,000 provided that (i) Parent is not then entitled to terminate this
Agreement under the terms hereof (other than pursuant to Section 8.01(f)) and
(ii) the conditions to Parent's obligation to close set forth in Sections 7.01
and 7.02 have been satisfied.
(c) In the event that the Merger is consummated, (i) Parent
shall bear its own expenses incurred in connection with the Merger, this
Agreement and related documents, including, without limitation, all printing
costs related to the preparation of the Registration Statement and Proxy
Statement/Prospectus, (ii) Parent shall bear up to $4,000,000 of the Company
Transaction Expenses (the "Parent Portion") and (iii) the Company Shareholders
shall bear all Company Transaction Expenses in excess of the Parent Portion. The
Company Shareholder Transaction Expenses shall be borne by the Company
Shareholders through the withholding by Parent of the Company Shareholder
Transaction Expense Shares in accordance with Section 2.01. Parent shall have
the option to pay up to 50% of the fee owed by the Company to Broadview
International LLC in shares of Parent Common Stock.
Section 10.04 Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given on the day established by the sender as
having been delivered personally; on the day delivered by a private courier as
established by the sender by evidence obtained from the courier; or on the fifth
day after the date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications, to be valid, must be addressed
as follows:
If to Parent or Sub, to:
FreeMarkets Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
With a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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If to the Company to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
With a required copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address or to the attention of Person or Persons as the
recipient party has specified by prior written notice to the sending party (or
in the case of counsel, to such other readily ascertainable business address as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
Section 10.05 Delaware Law to Govern. This Agreement shall be governed
by and interpreted and enforced in accordance with the laws of the State of
Delaware, excluding any laws that would cause the laws of another jurisdiction
to apply. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any court located within the State of Delaware, in connection
with any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such Persons and waives and
covenants not to assert or plead any objection which they might otherwise have
to such jurisdiction and such process.
Section 10.06 No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto, except that (i) in the case of Section 6.21, the officers
and directors of the Company prior to the Effective Time, (ii) in the case of
Article IX hereof, the other Indemnified Parties, and (iii) in the case of
Section 9.07, the Company Shareholders' Representative, such Persons and their
respective heirs, executors, administrators, legal representatives, successors
and assigns, are express third-party beneficiaries of such sections.
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Section 10.07 Headings, Gender and "Person." All section headings
contained in this Agreement are for convenience of reference only, do not form a
part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine, or
neuter, as the context requires. Any reference to a "Person" herein shall
include an individual, firm, corporation, partnership, trust, governmental
authority or body, association, unincorporated organization or any other entity.
Section 10.08 Schedules and Exhibits. All Exhibits and Schedules
referred to herein are intended to be and hereby are specifically made a part of
this Agreement.
Section 10.09 Severability. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 10.10 Counterparts. This Agreement may be executed in any
number of counterparts, and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
Section 10.11 Specific Performance. The Company and Parent each agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed by them in accordance with the terms hereof
and that each party shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
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ARTICLE XI
DEFINITIONS
Section 11.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
Acquisition 6.01(a)
Acquisition Proposal 6.01(a)
Action 3.15
Affiliate 3.18
Agent 6.01
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Agreement Introduction
Allocation Certificate 6.13
Articles Amendment 3.01(c)
Authorizations 3.10(a)
Balance Sheet 3.04
Balance Sheet Date 3.04
Benefit Plan 3.17
CERCLA 3.19(k)(v)
CGCL 1.01
Certificate of Amendment 3.01(c)
Certificates 2.03(c)
Closing 1.02
Closing Date 1.02
Code Recitals
Common Stock Exchange Ratio 2.01(b)
Common Stock Consideration 2.01(c)
Company Introduction
Company Charter Documents 3.02(c)
Company Common Shares 2.01(d)
Company Covered Person 6.21(a)
Company Disclosure Schedule Introduction to Article III
Company Equity Holders 6.13
Company Indemnifying Parties 9.02(a)
Company Intellectual Property 3.13(a)(i)
Company License 3.13(a)(ii)
Company Material Adverse Effect 3.01(a)
Company Preferred Shares 2.01(e)
Company Proprietary Information 3.13(a)(iii)
Company Registrations 3.13(a)(iv)
Company Restricted Stock 2.02(d)
Company Rights of First Offer 3.02(b)
Company Series A Preferred Shares 2.01(f)
Company Series A Warrant 2.01(g)
Company Series B Preferred Shares 2.01(h)
Company Series C Preferred Shares 2.01(i)
Company Shareholder Agreements Recitals
Company Shareholder Approval 6.03(a)
Company Shareholder Transaction Expense Shares 2.01(k)
Company Shareholder Transaction Expenses 2.01(j)
Company Shareholders 2.01(l)
Company Shareholders' Meeting 3.29
Company Shareholders' Representative 9.07(a)
Company Shares 2.01(m)
Company Stock Option Plan 2.08
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Company Stock Options 2.01(n)
Company Transaction Expenses 2.01(o)
Company's knowledge 3.02(b)
Constituent Corporations 1.03(a)
Confidentiality Agreements 3.13(i)
DGCL 1.01
Effective Time 1.02
Employment Agreements 3.16(a)
Environment 3.19(k)(i)
Environmental Action 3.19(k)(ii)
Environmental Claim 3.19(k)(iii)
Environmental Clean-up Site 3.19(k)(iv)
Environmental Laws 3.19(k)(v)
Environmental Permits 3.19(k)(vi)
Escrow Shares 9.02(b)
Exchange Agent 2.03(a)
Financial Statements 3.04
FIRPTA Certificate 6.14
Foreign Plans 3.17(i)
GAAP 3.04
Governmental Entity 3.03(b)
Hazardous Substances 3.19(k)(vii)
HSR Act 3.03(c)
Indemnification Floor 9.03(a)
Indemnification Obligations 6.21(a)
Indemnitee 9.04
Indemnitor 9.04
Indemnity Escrow Agent 2.03(c)
Indemnity Escrow Agreement 7.02(h)
Indemnity Escrow Fund 9.02(b)
Intellectual Property 3.13(a)(v)
Intellectual Property Claim 9.05(a)
Intellectual Property Rights 3.13(a)(vi)
Key Company Employees Recitals
Leases 3.12(b)
Liabilities 3.07
Liens 3.02(d)
Losses 9.02(a)
Management Shareholders Recitals
Marks 3.13(a)(vii)
Material Contracts 3.14
Merger 1.01
Merger Consideration 2.01(p)
Nondisclosure Agreement 6.05
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Notice of Claim 9.04
Other Purchase Rights 3.02(b)
PCBs 3.19(g)
Parent Introduction
Parent Common Stock 2.01(q)
Parent Disclosure Schedule Introduction to Article IV
Parent ESPP 4.02
Parent Indemnified Party 9.02(a)
Parent Material Adverse Effect 4.01
Parent Portion 10.03(c)
Parent Preferred Stock 4.02
Parent SEC Reports 4.04(a)
Parent Stockholder Agreements Recitals
Parent Stockholder Approval 6.03(b)
Parent Stockholder Parties Recitals
Parent Stockholders 3.29
Parent Stockholders' Meeting 3.29
Patents 3.13(a)(viii)
Pension Plan 3.17(b)
Per Share Merger Consideration 2.01(r)
Permitted Liens 3.08
Plan 3.17
Pledged Shares 2.03(c)
Preferred Stock Consideration 2.01(s)
Products 3.13(m)
Proprietary Information 3.13(a)(ix)
Proxy Statement/Prospectus 3.29
RCRA 3.19(k)(v)
Real Property 3.12
Registration Statement 3.29
Regulations 3.10(a)
Release 3.19(k)(viii)
Replacement Option 2.08
Replacement Warrant 2.09
Restricted Stock Agreements 2.02(d)
Rule 145 6.15
Rule 145 Affiliate 6.15
Rule 145 Affiliate Agreement 6.15
SEC 3.29
Series A Preferred Stock Consideration 2.01(u)
Series A Preferred Stock Exchange Ratio 2.01(t)
Series B Preferred Stock Consideration 2.01(w)
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Series B Preferred Stock Exchange Ratio 2.01(v)
Series C Preferred Stock Consideration 2.01(y)
Series C Preferred Stock Exchange Ratio 2.01(x)
Shareholder Parties Recitals
Software 3.13(x)
Sub Introduction
Subsidiary 3.01(d)
Survival Period 9.01
Surviving Corporation 1.03(a)
Tax Returns 3.06(a)
Taxes 3.06(a)
Third Party Claim 9.05(a)
Third Party Defense 9.05(a)
Third Party Intellectual Property 3.13(a)(xi)
Third Party Intellectual Property Rights 3.13(xii)
Third Party License 3.13(a)(xiii)
Third Party Proprietary Information 3.13(a)(xiv)
Total Parent Shares 2.01(z)
Transaction Documents 9.07(a)
Transitioned Employees 6.12
Transmittal Letter 2.03(c)
Treasury Shares 2.02(c)
Unvested Shares 2.03(c)
Vested Replacement Options 9.02(b)
Work Product Agreements 3.13(j)
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto, duly authorized
as of the date first written above.
FREEMARKETS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Chief Executive Officer and
Chairman of the Board
AXE ACQUISITION CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Vice President
ADEXA, INC.
By: /s/ K. ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
K. ▇▇▇▇▇ ▇▇▇▇▇▇
President and
Chief Executive Officer
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